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The exit tax is pretty insane too.
Basically if you earn a certain amount or have a high enough net worth, you must pay a tax on all of your assets as if you were selling everything you owned. You are charged this amount even if you are not selling anything.
This is the only wealth tax in America as far as I understand it.
It's there for a reason tho...
If it wasn't, the wealthy would take their wealth and fuck off to somewhere it was worth more.
They're fine to do that, but the US is still going to want it's cut, you're still paying federal taxes every year because you're a US Citizen.
Rich people hate paying taxes. So they just renounced citizenship on the way out and took all their wealth with them.
But like you said, it's based on how much wealth you own so for normal people, it's not a big deal.
It's weird seeing people against it.
Edit:
Also, you have to be pretty wealthy to even have to pay it. The vast majority of Americans would pay $0 to renounce.
https://www.irs.gov/individuals/international-taxpayers/expatriation-tax
Next day edit:
Edit:
I’ve lost count of how many rich overseas workers have made 5+ replies to my comments in less than 10 minutes screaching about how they shouldn’t pay taxes
And every single one claims to be right on the line for having to pay it… yet want it thrown out for billionaires as well…
Apparently I can’t turn off replies to comment like on reddit, so I’m just blocking every “temporary poor billionaire” who wants to spend energy online arguing billionaires should pay taxes because it would mean they do too
No one has time for the Scrouge McDuck defenders.
To be entirely fair, I think its insane that the US would charge income tax on citizens who live abroad in the first place.
Correct. It's only the US and Eritrea (the North Korea of Africa) who do this. It's insane.
It's like the Inheritance tax. It's basically meaningless to the poor, but it sounds bad so the GOP uses it to scare their base. However the targets of the tax are primarily the handful of rich capitalist bastards who have a harder time ~~bribing~~ lobbying their way out of it.
The exit tax starts at $120k. That's "I can rent but not buy an apartment in San Francisco" class, not the "rich capitalist bastard lobbying Congress" class. And of course it's also an income tax so it does jack shit to tax actual wealthy people.
Actual rich people already worked around the tax issue by putting their assets in stocks and loans. They aren't paying this tax at all in the first place. They don't need to lobby anyone.
It's fucking ridiculous how some of you try to frame this income level. Doctors and lawyers are not the wealthy capitalists phoning up Congress and getting what they want from them. It's actually fucking crazy that you're acting like they do. People raising a family at that income level will never retire just like any other worker, but now they're rich capitalist bastards?
Totally agree. Income isn't wealth and people are clinging onto 1970s implications of "millionaire" when in 2023 having a million net worth doesn't even allow you to retire and might just mean you own a house and have little other savings. Similarly "six figures" income meant a lot 30-40 years ago, but inflation eroded that to middle class in the 21st century.
I think it makes a lot of sense for people with millions of dollars (or more) of assets, but not for normal people.
Good, those rich fucks shouldn't be able to loot the country and cash out.
How can you file a lawsuit in a country you are not a citizen of, against a country you are not a citizen of? Real question.
Do you really think foreign nationals aren’t afforded legal rights within the United States? Real question.
Yes that was my understanding of the situation. Feel free to explain why I'm wrong, that's why I asked the question. Even the term "foreign national" is something I'm not familiar with and it's not entirely clear whether you would even use it in some of the cases cited in the article considering that one individual is self described as living overseas when he renounced his citizenship.
A foreign national is anyone that is a citizen of a foreign nation. If an American is renouncing their US citizenship, they must already have gained citizenship of another nation, which makes them a foreign national once they no longer have US citizenship.
If they had no legal rights in the United States, there would be zero tourism or business travel from foreigners to the US because any American could do whatever they want to that foreign person (steal from them, con them, murder them, you name it) without fear of legal repercussions.
So yes, foreigners have the right to use American courts if the injustice they are alleging happened on American soil.
Yes that makes sense now, thank you!
I have a few weird questions if you have time to answer them. How does it work in the case where the person was outside of the USA at the time, seeing as they were not on USA "soil" at the time? It's just that one of the parties (in this case the federal government) has to be on USA soil?
And how does that work if, say, you're standing on the USA side of the Mexican border and you throw a brick at someone on the Mexican side? Could the Mexican citizen in this case file a lawsuit in a USA court?
I am not the OP, nor am I a lawyer, but I believe I am informed enough to answer these.
How does it work in the case where the person was outside of the USA at the time, seeing as they were not on USA "soil" at the time? It's just that one of the parties (in this case the federal government) has to be on USA soil?
Yes. In this case, the alleged offense (the cost demanded for renouncing citizenship) took place by the US federal government on American soil, which is why they can use through American courts.
The reason why they probably wouldn't be suing through the court system of the country they immigrated to is because other countries do not have the authority to dictate how much money the US is demanding. But at the same time, there's technically no reason to pay the US either if you never plan on going back there, given that the US has no power to arrest people in foreign soil...unless the two countries have an extradition treaty in place (and much of the first world does). The US would then have to sue for extradition within the court system of the other country first, and then you'd be facing a lawsuit in the US over unpaid fees.
The threat of the latter is also assuming the fee justifies the court expense spent pursuing it, which I doubt it would. I met a lot of American expats in China who technically owe the US government thousands of dollars in unpaid taxes/fees/etc but aren't even worried about going back to visit because the government would be spending far more pursuing legal action than they stand to make from the suit. The only time one should be worried is the rare example where the government might want to make an example of someone, or if you're a mob boss or something and that's the only concrete offense they can jail you for.
And how does that work if, say, you're standing on the USA side of the Mexican border and you throw a brick at someone on the Mexican side? Could the Mexican citizen in this case file a lawsuit in a USA court?
Now ain't that the tricky scenario. A similar case actually came up recently, with Hernandez v. Mesa and it was ruled at the time by the conservative-stacked Supreme Court that the US government was not responsible for prosecuting a crime where the victim was not in the US and not an American citizen. But the fact that there were dissenting opinions from all of the non-conservative judges, who are themselves legal experts on the constitution, shows that this is a very contentious gray area.
I guess the takeaway from this is that the person in this hypothetical scenario would be better off filing suit from Mexico and pushing for extradition, as the two countries have an extradition treaty.
Wow thank you! Bonus points for citing case law and referencing dissenting opinions. To go back to the original article, one thing I did not consider that even though one man was not on US soil he still would have been a US citizen when he was charged the fee. Only after the fee was paid was his citizenship renounced. For some reason it's funny to me that if not for that fact, the government may have been able to argue that based (on face value) on Hernandez v. Mesa that he wasn't in the US nor a citizen at the time!
Court jurisdiction can become a really complicated question, but citizenship of the parties has nothing to do with it. If a court has jurisdiction, doesn't matter if the plaintiffs reside on Mars.
The law and courts apply to all inhabitants. Have you not read news stories when illegal immigrants are challenging their detention? Or Guantanamo prisoners petitioning the court that they shouldn't be tortured? This is the same thing.
You say inhabitants but it's clear from the article that at least some of the litigants were not inhabiting USA territory. And I thought the entire point of setting up Guantanamo Bay was that it "technically" wasn't US soil therefore they are not afforded the same protections.
You are right; it's not inhabitants. It's anyone with standing.
I edited my reply for clarity.
French citizens who are rear ended by an American during their vacation, for example, but must return home the next day, still have screws to the courts.
As one would expect.
The location of a person when they file a lawsuit has no bearing on its validity.
No other system would make sense.
Slow your roll, turbo, do you always get this shitty when someone asks a genuine question about a topic they aren't familiar with?
Real question.
The only people renouncing US citizenship are rich people because the US will still tax them.
The payment to renounce it is like a one time fee to not be taxed
I know that if you are a US citizen in France a lot of bank will refuse to open a bank account for you.
It's due to the fact that they need to report to the IRS the banking informations of all US citizen and they just don't want to spend any money on that.
Plus even if you are not taxed you still have to declare to the IRS your revenues every year.
Some people are US citizen without every putting a feet in the US, I totally understand that they would want to renounce their citizenship.
That's probably most of them- but there's other situations as well. Some countries require you renounce other citizenships to gain theirs.
Getting pretty deep in the weeds so I may be wrong.
But I believe in that case it's not a voluntary renouncement, so it may be treated differently.
But still, you gotta be pretty wealthy to owe any money. And with the state of America, the vast amount of Americans are more deserving of sympathy and they're the ones we should be focusing on helping.
They just don't have the money for lawyers, PR campaigns, political donations, or the contacts of journalists as the wealthy people do.
Not true.
The rich have other ways to avoid paying tax. Hell, arguably the US is a tax haven for the rich, compared to many many countries. IRC Trump paid no tax 10/15 years due to reported losses. I suspect this was plain old tax avoidance. People like Bezos, Musk or Buffet pay almost nothing.
For example, when I worked at a European bank, we would often refuse US citizens anything but the basics. The IRS and US government is notoriously over-zealous and the US is one the few countries which applies double taxation. Many banks therefore avoid American passport holders like the plague. There are stories of people having their bank accounts summararily closed or frozen:
https://www.thelocal.de/20210914/why-are-americans-being-turned-away-from-german-banks
Often these were people who hadn't been in the US since childhood or at all, earned and paid (up to 10x higher) taxes in Europe than they ever would in the US, but still got fucked over by the IRS and a country they would never visit (again). The US is one of the only countries in the world that does double taxation.
These weren't rich people. Almost all of them were middle-class. Plenty were unemployed or earning less than 20k a year.
For middle-class people, it's especially problematic come pension time, when time came for the payout of a European pension plan or the sale of the family home. Stuff they'd already paid tax on to the country they'd lived in most of their lives, but are forced to give America 'its share' despite getting less than nothing in return.
Plenty of them are also unable to vote in the US, because they never had a last residence, voting is a state matter, and it's made needlessly complicated for foreign residents. Taxation without representation.
I'll go with the IRS over you bud...
https://www.irs.gov/individuals/international-taxpayers/expatriation-tax
Unless you have more than $2,000,000 in assets or averaged more than $170,000 for five years, you don't pay the tax.
Thereby handily ignoring the rest of my comment, because you'd prefer to think of anyone who wants to renounce citizenship as a rich tax evader, rather than admit that there are plenty of reasons why someone might not want to have American citizenship, because shock horror not everyone wants to be American, live in the US, or loves the US. Especially if they've never lived there or visited.
Imagine having been born in Italy during a long holiday, and for the rest of your life being forced to fill in Italian tax forms, despite working a minimum wage job and having no idea how the Italian system works and barely speaking the language. And when you try to get a loan from a American bank, they say no, because they'd have to file relevant paperwork with the Italian equivalent of the IRS.
But here's the fun part, you still have to file a tax return every year! Even if you're well under the threshold! And trying to find someone living abroad who is versed in American expatriate tax law is expensive! And I can't afford it!!
I am hiding from the IRS and have been for 16+ years.
I imagine it starts with hiring a lawyer, the same as if you're a citizen.
The court has jurisdiction regardless of what country the plaintiffs are from.
I was thinking the same thing.
Didn't realize tax avoidance was so popular on Lemmy.
Unless your take is that literally all taxes are good always, it's not unreasonable to question why America is the only country in the world other than Eritrea to tax foreign earned income.
Because America is the top destination for the rich that isn't a literal tax haven?
Because US power defends the interests of the rich at great cost across the world?
Because the US has great control over the financial systems which make the international order run and has the capacity to tax foreign income, unlike most countries, for whom it would simply be a waste of resources to try?
And yes, I'll say it - all taxes on the rich are good. Controversial, I know.
Norway, Sweden, and Israel all have more billionaires per capita than the United States. Germany, Finland, Australia, Denmark, and Canada aren't far off.
I'm gonna take a wild guess that your definition of the rich for whom all taxes are good is precisely your income + $1.
The actual threshold is $120,000, which in the context of Switzerland, the case that will potentially be relevant for me in the future, is low enough that one in four residents exceed it. Costs of living there are consequentially very high, as you'd expect. There's something to be said about managing the fortunes of billionaires that will hide their wealth across a bunch of countries in elaborate schemes, but that's a very different matter than taxing engineers, tech workers, and doctors.
I'm gonna take a wild guess that your definition of the rich for whom all taxes are good is precisely your income + $1.
Man, if that was true, everyone above the poverty line is rich. I was thinking more "An individual income that is literally over double the median household income where I live"
Not sure where you are or what that amounts to but In the US I would consider double the median income middle class or upper middle class, still far from rich.
I think of “rich” as someone who can quit working right now and be able to live comfortably on their savings for the rest of their life. If they still need to work, that’s below the “rich” line.
I kinda like Chris Rock’s definition as well.. something like: “you can lose rich if you pick up a drug habit… but if you’re wealthy, you can’t lose wealth.. you can afford to do cocaine for the rest of your life if you’re wealthy”.
An INDIVIDUAL income that's double the median HOUSEHOLD income is pretty damn well off. This isn't the 1950s. Single-provider households are not the norm.
'Rich' is income in considerable excess of the average. The idea that 'middle class' is actually considerably above the middle shows the obsession we, as a society, have with being midde class - aped from both above and below that status.
I think of “rich” as someone who can quit working right now and be able to live comfortably on their savings for the rest of their life. If they still need to work, that’s below the “rich” line.
So 'rich' is money management to you?
all taxes on the rich are good. Controversial, I know.
I think what may be more controversial is who you are grouping in as “the rich”. Does home ownership put someone on the /rich/ side of the line?
People with more than $10k USD worth of non-USD in the bank must report the account. I would move that line at least to $100k if the idea is to not harass & intrude on non-rich people.
I don't see the problem with reporting the account.
So why exactly is the US permitted to tax people that don't even live in their country?
The only thing they should be allowed to do is tax the profit made in the US, they should not have access to anything outside of their borders. Even if that is in a so called "tax heaven".
Overreach it is called.
You can just Google it or ask AI, y’know. Number 2 really stands out, if you’re curious.
The United States is one of the few countries that has a system of taxing its citizens and residents on their worldwide income, including income earned abroad. This practice is known as "citizenship-based taxation." There are a few reasons why the U.S. follows this approach:
Historical Reasons: The United States has had a system of citizenship-based taxation in place for a long time. It dates back to the Civil War era when it was implemented to fund the war effort.
Desire to Prevent Tax Evasion: Citizenship-based taxation is intended to prevent U.S. citizens and residents from avoiding taxes by moving their assets or income abroad. Without it, individuals might seek tax havens to reduce their tax liability.
Complex Tax Code: The U.S. tax code is complex, and changing to a different system, such as residence-based taxation (taxing only income earned within the country), would require a significant overhaul of tax laws.
Revenue Generation: Taxing foreign income allows the U.S. government to generate revenue from its citizens and residents, regardless of where they earn their income.
It's worth noting that while the U.S. taxes its citizens and residents on foreign income, there are mechanisms in place, such as the Foreign Earned Income Exclusion and foreign tax credits, to mitigate double taxation and reduce the tax burden on income earned in other countries. However, compliance with U.S. tax laws related to foreign income can be complex and may require professional assistance for those living abroad.
I can't quite follow this:
Esther Jenke also told the Times that finances played a role in her decision to renounce her citizenship.
"My husband and I bought a house. If we sell the house, even though it is our primary residence, because from a US perspective it's foreign property, we would have to pay capital gains tax on it," Jenke told the Times.
The 1st part says that there is a financial reason to renounce your citizenship, but the 2nd part makes it seem like they'll pay capital gains on the house, specifically because they renounced their citizenship
If they remain US citizens, they will have to pay US capital gains tax on the sale of their home in the place they now live. They'd also be liable for US federal income tax. This would be on top of whatever taxes they're liable for in the country they moved to.
If they have renounced their citizenship and are no longer resident in the US, then they're (broadly) no longer liable for US taxes, including US capital gains on the sale of their home.
Renouncing citizenship is expensive, but massively cheaper than the taxes they'd pay as non-resident US citizens. I'd assume their income had come in under the threshold or something, so the matter only came up when they wanted to sell their home.
And somewhere, the world's smallest gold plated violin shittily plays an off-tune medly of mediocrity.
The US is one of the few countries who don't care where you earn the money...
The financial incentive is to avoid paying taxes. Then she gave a hypothetical of what would happen if she hadn't renounced us citizenship. Because the US taxes a foreign home sale as capital gains, even when it's labeled as primary residence.
Because wealthy people hate paying taxes and would renounce citizenship to avoid, the US put in this percentage based fee to renounce US citizenship. For normal people it's nothing. But for the wealthy it can be a lot of money. So now a bunch of them are suing to get it back.
It's hard for these people to explain why they shouldn't have to keep paying taxes, so it's always going to sound confusing when they want sympathy.