“The majority of us aren’t making millions or trying to hide our money in secret Swiss bank accounts. We just want to live simple, ordinary lives. The amount of stress that comes along with the U.S. tax system is overwhelming. It is extremely complicated and expensive to navigate. We live with a real burden that Americans living in the U.S. simply don’t understand.” – Michigan voter living in the UK
Seven members of the Hamilton/Burlington/Niagara and Toronto chapters drove to Buffalo in late January to meet with the staff of U.S. Congressman Brian Higgins, 26th District of New York. (Close to 200 DA members in Ontario vote in his district.) The subject: taxes, taxes. At a round table with Bonnie Kane Lockwood, Higgins’ director of special projects, and Chris Fahey, the congressman’s deputy chief of staff for special projects, DA members presented their case. Weighing in via teleconferencing from Australia was Carmelan Polce, chair of DA’s Taxation Task Force.
Ken Sherman, past chair of the Hamilton/Burlington chapter and member of the Democratic National Committee, explained that Americans living abroad must file taxes both in the U.S. and in Canada. “There are over 6.5 million Americans like us who are suffering serious personal and financial harm because we are subjected to taxation both in the United States – even if we have no U.S.-sourced income – and in Canada were we live. Most of us are filing zero-dollar tax returns in the U.S.”
Of particular concern is the Repatriation Tax Law which has had unintended consequences for Americans living abroad. As well, Trump’s Tax Cuts and Jobs Act of 2017 – which gave corporations a wonderful advantage, not so for small businesses – “has thrown people’s lives into an uproar. None of us saw this coming, but it has been terribly destabilizing,” said Sherman. The much-heralded bill is forcing many American small business owners abroad to close their companies. Another challenge faces those whom Steve Nardi, chair for DA Canada, calls Accidental Americans. These are people born in the United States to foreign parents, but who moved away as infants or young children, and those born outside the U.S. to at least one American parent. “According to numbers from the U.S. Consulate, there are between 1-2 million Accidental Americans living in Canada,” said Nardi. With no legal or cultural connection to the U.S., these people still bear U.S. tax-compliance obligations.
Other points of contention discussed at the meeting was the imposition of a new minimum tax on Global Intangible Low-taxed Income (or GILTI), further fall-out from the 2017 Tax Cuts and Jobs Act. Again, this has had a negative impact on overseas Americans, explained Ron Barrett, member-at-large for DA’s Hamilton chapter. Barrett and his wife, Susan Hill, the chapter’s membership secretary, came to Canada twelve years ago as part of a NAFTA initiative and bought a Canadian company. Their U.S. tax return numbered 70 pages last year with $40,000 in what are called “transition taxes” owed to the U.S. government.
These iniquities make a compelling case for what Democrats Abroad has been lobbying hard for in recent years: Residency-Based Taxation (RBT). The U.S. and Eritrea are the only two countries in the world which employ Citizenship-Based Taxation (CBT). “We would still be required to report U.S.-sourced income if we had any, but not the income we make and pay taxes on as residents of Canada,” Sherman explained to Rep. Higgins’ staff.
Two bills are currently in development in Washington that would greatly support Americans’ tax rights. The first, which argues for RBT to replace CBT, is now before the Ways and Means Committee. The second (HR 4362), the Overseas Americans Financial Access Act would exempt Americans living abroad from disclosures of their financial accounts in their countries of residence. Sponsored by Rep. Carolyn Maloney (12th District of NY) and Rep. Don Beyer (8th District of Virginia), the hope is that Rep. Higgins will join them as a co-sponsor of the bill.
Both pieces of legislation promise greater tax justice for expats. While the reception with Rep. Higgins’ staff was supportive and encouraging, Polce urges Democrats Abroad everywhere to talk to their respective members of Congress. “There’s push and there’s pull. We pull. We need everyone else to push!”