The day after Christmas, Axios reposted an August article discussing wealthy Americans renouncing their citizenship - these renunciations are merely a symptom of a much bigger problem, and highlight the need to address inequality in the tax code for Americans abroad.
Unfortunately, though, the article gives the false impression that Americans abroad affected by the tax system are uniformly “zillionaires” trying to dodge their civic responsibility, tacitly blaming renunciation on the Biden Administration for attempting to reform taxes, and obscuring much more complex tax issues faced by middle class Americans abroad.
After repeated efforts to reach out to Axios in the hopes that they at least mention the serious issues regarding taxation faced by non-zillionaire Americans abroad, we at Democrats Abroad received no response, and thus feel compelled to correct the record here.
It is a myth that U.S. citizens who move abroad are wealthy and do so in order to avoid paying taxes, and this misconception does substantial damage to Americans living outside the country, the majority of whom, research shows, are middle class and moved for work or love.
Americans abroad are frequently asked to shed light on various things about the United States to the citizens of other countries, and when we attempt to explain our citizenship-based tax system to citizens of other countries, they are almost always shocked. Besides the astounding fact that the United States stands almost alone in double-taxing its citizens abroad (we are, as the Axios article rightly notes, joined only by Eritrea), the patchwork quilt of laws governing taxes on U.S. citizens abroad was clearly designed without consideration of the millions of middle-class Americans living outside the country.
The raft of tax problems that Americans abroad face includes but is not limited to double taxation of non-U.S.welfare payments, double taxation of non-U.S. pensions, punitive PFIC rules, and artificial capital gains due to currency fluctuations, all of which can have devastating impacts on the life and livelihood of Americans who live outside the United States.
Democrats Abroad and other American overseas organizations call on Congress to make the switch to Residency Based Taxation to bring the U.S. inline with the rest of the world.
Those wondering why record numbers of Americans are tearing up their passports should not blame the Biden Administration, which is in no way responsible. Instead, the issue rests squarely on the shoulders of multiple Congresses for having failed to address the profound inequities in the tax code faced by Americans living abroad.
Click here to sign up for the Democrats Abroad Taxation Task Force Newsletter to keep up to date on our tax advocacy efforts.
New York Times Op-Ed published June 15, 2021
The Washington Post published further revelations from the Pandora Papers this week, expanding upon what was already understood from the Panama Papers and the Paradise Papers about how the really big Fat Cats hide their money from tax authorities. They hire formation agents, like one of the fourteen whose documents were leaked to the Pandora journalists, to stash their untaxed cash in anonymous shell companies whose legal filings, financial disclosures and bank records never reveal the Fat Cats’ identities.
In 2010 Congress enacted the Foreign Account Tax Compliance Act (FATCA), creating a system to catch tax cheats and other financial criminals who use foreign bank accounts to hide money from the IRS. Foreign bank accounts with no account holder names don’t make FATCA reports to the IRS. The Fat Cats go free.
Meanwhile FATCA causes real pain for ordinary, law-abiding, working class Americans living abroad. Foreign banks lock them out to avoid FATCA reporting; 1 in 3 report having accounts closed or bank products denied. Non-US spouses remove them from financial accounts and assets to avoid FATCA reporting. And they lose employment and business opportunities.
The Pandora Papers revelations prove that FATCA fails to discourage and apprehend tax cheats; but it traps Americans abroad in a damaging and unfair system never meant for them. It’s time for Congress to direct policy at the right enemy and exempt from FATCA the bank accounts of ordinary Americans abroad in the countries where they live.
Thanks to all who participated in our YOUR REPRESENTATIVE BELONGS IN THE AMERICANS ABROAD CAUCUS campaign to build the membership and the profile of the Americans Abroad Caucus. The caucus now has expanded leadership, more members and a new agenda. Read on to see if YOUR Representative has joined the caucus. If they're not, ask them to join!Read more
Click here for FAQs on the Tax Simplification for Americans Abroad Act introduced in the House of Representatives by Rep. Don Beyer (D-VA08) on Friday 19 November 2021.
A new bill - H.R. 6057 the Tax Simplification For Americans Abroad Act – has just been introduced in Congress by Rep. Don Beyer (D-VA08). It’s currently building support in the House and Senate. If we want the provisions in this bill to be enacted into law, it’s up to us to fight for it. If you support tax simplification for Americans abroad, then there is no more important time to make your voice heard back in DC. Read on for how to call or message your members of Congress and what to say.
Tax reform will happen when enough Americans abroad reach out to our members of Congress and demand it.
The IRS has upgraded its online tools, portals and applications, improving the identity verification and sign-in process. It now enables American taxpayers with non-US ISPs to create and access accounts. We are hearing from DA members who have created new online accounts and logged into their IRS records for the first time. It's a great step forward. DA applauds this progress for American taxpayers abroad and will continue encouraging the IRS to improve its support for our vastly under-served community. Click here for DA's most recent correspondence with the IRS National Taxpayer Advocate. Read on for more from the IRS about their system upgrades.Read more
Reps. Maloney, Titus and Salazar launch the Americans Abroad Caucus. Ask your Representative to Join!
Americans abroad struggle mightily to get Congress to understand our community and address the serious issues caused for us by vexatious tax, voting, immigration and other policy. That's why we celebrate the re-launch of the Americans Abroad Caucus for the 117th Congress. We thank Rep. Carolyn Maloney (D-NY12) for founding the Caucus more than a decade ago and for recruiting Reps. Maria Salazar (R-FL27) and Dina Titus (D-NV01) to act as co-chairs. (See Press Release below.)
Rep. Dina Titus has been a wonderful friend, constant advocate and greatly valued champion for Americans abroad for many years. We are excited to have her in the position of Caucus co-chair along with Rep. Maria Salazar. We look forward to getting to know Rep. Salazar and working with her to address our issues.
Democrats Abroad has been hard at work helping to build the Caucus profile and membership so that we can get more attention paid to the issues we raise with our elected representatives.
Will you help?
Click here to ask your member of Congress to join the Americans Abroad Caucus. And if your Representative is already a member of the Americans Abroad Caucus, use the links above to thank them and ask them to become co-sponsors of the Overseas Americans Financial Access Act, providing FATCA relief for Americans abroad, the Tax Simplification for Americans Abroad Act, to greatly simplify filing for the vast majority of non-resident taxpayers, and the Commission on Americans Living Abroad Act. (See below.)
Please support Democrats Abroad as we protect and expand your right to vote from abroad.
Thanks for your on-going interest in the work Democrats Abroad is doing to secure tax relief for Americans abroad. It’s been a busy time, with outcomes for our 2021 advocacy goals still uncertain. Which puts us into the same position as a great many others pushing Congress for important reforms this year. This week and next week may be critical to understanding what important reforms from the Biden American Families Plan and American Jobs Plan get into the Build Back Better Bill. Or, there may be many weeks of negotiation to come. We will be pushing continuously on behalf of the Americans abroad community.
These are important updates on our work.Read more
Democrats Abroad is pleased to announce that it has joined the RBT Coalition, adding our name to a non-partisan list of organizations, individuals and entities who support a switch from our current system of citizenship based taxation to residency based taxation, also known as RBT. Of all the Americans abroad issues, taxation is THE issue that impacts every single one of us. It affects young and old, married and single, regardless of economic status and party affiliation. We believe that this growing community of RBT advocates and activists will demonstrate to Congress the enormous demand for tax fairness for Americans abroad and persuade them to work with us on a workable RBT implementation model. Click here to download our expression of interest letter in joining the RBT Coalition and the RBT Coalition Media Announcement.