Below is a copy of the submission the Democrats Abroad Global Taxation Task Force submitted to the State Department for the public comment period on reducing the renunciation fee.
Last chance to submit your own comment before the deadline tomorrow! Click here for instructions.
Democrats Abroad is the single largest organization representing U.S. citizens living outside the country. In that role, we have never before publicly commented on the tragedy of loyal Americans feeling compelled to renounce their citizenship due to the uniquely burdensome tax system to which the U.S. subjects its citizens abroad. But the volume of renunciations of U.S. citizenship has reached a point where it is no longer possible for Democrats Abroad to remain silent on the issue. Tinkering with the bureaucratic fees around renunciation without addressing the root cause of the problem is rearranging deckchairs on the Titanic.
We are encouraged by the State Department’s recent acknowledgement that the increase in citizenship renunciations is partially due to the challenges posed to Americans by the unintended consequences of the Foreign Account Tax Compliance Act (FATCA) - namely that many foreign banks simply refuse to serve Americans, rendering them unable to save for their future, pay bills, or receive salary payments. The mere recognition of this reality by an entity of the U.S. government is progress. But when it comes to the tax bureaucracy challenges faced by Americans abroad, FATCA is, if you’ll forgive a second Titanic metaphor, just the tip of the iceberg (for more information, see the annex below).
To make matters worse, unlike our fellow citizens living stateside, there is little-to-no official support for Americans living abroad when filing their U.S. tax returns, which, it must be remembered, are vastly more complicated than those of Americans living in the U.S. At Democrats Abroad, we’ve seen for years how this system unfairly impacts working and middle class Americans living outside the country, and, yes, sadly, how it drives many to permanently cut ties with the U.S.
Some may consider renunciation a satisfactory solution. But the loss of American citizens due to badly-written tax laws - a uniquely American problem - is a tragedy. We encourage the State Department to liaise with Congress, Treasury, and the IRS to communicate the core tax issues driving increased renunciation and to urge other government agencies and Congress to address these discriminatory tax laws. Rather than tinker with the fees levied to cover the bureaucratic costs of renunciation, State should work to fix the root problem in order to curb renunciation in the first place.
We thank you for the opportunity to comment and provide recommendations, and we encourage you to read the detailed annex below.