Cook v. Tait 19: Q. How are #Americansabroad taxed by the US? A. What country do they live in?

The above tweet references the following  comment at Robert Wood’s blog.

The comment includes:

Tax loopholes? You must be joking Robert! Pity the poor US Slave (sorry, Citizen) who is self employed and happens to live in New Zealand (or any other country on the planet except for the 25 without an International Social Security agreement with the US). Having paid their taxes to their country of residence, they then face paying US self employment tax to the US as there is no exemption. In the case of New Zealand this is 33% local tax + 15.3% US self employment, a marginal tax rate of almost 50%.

It gets better – Firstly, non-US residents are not eligible for Medicare anyway. Secondly, even if they qualify for Social Security, New Zealand will simply deduct the benefit from their New Zealand state pension which has been funded and paid for from general taxation.
So, a person may spend half a lifetime paying 15.3% of their income in self employment taxes to receive NOTHING in return. Oh, did I mention PFIC, FBAR and all the other “gotchas” faced by the unfortunate US slave in New Zealand. Is it any wonder why people are willing to pay almost anything to get out from under this financial terrorism?

This comment is a reminder that there are no consistent principles for Americans abroad are taxed by the U.S. It depends completely on what country they live in. The situation described in this comment would NOT be shared by a U.S. person in Canada.

The “country by country” discrepancies in how Americans abroad are taxed, compounds the pre-existing injustice.

This is one more reason why it’s impossible to live as a U.S. citizen abroad.

Renounce and rejoice!





Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.