Category Archives: Land of the free

Cook v. Tait 29: “Citizenship-based taxation” or “Taxation-based citizenship” – From @IsaacBrockSoc

1. Citizenship-based taxation?

The above tweet references the following comment which is certainly “food for thought”.

A small change in vocabulary may be helpful. In point of fact, the US primarily practices RBT. More than 99.9% of tax returns are filed on by US residents. Within the US, the US tax net applies to RESIDENTS, both citizens and aliens and without distinction. It is meaningless to talk of taxing resident citizens based on citizenship when non-citizens are taxed on precisely the same basis. It is like saying we only tax people with blue eyes, but all people with eyes must pay the same tax. Within the US, it is meaningless to talk of CBT, since citizens and non-citizen residents are taxed on exactly the same basis.

The ONLY instance where the US practices CBT is in respect of NON-residents. That is a tiny fraction – fewer than a million filed returns from “compliant” non-resident citizens. With 7.6 million citizens outside the US and fewer than a million filed returns, one can only conclude that FATCA + CBT of non-residents has created is a situation of MILLIONS of US citizens hiding from the US government (7.6 million expats or duals can’t ALL be earning less than $2,500 per year…). The queue of renunciants is of course only the tip of the iceberg since almost all non-resident citizens are unquestionably non-compliant and simply live off the (US) grid and have ever done so.

Viewed in that light, the case for finding CBT to be discriminatory would seem to be a whole lot more evident since it ONLY applies to non-residents. A theoretical US resident who somehow renounced US citizenship would still be liable for precisely the same tax the next day as the day before. Citizenship is only a meaningful criterion for eligibility for taxation OUTSIDE the US; it is completely irrelevant within it. I’m sure someone who knows this better than I can check, but I’d be surprised if the domestic US tax return even asked if you are a citizen: why should they care?

2. If NOT “citizenship-based taxation”, then perhaps “taxation-based citizenship”?

The above tweet references the beginning of the discussion on whether the essence of U.S. citizenship really is just taxation. Remember that in 2004 the United States legislated a new kind of U.S. citizenship – that is the “U.S. Tax Citizen”.

Does the U.S. practice “citizenship-based taxation” or is it just “taxation-based citizenship”?

Bubblebustin suggests an answer.

We’ve had it all wrong! Unlike the rest of the world, the US practices taxation-based citizenship.

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Bubblebustin: “Taxation-based citizenship”. Wow! Why haven’t we noticed that before? Well done! Actually, this very morning I woke up with the realization that those expat Americans who are quoted in articles or surveys as being perfectly happy and willing to pay their U.S. taxes from “overseas” because “they’re American and they owe it” are actually filing and paying their U.S. taxes *in order to keep their American citizenship*. That is, indeed “taxation-based citizenship” …. which is about as un-American as it gets!

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Echoing MuzzledNoMore, great phrase you coined @Bubblebustin, re;
“… “Taxation-based citizenship”..”

Got to get that into common usage! Very insightful and useful turn of phrase.
Thanks!

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Leave it to you, dear bubblebustin, one among others of the most creative here, to come up with this descriptive term — CBT turned on its head.

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Taxation-Based Citizenship — TBC

Best one yet, Bubblebustin. It expresses perfectly the mindset of the U.S. government and those shadowy figures behind the U.S. government. Americans at home and abroad are nothing but tax fodder (some are both tax and cannon fodder). And they all thought they were being “loved” for their devotion to flag and country.

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Thanks everybody, but can we make the argument that Taxation-Based Citizenship is correct? I’ve struggled with the term CBT for quite some time and always thought there’s a better, less incriminating way to frame the issue. This all ties into the Human Rights Complaint that I’m actually just reading through now, which is very inspiring in terms of freedom, equality.

I think the argument here would be whether one can still enjoy US citizenship regardless of their personal tax situation. Can someone be denied certain benefits of US citizenship if they aren’t tax compliant?

Language matters. It’s important that we be clear in how we describe the taxation of U.S. citizens abroad.

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“… living life as an American is all about living in fear, ALL THE FUCKING TIME!! Fear of the government…”

Americans who self-identify as expats as opposed to citizens of other countries seem to believe that the solution to their problems related to the USA lies in Washington DC. But DC is the source of the problem, and its functional purpose is to serve Homelanders not expats.

A lot of the 8.5 trillion so-called Americans abroad do not self-identify as Americans but as citizens of their country of residence. Hence, they are not lobbying Congress or the POTUS, because these branches of government represent not the expat but the Homelander.

This post ushers in one of the most interesting discussions among non-U.S. residents who are deemed to be U.S. citizens. Truly fascinating. This discussion should be sent to Washington, DC (let’ pretend that they care).

U.S. residents do NOT experience the United States (and the world) the way non-U.S. residents experience it. We have just passed the 4th of July.

The above tweet references a comment from the Facebook discussion that should be required reading for all. Many of those trying to navigate the new FATCA and FBAR world often wonder whether they are “really American”. Does this really apply to them? I have often jokingly (or maybe not) suggested that:

 

“If you are terrified of the U.S. Government then you are truly American”.

Consider the following comment from the Facebook discussion.

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Looks like the Revolution of #Americansabroad is almost here!

https://www.facebook.com/groups/AmericanExpatriates/permalink/474144512751626

The comments are simply amazing. A revolution is clearly coming! It’s amazing to me that there are still people who see this as a partisan issue.

 

 

 

Peter Britton: In U.S., Canadians need not apply – If you apply you are in for a long wait

 

#Americansabroad will be subject to “economic quarantine” in a #FATCA world

The above tweet references a comment at the Isaac Brock Society.

@Nervousinvestor

See Deckard’s comment here:

http://isaacbrocksociety.ca/2015/01/27/are-strata-corporations-the-next-target-of-canadian-banks-fatca-zeal/comment-page-1/#comment-5391660

and Badger’s comment here:

http://isaacbrocksociety.ca/2015/01/27/are-strata-corporations-the-next-target-of-canadian-banks-fatca-zeal/comment-page-1/#comment-5394406

It is quite obvious that “U.S.ness” is a form of contamination that has the potential to first infect and then effect every aspect of human society. In Deckard’s comment he notes the restrictions placed on the Jews during the Third Reich. The restrictions were completely unjustifiable. Notice how they proceeded one “law” at at time. (what could be more legitimate than that – Remember the “Battle Cry of the Condor” – FATCA is “U.S. law”.)

Restrictions on U.S. persons are completely justifiable.

In the case of FATCA, U.S. persons really ARE a threat to the societies where they live. The reason, as has been articulated time and time again is that:

U.S. citizens are being used by the U.S. as tools (via citizenship-based taxation) to extract capital from other countries and transfer that capital to the U.S. There are people who do not understand this. There are people who pretend to not understand this. But, at the end of the day U.S. citizens really are IN ACTUAL FACT a threat to any country where they may reside.

Eventually countries will be forced to protect themselves from what I would call the:

“U.S.ness Forced Extraction of Capital” and the compliance costs associated with having U.S. citizens as residents.

Who could have imagined even 5 years ago that the discussion on this thread was even taking place?Whether a real threat or not, this newly discovered “Condo Terror”, will make condo boards and developers want to avoid U.S. persons. Same for jobs, marriages, businesses, etc.

But, here is the most likely next step.

Special tax laws imposed on U.S. persons. These laws will be for the purpose of neutralizing the extraction of capital by U.S. tax laws. Simple example:

“No person who is taxable as a U.S. person can have a tax free capital gain on a principal residence.”

(the effect would be to produce a Canadian tax which can be used as a credit against a U.S. tax)

So, although U.S. citizens would still be allowed to own property, they will be subject to special tax rules. These rules are designed to protect the local tax base from the theft of capital by the U.S. Perfectly reasonable. Unfair to the U.S. person? Of course, but they can and should renounce.

On a positive side, I predict a whole new universe of financial products.

These will be designed to:

A. Provide products that give U.S. persons the opportunity to plan for retirement; and

B. Segregate U.S. persons from “free people” so that the “free people” cannot be harmed by the “U.S. contamination”

These new investment vehicles will be a welcome development.

Perhaps we will see Condominiums that are specifically for those who carry the disability of U.S. citizenship.

U.S. citizenship is now a disability and this opens up a whole new world of possible financial products for this group of disabled people.

We are witnessing the beginning. What’s important to note here is that by using FATCA and CBT to attack the tax base of other countries, the U.S. has created a situation where retaliation against U.S. persons is rational, necessary and completely justifiable.

If you don’t want to live in the USA you should renounce NOW. You won’t be able to have any kind of life as a U.S. citizen abroad!

The defensive measures taken to protect countries from “U.S. person contamination” will be incremental and significant. But, they will quickly add up to a world where “U.S. persons are subject to “economic quarantine”. I could also see them being barred from certain professions. For example, the legal profession. Do you really want a lawyer who is subject to FBAR on client trust accounts? Real Estate: Do you really want a broker who must report his trust accounts (with your money) to the IRS?

The implications are huge.

No doubt, some will view this prediction as extreme.

Consider this comment to be a “message in a bottle”. Read it again in 10 years.

And finally, (to echo some of the posters here):

If you want to stop this, then you support the people who are fighting on your behalf.

I am thinking of the stopfatca.ca legal challenge.

Are #Americansabroad “members” of Club USA or “owned” by Club USA?

U.S. citizens abroad are now entering the fifth year of what some have called “the U.S. citizenship nightmare”. Since 2011 thousands of blog posts, comments and tweets have: deliberated, sought comfort, agonized, theorized and suffered persecution at the hands of the U.S. government. This can be understood only by those affected. Homelanders cannot understand how those who moved from American have suffered and continue to suffer.

Americans abroad have (with justification) felt betrayed. At a minimum they have learned that U.S “citizenship” is like no other “citizenship”. Stay in the Homeland and will be fine (maybe). But, if you leave you will be subjected to a slow and painful death by a “thousand cuts”. Each cut inflicted by an incomprehensible law, threat or penalty from the U.S. government, the cross-border professionals or the media.

How could it a country treat its “citizens” this way? I suppose the answer depends on how the U.S. views its citizens. What is the relationship between the U.S. government and its citizens?

What follows are two lengthy comments at the Isaac Brock Society. They are from two unrelated posts.  Each in its own way explores the “nature of U.S. citizenship.

The first comment is directed towards the theoretical nature of U.S. citizenship. U.S. citizens claim they have “rights”. Is that the case? Can something be a “right” if it is granted by a Government? Can something be a “right” if it is limited by the government? This comment suggests that the rights of U.S. citizens are quite limited. They are less of a “right” and more of an “indulgence” from the U.S. Government.

The above tweet references the following comment at the Isaac Brock Society:

@George and @Mettleman

George: Your comment includes:

@Mettlemen, let me rephrase your last comment;

“after the meeting as a canadian citizen resident in canada, i was able to work to come to peace with my self and mine and mine alone decision to preform an act of civil disobience and not comply with an unjust foreign law of a foreign government.”

Interesting thought

In an essay he wrote about the Afroyim case, Professor Peter Spiro suggested that “rights” are contingent on “personhood” and NOT on “nationality”

“… in the wake of the human rights revolution, under which rights are contingent on personhood rather than nationality”

This distinction may have some applicability here.

There are at least two ways of looking at this.

1. Is this “non-compliance” a recognition that a U.S. law cannot apply to someone who is a Canadian citizen residing in Canada?

Under this interpretation, one is saying that he is a free person who is NOT the property of any country but agrees to obey the laws of the country where he is present. He is saying: Sorry but U.S. law ends a the U.S. border. This U.S. law simply cannot apply to me.

Under this scenario he is NOT saying:

“I will NOT comply with an unjust law.”

He is saying the law simply doesn’t apply to me because I am a Canadian citizen living in Canada.

Note that under this scenario, he (while accepting the requirement to obey the laws where he chooses to live) he is really saying:

“My rights come from my status as a being human” – my “personhood”. Because I am “human” I have rights that are NOT dependent on the permission of any Government. I believe in the U.N. Declaration of Human Rights which recognizes that I have rights because I am a human being. I do NOT and am NOT dependent on the United States of America for my rights. U.S. governments will come and go, but “my personhood” is eternal. My tombstone will NOT say that my rights come from my nationality. My tombstone will say that I was a good person “Husband, father, friend ..”.

The Universal Declaration of Human Rights is worth reading:

http://www.un.org/en/documents/udhr/

The Preamble includes:

Whereas the peoples of the United Nations have in the Charter reaffirmed their faith in fundamental human rights, in the dignity and worth of the human person and in the equal rights of men and women and have determined to promote social progress and better standards of life in larger freedom,

(Notice there is no reference to citizenship or nationality.)

Because I am a “person” and NOT “property” I recognize that U.S. law ends at the U.S. border.

2. Is this “non-compliance” based on an acceptance that U.S. law DOES apply to a Canadian citizen residing in Canada, but is a conscious decision to NOT comply with an “unjust law” – making the “non-compliance” an act of “civil disobedience?

In this case the “non-compliance” assumes that the U.S. law does apply to a Canadian citizen residing in Canada. This necessarily assumes an acceptance that he is NOT a free person but U.S. property. (This is the view of the Government of Canada. NEVER FORGET that the Government of Canada believes that, because you were born in the U.S., you are the property of the U.S., and that you have only the rights that the U.S. government allows. That’s what the FATCA IGA is about.)

In contrast to the model where one has rights by virtue of being human, this model assumes (perhaps unconsciously that one’s rights come NOT from being a “Human Being” but rather from citizenship in a country. In other words, as a U.S. citizen, I don’t get my rights because I am a “Human Being” I get my rights because I am a U.S. citizen. (Think of American T.V. – Have you ever heard:

“I’m a U.S. citizen, I have rights.”

Furthermore, since my rights are NOT based on my status as a “Human” but on my status as a “U.S. citizen” I fully gratefully and graciously accept that my rights can be limited by the United States regardless of where I may be and regardless of my status as a “Human”.

Since I recognize that my rights come from my U.S. citizenship, my “non-compliance “really IS an act of “civil disobedience”.

Conclusion

If you believe you are a “person” and that your rights come from your “personhood” there is no civil disobedience.

If you believe that your rights (or limitations) come from your status as a U.S. citizen, then you clearly are committing an act of “civil disobedience”.

So, as the Spiro observation implies, the question that people must ask is:

Am I a person who has rights because of my “personhood” or am I the property of a country where I don’t live and don’t choose to live?

The next tweet references a second comment at the Isaac Brock Society:

The second comment argues in a less theoretical but more practical way that U.S. citizenship is not like a club membership where you are free to leave. Through example, it implies that the relation of a a U.S. citizen to the U.S. Government is more like the relationship between a “master” and “servant”.

The comment, which addresses the question of whether U.S. citizenship is a “membership” or an incident of  “U.S. Government ownership” includes:

@Medea,
re;
“….but refuses to man up and give the citizenship up. If he [Boris] wants to continue to be American – which recently renewing his passport suggests he does – then he’ll have to do as thousands of others do and get his tax affairs in order – even if it bankrupts him as it has others. He’s not the only one who’s been through this and I suspect he could weather the cost much better than most…”…

Forgetting about this example being about Boris specifically.

Extrapolating:

Is the fair price of US citizenship – or any citizenship “…even if it bankrupts… as it has others…”? Should citizenship have a price, or a price so high that it “bankrupts”? Or is it a right conferred on us regardless of our assets and net worth? Rights by definition are something immutable that are not dependent on the ability to pay – or subject to market or other forces.

I and others were FORCED to get a US passport because of the US control of our travel – due to the changes in border crossing rules after 9/11 we had to obtain one – many not until very late in life – if we wanted to see a family member on their deathbed, attend a funeral, care for them in need or emergency. What ‘choice’ is that? Is possible bankruptcy, or going into debt to pay lawyers and accountants and possibly part of the price of our family home outside the US a reasonable price for a birthright?

Is bankruptcy a fair, ethical and just cost that US citizens abroad must all potentially incur in order to “continue to be American”, and to travel to the US if we ever want to see our family again? Or even just to travel to another destination – where most of the travel options go over or through the US in a virtual monopoly? Particularly if we did not choose to be an American, but only inherited it by accident of where our mother happened to be when she gave birth to us? Or, we had a US parent, but were born outside the US?

Is that in the US constitution?

Are FBARs in the US constitution? Is FATCA? Is the punishment of all local non-US mutual funds, savings plans and other legal local banking in the constitution? Is double taxation? How does that accord with the founding values and the ‘rights of man’?

Is American citizenship, or any citizenship a commodity to be bought and sold? Is it a membership fee – as in an exclusive country club where only some can belong – if they can afford to pay whatever is charged?

Does/should US law rule millions outside its boundaries no matter the consequences (and non-US persons and taxpayers and families pay the price too)? Should our US family members be deprived of our assistance and visits because the US is attempting to blackmail them and us by tying the US passport to acceptance and resignation to complex and unfair tax and financial control/oppression over those abroad?

In the current circumstances, there are aprox. 6 million or more living outside the US who it deems to be ‘US taxable persons’. Many are only ordinary people and families, who can neither afford to keep US citizenship, NOR to give it up (an average family of four renouncing would incur almost 10,000. USD just in State Dept. fees, plus the untold thousands in accounting and legal fees, plus whatever interest and penalties the IRS could apply depending on their circumstances – for example, US taxes imposed on their retirement, education and disability savings and their family home). I don’t know about you, but 10,000. is an astronomical amount for my family.

Many are being forced to pay in order to give up the US citizenship because they could not afford to keep it. Especially if they did so using the methods that the IRS and US Treasury demand. A part-time worker or caregiver who makes barely enough to be taxable in either Canada or the US may have almost no income at all and may not even have met the US filing threshold and owe no US taxes. They may have no US economic connection or income, have lived outside the US for more than 50 years, never worked there. Canadian taxpayers, their family and their community and they themselves have paid for their education, healthcare and any other social and economic benefits enjoyed. US hospital fees at birth were paid in full by parents paying directly fee for service, and any other costs came from the taxes paid as US residents at the time incurred. In that scenario, they do not qualify for US social security, or healthcare, and many/most have no intention of ever living in the US. Often, the NON-US/Canadian spouse is the breadwinner. So, the NON-US / Canadian family pays the cost of one or more members retaining their birthright US citizenship – incurred through an accident of fate many decades ago. Should individuals and families outside the US shoulder the compliance burden forever? We are prevented from taking on community work due to the FBAR obligations to report even non-personal co-signatory roles. Prevented from being a co-signatory on RESPs, prevented from being a potential executor or co-signatory on family accounts.

Is that the cost of US citizenship that is just, moral, reasonable and ethical?

I feel that I was the victim of extortion by the US. If I had decided not to burden my Canadian family with the fees to become ‘compliant’ in the manner prescribed by the IRS and US Treasury, and had not renounced, would you advise that I should have ‘manned up’ too? I and my family paid too high a price for ‘compliance’ – a state almost impossible to achieve if done in the manner the US prescribed in 2011, and almost impossible to achieve for anyone with local legal accounts, a home, retirement savings, mutual funds, etc. due to the ways in which we are punished for living, earning, banking and saving outside the US.

Do US residents – those who are merely permanent residents, as well as those who were born with US citizenship have to bear the same burden that those residing outside the US bear? The Taxpayer Advocate says not.

The US is the ONLY country in the world to do this other than Eritrea.

Funny that of all the so-called ‘developed’ nations in the world, only one forces people to entertain bankruptcy in order to maintain a passport or citizenship.

 

 

 

 

Brandeis: The right to be let alone, to have privacy, is the most comprehensive and valued right

An attack on privacy is an an attack on freedom itself.

I have previously posted on the theme of – “From Facebook To FATCA” . My theory has been that FATCA (which is an erosion of freedom) is possible only in a world that does NOT value privacy. The erosion of privacy NECESSARILY LEADS to the erosion of freedom.

An earlier post describing the relationship between FATCA and freedom included:

The argument over FATCA is NOT really about taxes. The argument is over whether individuals should be allowed to have freedom and privacy.

The U.S. government wants to abolish privacy and freedom.

Some countries and individuals want to preserve freedom (at least as long as possible.)

Question: How did the values of “freedom” and “privacy” disintegrate? Why are so many people unconcerned about the the loss of privacy? Makes no mistake about it, “privacy” and “freedom” are linked.

I speculate that the world of social media has paved the way for this. People now think nothing of having their life visible to all on Facebook, Twitter and the rest. If there is no personal privacy, and financial privacy is part of personal privacy, then …

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