US makes money when its citizens leave. Why are they going?(Read article summary)
US citizens are renouncing their citizenship at record rates because side effects of tax evasion laws are impacting expatriates, but the US government has increased the fees for renunciation.
A record 4,279 Americans dropped their US citizenship in 2015, setting a record for the third year in a row, even though it costs at least $20,000 in legal fees alone.
Immigrants from around the world wait years for visas or smuggle themselves into the United States, and 729,995 new US citizens were naturalized in 2015 alone, but the number of US citizens who want to shed their American identity legally is at an all-time high, according to the Department of Homeland Security.
To capitalize on the increase, and also to recoup the rising administrative costs to embassies and consulates around the world, the government increased the fees for renunciation from $450 to $2,350 in fall of 2014, Sophia Yan reported for CNN. The government has received $12.6 million in fees since then.
What is driving people to give up the rights so many covet, and pay thousands of dollars to do so? Some are protesting US policy or expressing an idealistic loyalty to another nation, but most simply want to avoid red tape.
"Not one client of mine has ever said I hate the US government; I hate its foreign policy; I hate that we have troops in the Middle East and that’s why I am renouncing my US citizenship," Diane Gelon, a US attorney who has helped US citizens in London with the paperwork for formal renunciation, told the Independent.
Many US citizens who leave have always lived abroad and were only nominal citizens because of an American parent, or because they were born in the United States. At one time, US citizenship would have offered no disadvantage, and perhaps many advantages, to these individuals, but in the mid-2000s new laws targeting tax evasion began to worry even honest expatriates. The balance of benefits and costs began to change, Doreen Carvajal reported for The New York Times.
“The administrative costs of being an American and living outside the U.S. have gone up dramatically,” Marnin Michaels, a tax lawyer with Baker & McKenzie in Zurich told The New York Times in 2006.
Worries about tax increases on expatriates or simple frustration with growing paperwork have caused rates of renunciation to reach their highest since the 1970s, when about 2,000 US citizens were leaving each year in a form of political protest. The new wave is quieter, and one woman refused to give her name to the Times when discussing her reasons for leaving.
"It’s a really hard thing to do,” the retired Marine told the Times. “I just kept putting this off. But it’s my kids and the estate tax."
The trend was slight until 2012, but since then embassies in Canada, the United Kingdom, France, Switzerland, and Singapore have all increased the number of renunciations they process annually. In certain countries, the new US tax laws have affected them only indirectly, which is one reason the numbers have only increased in recent years, Swiss Info reported. Some banks in Europe are increasingly refusing to serve American citizens for fear of the IRS.
“Tax reasons are not to blame," Anne Hornung-Soukup, an executive member of American Citizens Abroad in Geneva, told Swiss Info. "It’s more the administrative and logistic costs, as well as threats of fines. More and more [Swiss] banks are refusing their services, for a loan, mortgage, or life insurance on the pretext that we are US citizens."