Israel Matzav: US expats giving up citizenship

US expats giving up citizenship

The New York Times notes a large increase in the number of Americans abroad giving up citizenship.

Amid mounting frustration over taxation and banking problems, small but growing numbers of overseas Americans are taking the weighty step of renouncing their citizenship.

“What we have seen is a substantial change in mentality among the overseas community in the past two years,” said Jackie Bugnion, director of American Citizens Abroad, an advocacy group based in Geneva. “Before, no one would dare mention to other Americans that they were even thinking of renouncing their U.S. nationality. Now, it is an openly discussed issue.”

The Federal Register, the government publication that records such decisions, shows that 502 expatriates gave up their U.S. citizenship or permanent residency status in the last quarter of 2009. That is a tiny portion of the 5.2 million Americans estimated by the State Department to be living abroad.

Still, 502 was the largest quarterly figure in years, more than twice the total for all of 2008, and it looms larger, given how agonizing the decision can be. There were 235 renunciations in 2008 and 743 last year. Waiting periods to meet with consular officers to formalize renunciations have grown.

Anecdotally, frustrations over tax and banking questions, not political considerations, appear to be the main drivers of the surge. Expat advocates say that as it becomes more difficult for Americans to live and work abroad, it will become harder for American companies to compete.

Here in Israel, the domestic tax rates are so high that for most people, the US taxes are more than offset by the foreign tax credit. And over the past few years, more and more expats have been registering their kids as US citizens and filing US tax returns for the first time in years, because the Bush tax credits are also paid to expats (yes, an expat can actually get money from the US by filing his tax return even though he paid $0 in taxes to the US). But if Obama repeals the Bush tax credits (which I believe he has) and if we have to start paying a penalty for not having US health insurance (which was in the Senate version of Obamacare), that will all change. And when the US made having a foreign bank account without reporting it a felony, it caused panic here last September.

I think you're going to see a huge backlash of people giving up their citizenship if things continue this way.

Israel Matzav: US expats giving up citizenship