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Why More U.S. Expatriates Are Turning In Their Passports
By Helena Bachmann / Geneva Tuesday, Apr. 20, 2010

Chicago native Ben loves his country and is proud to be an American. Yet the longtime resident of Melbourne has just relinquished his U.S. citizenship. "This is not something I did lightly or happily, but I saw no other choice," says Ben, a businessman who became an Australian citizen two years ago.

His words resonate with another American expatriate, John, a business owner based near Lausanne, Switzerland, who like Ben asked that his last name be withheld for fear of alienating his family in the U.S. "Giving up my U.S. citizenship is a genuine option," says the Ohio native, who recently received his Swiss passport and is considering relinquishing his American one. "I am at a breaking point — being American costs me time [and] money, but mostly aggravation."

For U.S. citizens, cutting ties with their native land is a drastic and irrevocable step. But as Overseas American Week, a lobbying effort by expatriate-advocacy groups, convenes in Washington this week, it's one that an increasing number of American expats are willing to take. According to government records, 502 expatriates renounced U.S. citizenship or permanent residency in the fourth quarter of 2009 — more than double the number of expatriations in all of 2008. And these figures don't include the hundreds — some experts say thousands — of applications languishing in various U.S. consulates and embassies around the world, waiting to be processed. While a small number of Americans hand in their passports each year for political reasons, the new surge in permanent expatriations is mainly because of taxes.

Considering that an estimated 3 million to 6 million Americans reside abroad, the number of renouncements is small. But expatriate organizations say the recent increase reflects a growing dissatisfaction with the way the U.S. government treats its expats and their money: the U.S. is the only industrialized nation that taxes its overseas citizens, subjecting them to taxation in both their country of citizenship and country of residence.

"Their income and wealth are generated largely outside the U.S., so why does the U.S. get a slice of that?" says Phil Hodgen, a California-based international tax attorney who helps Americans in the expatriation process. "More and more people see no long-term benefit to retaining U.S. citizenship."

Additionally, the U.S. government has implemented tougher rules requiring expatriates to report any foreign bank accounts exceeding $10,000, with stiff financial penalties for noncompliance. "This system is widely perceived as overly complex with multiple opportunities for accidental mistakes, and life-altering penalties for inadvertent failures," Hodgen says.

These stringent measures were put into place to prevent Americans from stashing undeclared assets in offshore banks, but they also make life increasingly difficult for millions of law-abiding expatriates. "The U.S. government creates conflict and abuses me," says business owner John. "I feel under duress to understand and comply with laws that have nothing to do with me and are constantly changing — almost never in my favor."

John says that since he moved to Europe 25 years ago, U.S. tax regulations have become more and more burdensome. "Every time I turn around, I get smacked in the face with some new restriction as a result of being a U.S. citizen abroad," he says. And because the U.S. government requires other countries to abide by its banking and financial rules when dealing with expatriates, Americans living abroad are often denied services because of the increasingly complex legalities and logistics involved in serving U.S. customers. Many U.S. expats report being turned away by banks and other institutions in their countries of residence only because they are American, according to American Citizens Abroad (ACA), a Geneva-based worldwide advocacy group for expatriate U.S. citizens.

"We have become toxic citizens," says ACA founder Andy Sundberg. Paradoxically, by relinquishing their U.S. citizenship, expats can not only escape the financial burden of double taxation, but also strengthen the U.S. economy, he says, adding, "It will become much easier for these people to get a job abroad, and to set up, own and operate private companies that can promote American exports."

Relinquishing U.S. citizenship is a fairly simple process: after filling in a few forms, and in some cases, paying an exit tax (based on the applicant's worldwide income and assets), the former citizen receives his canceled passport in the mail. But the decision can be difficult. "Cutting my ties with America hasn't been easy," says Ben, who as a foreigner can now spend only 90 days a year in the U.S. "My family and friends think I am a traitor. But the financial burden was killing me."


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It's seemingly just about the money nowadays. For the most part, and given the very small percentage of folks who have opted out of US citizenship, it seems to me that a few may just have philosophical differences, but the rest are doing so for financial gain. I'm not talking about a pensioner looking to lighten their tax burden. I am seeing the individual version of massive corporations such as Exxon, that have managed to game the system to avoid paying taxes in the US. Gotta ask how folks think we're going to retire the deficit when huge corporations, as well as a few disgruntled individuals opt out.

"It will become much easier for these people to get a job abroad, and to set up, own and operate private companies that can promote American exports."

Yeah, right!

We have spent the last three decades watching a long parade of ruthless shysters take the largest share of the heist for themselves. As that all comes crumbling down, why should those who missed out their piece of the pie not seek some scheme of their own?

Originally Posted by BajaGringo

...These stringent measures were put into place to prevent Americans from stashing undeclared assets in offshore banks...

The poster boy for that:



His firm helped thousands do exactly that; one to the ludicrous point of actually smuggling diamonds in toothpaste. The IRS recently offered a deal to tax dodgers and many took it.

Deferred Prosecution Agreement

Best part: after conspiring with criminals to defraud the taxpayer, he calls us "whiners" as McCain's financial advisor.

It appears that all those addressed in the article are still generating an income. IMO, it's a totally different scenario for those of us who are retired & for whom money is no longer a renewal resource. 100% of my income is U.S. generated; retirement & Social Security; as such, is taxable by the U.S. I consider my U.S. citizenship a birthright; it's nothing I'd consider giving up lightly....it's genetic....as much a part of me as my blue eyes.

I personally DO have a problem with Uncle Sam's strong-arm tactics of late. They do seem to be targeting additional revenue from ex-pats, I'd guess the majority of whom are on limited income. IMO, it's a waste of U.S. tax dollars (mine & yours) to go on a witch-hunt by changing laws & targeting U.S. citizens who have chosen to reside outside of the U.S. for whatever their individual personal reasons may be. Things like threatening totally irrational & exorbitant fines & penalties for failure to report fideicomisos as a trust by U.S. definition, when it's clearly not a revenue generating trust in actual Mexican practice, anger me. Not to mention the laws are not equally applied to U.S. citizens who reside & own land outside of the Mexican coastal zone & are not required to have a fideicomiso. Capital gains on Mexican property is another revenue that I personally don't feel should make it's way into the coffers of the U.S. Federal Government.

I'm a U.S. citizen, but I'm not chattel....they don't OWN me. So much for "the will of the people"! Taxing or attempting to tax earnings paid to U.S. citizens outside of the U.S. by non-U.S. companies; monies which will most likely never see the light of day within U.S. borders; is unconscionable to me. The Federal Government is treating U.S. citizens as chattel.

It'd be interesting to know what the U.S.'s legal approach would be toward ex-pat citizens who are collecting Social Security from the Federal Government. You give up citizenship, how far downstream would the financial repercussions go? I'm not willing to be the test case guinea pig! I guess I'm grateful that my income earning days are over!

I hear you Legz and share many of your sentiments. My guess is that most who would consider such a move as to give up their citizenship is due to many of the reasons you quote and not for "hating" their country of birth as some have posted elsewhere.

The fact that you give up your citizenship should not affect your continuing to receive your SS checks IMHO. That is derived from money you and your employer paid into the system on your behalf during the years you worked. I know for a fact that many of the older US customs agents working at the border are Filipinos. They served in the US Navy for 20 years, retired and went to work for customs to be able to collect 2 pensions plus social security. When they are done they go back to the Philippines and live like kings. All without ever becoming US citizens.

I talked to a retired couple a few months back in Rosarito going through the process of renouncing their US citizenship for the very same reasons stated in the article...

I won't do it. I want my national health care plan accessible, damnit!

Of course it is about money. People and businesses have a peculiar habit of wanting to benefit from their effort, their work. When the costs of citizenship in a city, state or country out weigh the perceived benefits, it is natural to seek a location where that isn't the case. The migration of businesses out of just California has been going on for almost two decades. Did we not all know this was a harbinger?

In order to return to the 5 % unemployment rate we had two years ago we need to add over 290,000 jobs a month starting NOW and we'd get there in 2015. Putting this in perspective, during the booming 90's we were adding approx 150,000 jobs per momth. If we could just get to just that (tomorrow) we could return to full employment by 2020. It's a double whammy, the deficits and debt are so huge there is no choice but to raise every type of tax and fee imagineable and doing so increases the probability that the most capable will "drop out".

Originally Posted by dusty

...When the costs of citizenship in a city, state or country out weigh the perceived benefits, it is natural to seek a location where that isn't the case...

A child born in the US today owes nearly a quarter million dollars. The interest alone(let's be conservative and say 4%) comes to about $850/month.

If you assume that everybody pays.

When looking back at the recent past for employment numbers, we must take into account the enormous financial crime wave and it's effects. Without all that, the real, sustainable numbers are far, far lower.

Originally Posted by Marty Cortez

A child born in the US today owes nearly a quarter million dollars. The interest alone(let's be conservative and say 4%) comes to about $850/month.

If you assume that everybody pays.

When looking back at the recent past for employment numbers, we must take into account the enormous financial crime wave and it's effects. Without all that, the real, sustainable numbers are far, far lower.

Originally Posted by Marty Cortez

A child born in the US today owes nearly a quarter million dollars. The interest alone(let's be conservative and say 4%) comes to about $850/month.

If you assume that everybody pays.

When looking back at the recent past for employment numbers, we must take into account the enormous financial crime wave and it's effects. Without all that, the real, sustainable numbers are far, far lower.

If that isn't sobering, tell me what is...

Originally Posted by BajaGringo

If that isn't sobering, tell me what is...

A broken blender?

Not to worry my friend - I drink my Cadillac's on the rocks, not blended...

Originally Posted by soulpatch

I won't do it. I want my national health care plan accessible, damnit!

Didn't you get the memo? Your health care will be outsourced to Mexico...

Proposal to expand U.S. retirement benefits and medical tourism to Mexico

Originally Posted by Marty Cortez

The poster boy for that:



His firm helped thousands do exactly that; one to the ludicrous point of actually smuggling diamonds in toothpaste. The IRS recently offered a deal to tax dodgers and many took it.

Deferred Prosecution Agreement

Best part: after conspiring with criminals to defraud the taxpayer, he calls us "whiners" as McCain's financial advisor.

This guy is the biggest skunk one could hope to find.. Just back from a tour of duty at UBS... for gee.. Wonder who... and for what !!!... Oh, by the way what happened to the "deal" hammered out between the Fed's and Switzerland on the release to Congress on individuals who had stashed "CASH" in numbered accounts in same?...

Oh, guess they have been busy.. and gee, like they didn't know about the former head of the RNC going to UBS and doing point work.. for the Financial Industry... for over 10 years...

Gee, maybe we need another "hearing" or perhaps a subcommittee, headed up by some really smart folks form Princeton, Harvard, Yale, Stanford, Cambridge or.. some other center of higher education which continues to give us these fine examples of American's with only the PEOPLE of this nation's betterment in there hearts and minds.... every day... as they go to work... working together to insure a stable and viable future for all...

These guys should be put in jail, immediately with a trial followed by a hanging for treason .....

This has nothing to do with Politics, rather plain and simple greed coupled with a complete lack moral fiber and/or character.

Originally Posted by BajaGringo

If that isn't sobering, tell me what is...

Originally Posted by dusty

A broken blender?

Originally Posted by BajaGringo

...rocks, not blended...

It is enough to drive you to drink!!!

Originally Posted by BajaGringo

Not to worry my friend - I drink my Cadillac's on the rocks, not blended...

Since when is a shot of Grand Marnier, with a Margarita back, a Cadillac?

Excellent, then I won't have to travel!

Originally Posted by BajaGringo

Didn't you get the memo? Your health care will be outsourced to Mexico...

Proposal to expand U.S. retirement benefits and medical tourism to Mexico

Originally Posted by BajaGringo

........ I know for a fact that many of the older US customs agents working at the border are Filipinos. They served in the US Navy for 20 years, retired and went to work for customs to be able to collect 2 pensions plus social security. When they are done they go back to the Philippines and live like kings. All without ever becoming US citizens.....................

Ron: Hate to pick at nits, but I took this from the US Customs employment recruitment information page:

U.S. Citizenship: Candidates must be United States citizens and present proof of citizenship, if selected