The Right Opinion

What Price U.S. Citizenship?

By Cal Thomas · Jan. 1, 2013

HONG KONG – We read about famous people like French film star Gerard Depardieu, who moved to Belgium to avoid a 75 percent income tax on millionaires proposed by France's Socialist government (a measure rejected last week by a French council, though French leadership has vowed to resubmit a similar proposal). Then there is Eduardo Saverin, who took the extreme step of giving up his U.S. citizenship and could see a savings of $39 million on his Facebook investment, according to the research firm Wealth-X. He says business reasons, rather than high taxes, were his primary motivation.

I had read about financially motivated expatriates but never knew one who had taken the ultimate step until I visited with my longtime friend “Sam” (I'm withholding his real name to protect his current employment). Sam works for a large investment firm. He has lived here for the last 25 years.

He says that five years ago, he began thinking he could no longer “afford to be an American.” Contributing to his decision was the cost of sending his five children to college. Even though he and his wife pay taxes on a home in California, the state has denied them in-state college tuition, meaning it could cost them $50,000 per child. While there is a $95,100 earned U.S. income tax exclusion, Sam says it isn't enough to substantially reduce his U.S. taxes and still cover his costs.

Here is how burdensome U.S. tax laws have become: Seven years ago, Sam left a major investment banking firm based in the U.S. to join another international bank. The law required that his 14 years of pension savings become current income and taxed it at a rate of 35 percent. He says he could not roll over the account due to a “quirk” in the law. Hong Kong citizens are taxed at a rate of only 15 percent.

Another consideration, he says, was the refusal by Hong Kong banks to allow him to open a securities account. The reason? “None wanted to deal with onerous U.S. reporting requirements. My own bank could not even open an account for me to invest in local securities.”

Sam says his decision was “emotionally difficult. My parents worried I would not be able to return to see them in the U.S. (He managed to get a 10-year tourist visa.) I would have to give up the right to vote or run for political office. I was concerned that others would call me a traitor or deserter.”

“I had paid over $1 million in U.S. taxes but didn't receive any benefits, nor did my wife and kids. (She maintains her U.S. citizenship.) As I saw the massive U.S. deficit continue to climb, it became clear that the government would likely raise taxes further. I finally decided to expatriate. … A dozen of my friends who have lived over 10 years in Asia have done the same. We can no longer afford to be American citizens.”

Eugene Chow, an attorney who specializes in helping Americans give up their U.S. citizenship, told The Wall Street Journal's “Asia Today” program that while such actions continue to be rare, they are increasing. He says people pay a high price for giving up their citizenship. Not only is there an “exit tax,” but all appreciated assets, including a home, are assessed a 15 percent capital gains tax, even if they haven't been sold.

Chow says, “The IRS is essentially outsourcing its compliance rules to non-American-related companies and they are saying to Americans, 'We don't want your business.' So that's more of a practical reason for why some people choose to give up their passports – to make it a less complicated life living overseas.”

While the media love to focus on billionaires, says Chow, most who renounce U.S. citizenship are “people who have changed circumstances; people … who have lived and worked (overseas) for the last 10-15 years, who might have married a foreign spouse and who believe their future is overseas, rather than back in the U.S.”

With so many foreigners wanting to become U.S. citizens, it's still a shock to know someone who has relinquished his citizenship. It is another reason for simplifying the U.S. tax code. America should want to retain people with the skills and experience of people like Sam, who have contributed more than tax money to their (now former) country.



Tod the tool guy in brooklyn ny said:

Yes Cal-Simplify the US TAX CODE, and embrace the Constitution of our Founding Fathers! We must not punish success. We must not punish prosperity. We must not punish Ourselves with unjust laws, and over Regulation-Follow the Reagan-Friedman blueprint, for growth!!!We are CCC-Christian, Conservative, and Capitalist, forever!!!

Tuesday, January 1, 2013 at 7:04 AM

Doktor Riktor Von Zhades in Western KY said:

Mr. Thomas:
I agree with your column, however the Federal Government sadly does not. They are doing all in their power to not only punish those who are successful, whether it be a huge scale that employs thousands, or moderately, such as small company that might employ less than 25 people. Then when it has sucked you dry, and you've decided enough is enough, it punishes you for wanting to leave them in the dust. What does not occur to government pinheads is that even with almost half of one's wealth stolen by the feds in the form of the "exit" tax. Most individuals will have enough to not only start over, but to parley their monies and assets, once again into wealth, while the government spending machine will have exhausted its "share" in a matter of minutes.

There is a silver lining to all of this, I can in the future a wall being built on our borders, not to keep people out, but to keep Americans in....

Tuesday, January 1, 2013 at 7:40 AM

Jay in FL said:

A healthy economy is an organic free-market economic phenomenon, not a state phenomenon. In that sense, the wealthy represent the head of the body. Chop off the head, and all you'll have left is government busy-bodies being way too busy with your body (your political freedom and your personal economic life).

Tuesday, January 1, 2013 at 9:14 AM

Cal in SoCal said:

While the rich leave, the poor continue to pour in and expect to continue to get many free goodies. The catch (phony) phrase of "Comprehensive
Immigration" means legalizing welfare to more millions - until the well runs dry. Keep pumping, Washington. When you hit sand, it is too late.

Tuesday, January 1, 2013 at 5:25 PM

p3orion in Midland, Georgia said:

I can envision many people doing the same thing, if only economically. Rising taxes and onerous government regulations inevitably lead to the growth of a black market economy. Whether people do it for economic or philosophical reasons, starving the beast of federal government would not be the worst thing that could happen.

Thursday, January 3, 2013 at 10:09 AM