Freedom of movement is free as in libre, not free as in gratis. “You owe taxes if you leave” isn't a violation of freedom of movement.
That's because you still have U.S. citizenship. You can give that up and not be taxed, as I understand it.
Also, it looks like there are provisions to give you exclusions on your foreign income,if you have any.[1] That seems sane to me, if you live their the whole year and that location is your tax base, then you can exclude all the income from their in your U.S. taxes. But living elsewhere won't protect you from U.S. taxes if you still have the benefit of U.S. citizenship and make a lot of money from the U.S.
California considering a wealth exit tax seems a bit different on first glance, but I could see it making sense if it's somewhat similar in use. If you make your money from California and continue to after moving from there to elsewhere, that money being eligible to be taxed by California because otherwise it's extracting the benefit of California's laws and markets without paying into the system that provides them.
1: https://www.irs.gov/individuals/international-taxpayers/fore...
For Americans, for better or worse, its very large stick (the military) affords its citizens all sorts of benefits while traveling/living abroad.
This is mostly a myth.
There are lots of examples of cases where people from less RAWR MILITARY countries (like... Sweden) got pulled out of risky situations before the Americans did. In some cases Americans simply have not gotten rescued at all and left to fend for themselves! And the US doesn't perform that service for free... if you get rescued they charge you tens of thousands.
Being able to be negotiated out of detainment has more to do with politics and trade, and the US has a lot of political enemies. The countries where the US military is a factor are countries you're not likely to want to move to and make a living in anyway.
Being able to travel to countries is also weaker as a US citizen, since many countries apply reciprocity, and the US often has stricter immigration controls.
Being American living abroad is mostly a demerit. You can't open bank accounts due to FATCA, you have to pay expensive specialized accountants due to foreign taxation, and in many cases people just don't like you due to your government. I can't think of any situations where being American is a pro over being an EU citizen.
The USA isn’t exactly hurting for new citizens and it’s probably desirable to have expats incentivised to deliberately relinquish their passports.
Mind you I’m looking at this from the perspective of here in New Zealand, where there’s regular media stories about Australia deporting NZ citizens who moved over there as kids and ended up criminals. There’s no incentives to relinquish an NZ passport so Australia can revoke their citizenship, deport, and they become NZs problem.
That should be "intend to stay there forever", since renouncing your USA citizenship is typically permanent, once you renounce citizenship, it's difficult or impossible to regain it.
That large stick to me seems to rather hit Americans traveling abroad, in that the US military unfortunately a bit has given ( people from the US ) a bad rep at some places?
when instead I, from western/northern Europe, is welcomed wherever I go (it seems this far)
Exclude up to about $100k of your foreign income from US taxes -- after that you still pay US taxes, and at the rate you would have paid if you were paying from the first dollar, meaning if you make $130K, you don't pay US taxes as if you made $30K, you pay the difference between the taxes on $130K and the taxes on $100K.
Deduct whatever you pay in foreign taxes from your US taxes, dollar for dollar.
The US is almost the only country that does this. All of my co-workers from Israel, Ukraine, India, and many other places pay generally no taxes in their home countries.
The foreign income exclusion is not that high, especially if you are a mid career tech worker ($107,600 for 2020), and you will be double taxed on amounts above the exclusion. But at least you can skip California state taxes if you count as a nonresident.
I'm sure different people will have different ideas of what that's worth, but it's available as a choice. People that opt not to renounce citizenship have obviously decided it's worth it to not do so, whether that be keeping future options open, or because they know they plan to return. $100k is a lot of money, even if in many locations its less than a mid-career tech worker salary, so I'm not sure I have any objections to this.
Also many countries have double-taxation treaties to avoid the double taxation when you exceed $100k
I know a bunch of Americans abroad, none of them have to pay any tax to the US, but several of them have to pay specialist accountants to deal with the differences in taxation between the countries. It ends up being a tax on Americans that is not paid to the US but to accountants.
Definitely it depends on the country, the industry, the specific company, and by the definition of mid-career (10 years? 20 years?).
> Also many countries have double-taxation treaties to avoid the double taxation when you exceed $100k
But then again, other countries do not double-tax from the start, so none of the international coworkers of the Americans abroad have to pay any taxes to their home countries, or for specialist accountants to deal with the differences in taxation.
Americans have a big burden of FATCA, specialist accountants and just a lot of stress in general.
And to what end, when most of them end up paying no taxes to the US whatsoever? (this was the point I was trying to make - that after all this BS they are put through, the US is still not getting any extra tax revenue from these people)
It seems like it's mostly so that US politicians can say they've done something about high-profile rich people who have moved to tax havens, rather than actually increase tax income measurably.
The other option is to pay the difference in taxes, so if you were taxed at 50% in the country of residence, and the tax bill in the US would have been 45%, you’ll get the 5% back as tax credits towards future US tax obligations.
If you’re working in most European nations you’ll probably be paying more in tax than you would in the US.
Safe Harbor
Safe harbor is available for certain individuals leaving California under employment-related contracts. The safe harbor provides that an individual domiciled in California who is outside California under an employment-related contract for an uninterrupted period of at least 546 consecutive days will be considered a nonresident unless any of the following is met:
• The individual has intangible income exceeding $200,000 in any taxable year during which the employment-related contract is in effect.
• The principal purpose of the absence from California is to avoid personal income tax.
The spouse/RDP of the individual covered by this safe harbor rule will also be considered a nonresident while accompanying the individual outside California for at least 546 consecutive days. Return visits to California that do not exceed a total of 45 days during any taxable year covered by the employment contract are considered temporary.
It is actually quite a lengthy application process to try and renounce your US Citizenship, and the federal government can simply deny your application.
For example, if you work remote for a company based in NY, PA, CT, DE, AR, or NE; your income is taxable in that state regardless of where you live or work. This is known as a "convenience of the employer" test. In fact, before a certain SCOTUS ruling you couldn't even claim a refund on that tax for your residence state's tax return (and even after, that refund is taxable).
California is already considering a wealth exit tax that would apply 10 years worth of tax nexus to anyone who leaves the state. I'd complain about this more, as it goes against the whole concept of freedom of movement... but the US already does the same thing. Emigrate from the US and you'll still be expected to pay US taxes on foreign income. I've heard there's a rule that exempts you from said taxes if you spend the entire tax year outside the US. Some people also take the really risky step of throwing out their US citizenship... which is actually grounds to be permanently banned from entering the US for any reason if they find out that you did so for tax purposes.