There's a ton of related frictions too, FATCA makes it impossible for US persons (including citizens) to open a bank account in a many foreign countries, especially European ones. SEC regulations preclude Americans from opening foreign brokerage accounts. Any aggregate bank account balances over $10,000USD at any time in the calendar year requires filing with FinCEN - [edit] and failure to do so may result in forfeiture of up to 50% of the balance of said accounts.

Starting a business while abroad is especially painful as you are the beneficial owner of a controlled foreign corporation, and the tax reporting there is its own special hellscape.

American who‘s been abroad for a decade: I 100% agree. It introduces a lot of friction, complexity, and annoyance.

Beyond taxation, the limitations with American institutions when being domiciled abroad put you into a terrible edge-case with needing to crutch on someone stateside with an address. So much stupidity.

One addendum: while FATCA is newish and bad, the concept of taxation of Americans abroad dates back to the Civil War period. FATCA only made an existing injury worse.

> "the concept of taxation of Americans abroad dates back to the Civil War period"

I'm not surprised, but could you provide some references on this...I am curious to read.

Just guessing, but I assume the Union wanted to continue to tax the Confederates who no longer lived in the Union because even though the succeeded from the Union, they were still Union citizens by birth.

seems unlikely. the Union didn't recognize the legitimacy of Confederate secession (hence, you know, the war.) the Emancipation Proclamation only applied to rebel states, as an example. they may have had trouble collecting taxes, what with the bullets and all, but amending the tax code doesn't help that.

Someone actually expanded on it down the page as a way to punish deserters.

…which is exactly what the US criticizes Eritrea for doing with its citizenship based taxation! The only other country in the world to do this.

>some negative impact on US competitiveness

Negative impact on US citizen's competitiveness, which means they're less likely to get jobs outside of the US. Which means more looking for jobs domestically, leading to lower cost of labour for corporations inside the US.

Well I suppose that’s one interpretation but I think it misses the forest for the trees. Everything I’ve come across has discussed how it exacerbated trade imbalances due to a relatively lower proportion of Americans living abroad than citizens of other nationalities. Americans want to trade with Americans, like Chinese want to trade with Chinese. So having Americans abroad in bigger numbers helps for trade which I think would have a much bigger impact than some small reduction in labour costs locally.

Why would the multinationals that set the agenda in the US care about any of that?

Most of them make more money abroad than they do in the U.S. Setting up foreign branches is critical for their ability to reach new markets. Most of these branches are setup by U.S. citizens or permanent residents who have a deep history with their U.S-based employer and often personal connections with the executives at the home office. It is much easier to retain and pay these people if the bureaucratic hoops for retaining American citizenship abroad are less, and they will be less tempted to jump ship and set up competing businesses that jumpstart a foreign country's industry if it's convenient for them to stay American citizens.

Once they've set up the foreign branch, they don't really care if they retain them. Most foreign branches aren't staffed by Americans. This is also a 1 time thing in each country that they start a branch in, not an on going concern.

>they will be less tempted to jump ship and set up competing businesses that jumpstart a foreign country's industry

The number of instances of this happening has to be close to zero.

In my experience, something else happens - someone moves abroad to set up foreign office, then jumps ship to a competitor to set up a foreign office for them too.

None of this impacts a foreign employer’s employment of an American.

》This misses the point in that the US is the _only_ developed country to impose worldwide taxation on its citizens regardless of where they live

Not really. Norway does that for 3 years after leaving. Australia is very opinionated and may not allow people to change tax residency, even after physically moving out...

Norway and....Maryland. I've lived abroad most of my career and unwisely lived in Maryland for a short time. When I left to go abroad again, Maryland insisted on taxing my earnings, despite the overseas domicile. I found trying to fight Maryland over taxes was exasperating and futile.

protip: if you live in Maryland, and plan an overseas life, establish a domicile in a tax friendly state beforehand. Then leave. Otherwise, Maryland will own you. A pox on Maryland.

You can renounce your statehood without renouncing your citizenship. Former Virginian here and I renounced my Virginia statehood for the same reason. It's common for American states to continue to tax their citizens after they leave. And there aren't really any downsides to not being a resident of any state.

That's also true for California. I established tax domicile in Nevada before expatriating.

Of course, nowadays Australia won't even let people physically leave at all!

I thought leaving was easy, but returning was the complicated part.

Nope:

> If you are an Australian citizen or a permanent resident you cannot leave Australia due to COVID-19 restrictions unless you have an exemption.

You can leave at will if you're not an Australian citizen or a permanent resident. If you are, then you currently need an exemption, e.g for work or business, or you're going to live in another country.

Does this seem... reasonable? Citizens aren't allowed to leave unless they have 'compelling reasons' and provide evidence.

People used to escape communism for such reasons.

It probably cuts down on the number of citizens who wish to enter from covid land.

3 years seems reasonable. The USA does it forever.

There’s no if ands or buts for the US citizen though, other than the normal ones like making less than $10k a year or whatever.

I've always thought it was something like a middle finger to americans who leave.

"You're not part of this project, get out and stay out." There was a bill in the 1990s to permanently ban any Americans who renounce from coming back, which is hardcore.

But we're also a country that to war over a few states leaving. Whatever the reasons, it was equally hardcore to sacrifice so many to stop it. Maybe an intense dislike of people leaving is embedded in our blood.

Humorously enough, it was actually brought in as a way of punishing deserters in the civil war. [1]

> Civil War lawmakers were clearly suspicious of Americans who chose to live overseas, especially during the nation's most desperate hour. In his fascinating study of citizenship-based taxation, Kirsch offers a particularly apt quote from one Union lawmaker: "If a man draws his income from our public debt, or from property here, and resides in Paris, skulking away from contributing his personal support to the Government in this day of its extremity, he ought to pay a higher income tax."3

[1] http://www.taxhistory.org/thp/readings.nsf/ArtWeb/3AF72D29CA...

I would say countries that prohibit dual citizenship are much more punitive towards those who leave. In the case of the US, compared to say Western Europe, we are so much more inward looking that policy towards expats is mostly one of neglect to even consider their interests.

If makes sense if we relax an assumption that the IRS and the agents therein are interested in optimizing tax revenue.

Some of her points are valid but the melodrama drawing analogies to stress from the death of a spouse, describing nearly breaking into tears every so often, and describing the consequences of her actions as something "done to her" are absurd.

Citizenship is a meaningful thing to most people. Of course it's a legal fiction, but so is marriage. Personally I've never given up a citizenship, but I imagine that it'd be an emotional experience.

I'm interested in knowing:how is citizenship a legal fiction ?

It exists only when people believe it exists. If no one believed in your citizenship, your passport would just be a little notebook with no value. When going from a world without citizenship to a world with it, nothing needs to change outside of the human brain. In that sense, it’s a fiction.

No. A passport says what country must take you when other places decide to deport you or refuse you entry.

You may be missing my point. If no one believes in the country’s existence, including the people who live in the land that the country is purported to encompass, then it doesn’t exist. Nations aren’t tangible physical objects. They exist in the collective human imagination. Yes. Your passport is just a notebook if no one believes in the country it is supposed to be for.

Sealand would be of note here. This is basically that exact scenario. Dude buys an old oil platform, calls it a country and issues a bunch of passports. Debates abound over whether they should be accepted or not.

I think its most clear at the extents. For instance, if you live in Point Roberts. [1]

Most people also associate citizenship with right of abode, but that's not always true either. For instance, the BN(O)s from Hong Kong are British Citizens who on that basis cannot live in England or Hong Kong - or anywhere. A separate document, an HKID or a visa, are required for them to live in HK and the UK respectively.

At the end of the day it's just paperwork that decides who negotiates your right to travel and is responsible for coming to get you if things go bad.

It doesn't really mean much else. Where you live and the government you engage with regularly in my opinion has far more bearing on you, your obligations and your benefits.

[1] https://goo.gl/maps/tmia7U6hef3Pvf4v8

Marriage is voluntary and almost always necessitates an emotional element.

Based on this post, apparently citizenship is also voluntary. You might say that giving up citizenship is difficult and expensive, but you should talk to someone who has gone through a divorce.

I would also counter that citizenship also almost always necessitates an emotional element. Citizenship is a primary part of many people's identity, and identity is the most emotionally charged thing of all.

Divorce might be expensive, but never getting married is cheep.

I mean sure, but on the other hand WTF? I understand not sharing the emotions regarding the country, patriotism, the 4th of July, the standing for the pledge from school years onward etc. but despite your freedom from the effects of all this it should probably cross your mind that not everyone else is free in the same way.

It's either a fiction or it's real. And given the privileges that come with being a citizen, of course it is not a fiction.

But if it is meaningful, why should it not come with a cost? Nations as constructed obviously provide value to the people residing there, should this not come with corresponding responsibilities? Like paying taxes? And if there is value and meaning to being a citizen of a specific country why should a nation not place restrictions and requirements on this privilege? I could even see for example the incentive to ban dual citizenship as one. Why is it just assumed that keeping a bunch of citizenships, not paying taxes to that country, all while not living in that country is a thing that should exist?

It seems like these people want their cake and to eat it too. If the country wasn't good enough to live in, why would you expect to keep the citizenship if you leave? "Marriage" is a two-way street..

> It's either a fiction or it's real.

This I disagree with. Nations are real in the sense that they have a material impact on the world, but are fictions in the sense that they only exist when people believe in their existence. It's like money. Obviously money is real - I have some in my wallet right now - but if no one believed in the currency then it wouldn't exist. It would just be pieces of paper.

> Nations as constructed obviously provide value to the people residing there

I would quibble with the assertion that this is the _reason_ nations are constructed, but I do agree that they provide value.

Some people's lives are just more complicated. I'm a dual citizen myself, with two citizenships from birth. I was born in Canada from two American parents. I've had two passports all my life. I happen to live in the US but I've never really chosen one country over the other. I derive identify from being a citizen of North America. There are plenty of people with slightly more complicated than average stories, they should be able to exist.

This is not “having your cake and eating it too,” it’s much more complex. It also is never a case of “the country wasn’t good enough to live in.” I would love to live in the USA. That is not where life took me. At its simplest Americans are not free to live anywhere in the world the way citizens of all other countries are (even Eritrea, the only other country that taxes it’s citizens based on citizenship, does not subject its citizens to the same tax complexity). All Americans should be outraged over their lack of freedom in this regard. 20 years ago I could not have imagined I’d end up living in Australia, but we don’t always know where life will lead us. Many people are born to American parents overseas and are required to spend thousands yearly to file or pay $2350 to renounce. Paying double tax to two countries is unachievable for the majority of us. There are treaties in place to avoid the is happening, however the cost of having a specialist accountant file every year is astronomical. I have paid over $25k to accountants and never once owed tax to the US. There are also some seriously unconstitutional and human rights violations going on. The surprise retroactive Transition tax of 2017 has financially ruined many small business owners, in some cases taking all their retirement savings. These are people who have worked and paid taxes in their residence country for their lifetime. There is a case in front of the Supreme Court challenging this right now.

But in this case, even though you were living abroad, you’re still a American citizen and required to pay taxes. It’s not America’s fault that you’re living abroad for a decade. Is your intention to stay there for life, and if so, just renounce your citizenship. If you’re not willing to contribute as a citizen, why remain a citizen?

Wow. I can’t wait to see what they do with the $0 tax I paid. It’s spending a lot more money validating that $0 tax, and I’m spending a lot more than $0, sharing information about my private life (more than I did as a US resident) to pay $0. I’m really curious what you’re expecting the $0 tax to contribute to?

But you asked, why remain a citizen? As a citizen, I can freely enter the US, even during a pandemic. When a relative dies, you want to go back and you shouldn’t have to worry about getting a tourist visa, you know? That’s not the only reason, but it’s a pretty big one.

he had pay tax, can not USA let him pay more easier?

Most people are strongly emotionally attached to their home country. Not sure why you would expect the breakup to be low-stress and unemotional.

Thats so weird. Why do people give a damn about something that only matters with legal matters and not anything about identity.

Legal matters have ramifications. She can never live in the US ever again. The loss of that option alone would be emotional for me, knowing that I have to chunk up time with loved ones into 90 day periods, or knowing that I never the option to say, move home and take care of my parents.

This comment has a sexist smell. I wonder if the same criticism would be leveled at an identical story written by a man.

Obviously, I have no idea what goes on in other peoples heads.

Honestly? It would be worse if they were a man.

People don't take kindly to men being "weak".

This comment has a blindered, dogmatic smell.

If the only tool you have is a hammer…

I don't disagree with the spirit of what you're saying. This is a burden for expat US citizens. A few notes and corrections though:

> Moreover, it makes expats ineligible for certain retirement savings in their country of domicile (as the US does not recognize pre-tax deductions for these investments, like those countries do not recognize investments in 401k’s).

This is true but unrelated to taxing worldwide income. Basically, there has to be bilateral/multilateral agreements between countries about how to treat contributions to and distributions from retirement accounts and these are very few and far between.

The US and Canada have such agreements but the US and Australia do not. So Australian superannuation accounts generally can't ever be closed so you have to keep reporting them to the US government every year, whether you're a citizen or not. Even those on work visas have to do this. Worse, it's unclear how gains in such accounts should be treated for US income tax purposes. There are literally no laws and no case law on the subject so everyone just has to guess.

> It also makes it challenging for expats to find banks willing to serve them because elf the added complexity.

So this is also mostly true but again (mostly) unrelated to taxing worldwide income. This is because of FATCA [1]. The US uses access to the US financial system as a wedge to get foreign financial institutions to report accounts of US citizens so being a US citizen imposes a reporting requirement on foreign banks that many don't want to deal with. It's easier not to offer services to US citizens. But again, FATCA reporting requirements aren't really the same thing as taxing worldwide income.

> ... lost taxes to be a mere fraction of the costs of enforcement.

The point here unfortunately isn't really to enforce anything. It's so if the US decides to get you, it's something else they can prosecute you for.

> This makes literally zero sense.

That's not strictly true either. The idea is that US citizenship is so beneficial that it justifies these costs. It's true that a US passport gives you a lot of access to various countries. I believe the US passport is right up there in the top 10 passports. I'd hazard a guess and say the only reason it's not even higher is Middle Eastern countries. Also, the State Department will make some efforts to recover and evacuate US citizens in certain circumstances.

Is this worth the hassle? Probably not but for some it is, I'm sure.

Still, there's definite room for improvement.

[1]: https://www.irs.gov/businesses/corporations/foreign-account-...

The US seems to be in 18th place worldwide along with France, Malta, Czech Republic, Greece, Poland, Hungary, United Kingdom, Canada. Based on https://www.passportindex.org/byRank.php

The ratings are skewed because of COVID-19 related travel restrictions. Looking at the rankings in late 2019, US passport had an equal or higher rank than all but 5 countries.

https://web.archive.org/web/20191128002117/https://www.passp...

In practice the 2021 108k per person foreign earned income exclusion is reasonably large and uncomplicated to claim. After that the list of countries we have tax treaties with is pretty large:

https://taxsummaries.pwc.com/united-states/individual/foreig...

As someone who lived in Italy for years, it is a total hassle to file US taxes, because you need an accountant that gets all this, and most in the US do not.

I agree with her that the system is really bad. We're in the US now, and my Italian wife has none of these hassles: we live in the US and pay taxes in the US and that's that as far as Italy is concerned.

> because you need an accountant that gets all this,

As someone who has been through this, perhaps you can explain why this is.

What makes it so different from US taxes for people living in the US? You definitely do not need an accountant here.

Americans living overseas generally go by a different financial year, for example, in Australia the financial year is July1-June 30. All income and business records need to be made to fit the US financial year. We also have different much more complex forms to fill out and have far more to report than the American citizen living in the US. All our bank details and highest balances must be reported. We also have to file forms with regards to our retirement investments. If you own your own business here it’s literally days of compiling and working out amounts. And if something is wrong, look out. The trust reporting form, 3520, (which most businesses must file) is due before your tax return, and if you don’t realise this it’s a 10k fine. Even for a trust with a balance of $0. Then another 10ks every month you are late after the fine is assessed. (It’s also worth mentioning that the IRS only communicates through snail mail and sends us letters out of some strange places, such as the Czech Republic, and they take 4 months to arrive) meaning you have tens of thousands worth of fines before you even know it. I wish this were a joke or I was exaggerating. For years accountants filed that trust form with tax returns, until the IRS suddenly realised this could be a money maker and quietly introduced the fine. There’s so much more I could write but I have to go to work. I’m just trying to say it’s a never ending nightmare, and in most cases too complex for the average person.

You clearly never owned non-US mutual funds then.

If you don’t make much money, and what money you do make is cash, you spend that cash immediately instead of putting it in your bank account, and you don’t care about retirement, then sure, it’s easy. Dead simple, in fact!

If you’re pretty normal though, it’s impossible to invest in mutual funds and ETFs outside the US unless you want to deal with PFIC filings (you don’t) and if you live in the EU, you’re double screwed, because they won’t let you buy US mutual funds either. And by the way, the accounting algorithm for FATCA is complete nonsense, because you need the highest value of each account over the year, a number that simply doesn’t exist in most banks, so good luck digging that up properly. And if you don’t, $10k fine if they prosecute.

And for retirement, I’m honestly not even sure what to do there, so yeah.

It’s a shitshow, and I’m not sure what your situation was that you didn’t feel like an accountant was useful.

This paper lays it out pretty well. There’s a parallel tax code that is more complicated, and that’s before the nuances of tax treaties factor in.

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3795480

As the name implies, that only applies to Earned Income. Not investment or business income not taken as salary or any other form of income.

> After that the list of countries we have tax treaties with is pretty large

Would need to look at the tax treaties for the specific country.

Not for things like ISA's in the UK

In practice US citizens have it difficult to even open simple bank account. Most foreign companies prefer not to deal with US gov.

Yes! Banks in Germany would flatly say "we can't help you" when I pulled out my US passport. The only one I could get was Number26, which is technically only an online bank account.

N26 is in the headlines for money laundering incompliance. Probably not at all related to average American expats, but as soon as they strengthen their processes they might find it the easiest not to do business with a couple of Americans.

> which is technically only an online bank account.

Which is technically also a normal bank account.

It depends on the country and the financial institution. I'm a permanent resident of another country and had no problem opening an account there(on vacation there the first time no less). Another user here reports a very easy experience opening an account with an institution in the Netherlands.