Wealthy Americans Relinquish U.S. Citizenship to Avoid High Taxes

In 2012, a Bloomberg report found a growing number wealthy Americans were choosing to give up their U.S. citizenship rather than pay high taxes when living outside of the country. Now, in light of the expiration of the payroll tax cut, 2013 could be the biggest year for expatriation due to high taxes to date.

Some of the more notable Americans who have recently given up citizenship include actor Jet Li, Facebook co-founder Eduardo Saverin and socialite Denise Rich.

U.S. Zeroes-In on Tax Evasion

Four years ago, whistle-blower Bradley Birkenfeld triggered a crackdown on tax evasion, which was meant to stop wealthy Americans who stored money in offshore accounts to avoid paying high taxes.

Though this was intended to stop Americans living in the country who stored money in other places, it also applies to individuals living outside of the U.S. who store money in the banks of countries they reside.

The U.S. is the only nation in the Organization for Economic Cooperation and Development that taxes citizens wherever they reside. In facing taxes within foreign countries they live in as well as paying American taxes due to their U.S. citizenship, many wealthy Americans are weighing whether remaining a U.S. citizen is worth it.

Americans Giving Up their U.S. Citizenship

Andy Sundberg, secretary of Geneva’s Overseas American Academy, shared that 1,780 expatriates gave up nationality at U.S. embassies last year, which is an increase from 235 in 2008. The number has increased so quickly that the embassy redeployed staff to clear the backlog of Americans queued to relinquish their passports.

Another reason Americans are ready to give up their passports is that many non-U.S. banks feel it’s too risky to deal with Americans abroad after the Birkenfeld and the U.S. probed USB and 11 other Swiss financial firms for aiding offshore tax evasion.

Due to difficulties acquiring accounts in some countries and facing taxes from the United States, Americans are deciding  that giving up their U.S. passports and relinquishing their citizenship is the right choice to make.

Comments
  • These are no doubt some of the same people who have loudly protested about how the U.S. government is so gosh darn mean to rich people by making them pay taxes.

    • JaneS.

      There are seven million U.S. expats 82 percent would never owe a dime in taxes to the U.S. due to tax treaties already in place and the VAST majority are not “rich” It is a MYTH that those who don’t live in the U.S. are all on islands sipping champagne on yachts sold to you by the U.S. government. The majority of U.S. expats are in Canada *one million* and no one moves to Canada to run away from taxes.

  • penick

    Will we be soft and let em back in if they come crawling/crying? Probably- thats the american way, correct; like the poor going to the emergency rooms today, and we tax paying worker bees have to pay for that/them too.

    • JaneS.

      Why would my Canadian spouse “come crying” to move to a country he’s never lived in. Good god what most U.S. persons know about citizens abroad and their families could fit into a thimble.

  • As an american working abroad I can see why one might consider giving-up their citizenship to avoid unfair taxation on overseas income. I assure you, its not just wealthy Americans doing so. Personally, I wouldn’t do it; but thats just me.

    Not only do we pay taxes on income we earn outside the U.S. (despite never being there), every time we use our US credit or debit cards we’re hit with a hefty currency conversion fee (up to 6%). That gets really old.

    If one has no intention or need to reside in the U.S. in the future, giving up the citizenship is a good move.

    Despite what people may believe, there are many nice places to spend your life outside of the U.S. Its pretty arrogant to believe they will come crawling/crying to get back in (as if its heaven-on-earth).

    But then again, we Americans are known for being arrogant aren’t we?

  • Poohbear

    As a non-wealthy American living outside the US, I take umbrage with Nunya and penick’s assertions.

    I think it’s really stupid that I have to pay taxes to the US. I haven’t lived there in over four years, and I don’t spend or make money there. Why is it that the US is one of very few countries in the world that does this?

    It’s like permanent servitude, in my opinion.

    I moved here so my kids could go to a good schools without paying too much money for too little, plus universities here are actually affordable. I don’t want to saddle my kids with unpayable debt.

    Enjoy your future in the US as the economy continues to circle the toilet though!

  • INTJ

    It is foolish to think that people – any people – will simply accept double taxation. Within the U.S., we have arrangements to avoid multiple states taxing the same income; it is both grossly unfair and phenomenally stupid to think we can do so to our citizens at a national level.

  • sjb

    We are doomed if Ron Paul doesn’t get elected. Mittens or barry will just continue the good cop-bad cop extortion of the masses to pay money to their friends…repubs pay out millions to the missile manufacturers and keep the wars going so the missile stockpiles stay half empty, and the demons pay millions to their solar panel buddies while we just keep getting closer and closer to the $1,800 loaf of bread and riots in the streets. Ron Paul will veto everything that comes before his desk and send the power back to the states where it belongs. Then you and your states can do as you please and have liberty. You wanna do social security, fine, you in your state vote to pay for it and do it. States are sovereign. Don’t like what your state is doing, you are free to move…because you are free! Sure Ron Paul will shrink the department of education to an almost unrecognizable department, but that’s good. Not one of you reading this or anyone you’ve ever known has ever learned any thing at all from the federal department of education. And you all have local department of educations to look to if the teachers in your towns need help figuring out what to teach. We have too much federal government. Shut it down, leave us alone.

  • sjb

    Remember the FAA was shut down for 2 weeks last year and not one flight was delayed. Federal government is legal plunder. Turn the power back to the states and do any programs you want.

  • DIck Brandlon

    So nobody likes taxes. So how in the name of God can we pay for what we get? Who will pay the armed forces? Who will fun the folks that test meat for mad cow disease? Who pays the people that make sure we don’t get another thalidomide in the U.S.?

    One of the great conservative priciples I was reaised with is that you don’t get anything for nothing. Those who bitch about taxes and still want the government to do things for them are moochers and free-loaders.

  • Jonathan D

    My retirement pension is taxed regardless if I move abroad. I will not take advantage of amenities in the US nor I would contribute to polution. I would think the tax rate should be lower for people like me. In addition, I will be taxed by the US for part time work even though the host country will tax me.

  • Dave S

    I can’t understand why people are parroting Faux News propaganda about the poor not paying taxes. In this country the less money you make the more you pay as a percentage of income, those are the facts.

    You can’t forget state and local taxes, social security and medicare, sales and property taxes and fees for services. America has it all exactly backward.

  • Jim M

    Well, if folks are too cheap to pay taxes then I am glad they relinquish thier citizenship. When these people are attacked or terrorized or otherwise victimized we won’t have to spend money to defend or rescue them. It all works out.

  • Stan G

    “Good Riddance to Bad Rubbish”

  • FedUp

    Wait, what happens when they want to move back or buy real estate? I say reform immigration and get the illegals out. You can’t buy real estate if you aren’t a citizen, etc. If you want taxes to go down for everyone make sure everyone is paying their fair share of taxes first. I don’t care how poor you are you should pay too, when you get more out than what you put in that’s wrong. Second, I’d love to know and be able to vote on what and how MY money is spent. That would be a nice change and I’d start by not funding all those religious pregnant teenage skanks and their illegitimate offspring. I think their parents and CHURCH should foot that huge bill!

  • Marty G

    The US is the only country that taxes its citizens even if they don’t live in the US and even if their income is not from US sources.

    Other countries do not tax their citizens who live abroad, unless they have income generated from that country. The US should adopt a similar tax policy.

    http://www.aca.ch/residencetaxproposalapril2012.pdf

  • Dennis H.

    Wealthy Americans are typically Producers and may continue leaving in mass not to avoid paying taxes, but to find countries that reward their creativity.

  • Carlos Bagram

    It is very easy for those here who say good riddance to wealthy Americans who leave and don

  • hubble

    All the wealthy who give up their citizenship to avoid paying taxes should not be allowed back when things get rough and start crying to the us to let them in.

  • Angry American

    Good bye! Good riddance! Don’t let the door hit you in your kiester on your way out!

    Hopefully some of our circus clowns in Congress or federal government will have wits enough to make sure these expatriates are not continuing to cast absentee ballots.

    Oh, and when you fat cat expats get in a bind out there:

    You went away and left me long time ago
    Now you come back knockin’ on my do’

    I hear you knockin’ but you can’t come in
    I hear you knockin’, go back where you been

    I begged ya not to go but you said goodbye
    Now you come back tellin’ all those lies

    I hear you knockin’ but you can’t come in
    I hear you knockin’, go back where you been

    If you had a-listened long time ago
    You wouldn’t be goin’ from do’ to do’

    I hear you knockin’ but you can’t come in
    I hear you knockin’, go back where you been

  • eg smith

    people should read the law about relinquishing citizenship in the US. Many people have done it and do it for estate planning. At the time of relinquishment you have to give 50% of your current net worth to the US. Politicians leave this fact out because it doesn’t fit their agenda or the foolish idiots that listen to them. The reason the guy from Facebook relinquished his citizenship long before the stock went public was to avoid MASSIVE taxes. He still paid many millions of dollars to forgive his US citizenship, but no one in the media will mention this. It doesn’t fit the template. I know a guy who gave up his citizenship in the 80’s( he moved to the Bahamas) because he is heir to one of the largest media empires in America. He did this when he was a mere minor millionaire and it did not cost him that much. When his 90+ year old mother dies he will be a MEGA-BILLIONAIRE. People don’t plan to fail, they simply fail to plan.

  • Its not the tax issue.Its what we do with the taxes its what we waste with welfare and disability ripoffs and excessive federal employees,especially the managers and directors we should can about half of them as they are useless.Its not about helping the poor or the sick or the elderly.We can give these people who deserve it more .Its about the govenment letting us get ripped off no one is being responsible for the spending.Why pay more taxes
    it will just be poured down the toilet.

  • This country was started because people were being ripped off for taxes by the King of England.While he sat on his fat a**.

    Who will check all the meat? What about Thalidomide.First of all the govenment doesnt check the meat the processors check it and the govenment just looks at their records on a monthly or quarterly basis.Thats why we have all the bad meat and people dying the govenment is doing nothing as far as bad medicine look at all the law suits against medicines the FDA has approved.We need federal govenment for sure.
    But we need a govenment that is responsible not the fat bloated pig we have now.The meat processors start the recall not the govenment by self reporting.

    Religious skanks would probably be at the bottom of the unmarried women pregnacy list.
    Try 65% blacks born without a father 45% of latina’s without a father and 25% of Whites
    Dont believe religiuos skanks made the top 100.
    Shows how much hate you have for others and how ignorant you are.The govenment has created a welfare system that only perpetuates the racial
    injustice done to blacks by the govenment.No amount of welfare money will bring a great life when you are living in the getto and attending school in the hood and your kids are seeling drugs and robbing and being shot.Thats all on this govenment all parties for decades.

    • The_Universal_Curmudgeon

      “This country was started because people were being ripped off for taxes by the King of England.While he sat on his fat a**.”

      Loren, if you will actually check your American history, you will find that the taxes that the colonists objected to paying were for the upkeep of the troops that the colonists demanded that the British government send to the colonies so that the colonies could kill off the Indians in the lands that the colonial governments had ceded to the Indians (as independent and sovereign nations) by treaty – because the colonists wanted to take that land for their own uses and profits.

      As far as the “Boston Tea Party” is concerned, most of that was organized by the people who were smuggling tea to avoid paying the taxes on its import – which sounds fairly reasonable until you consider that the tea that was being dumped into the harbour was tax paid tea which the people importing it legally could sell for less than the people who were smuggling it (and not paying taxes on their cargoes) could. [In short, the crooks were complaining that the honest people were making more money being honest than the crooks could make by being crooks.]

  • Katherine

    In response to Loren: No, this country was not started because the King was ripping people off by taxation. The issue was taxation WITHOUT REPRESENTATION.

    Additionally, this government may be “fat and bloated”, but it’s become that way because of wars undertaken by Bush and Cheney who went into office with a surplus (courtesy of Bill Clinton) and left office with a huge deficit.

    The people are by no means receiving benefits that could count them as part of the “fat and bloated” part of this deficit.

    I wish you people would get off of the “welfare” wagon from the 1940’s and 1950’s. Most people in this day and on these forums are well educated and gainfully employed, but being educate, they are well aware that jobs are here today and gone tomorrow, therefore, they may rightfully be concerned about having access to a safety net, not “collecting welfare”.

    Your argument is ludicrous and completely invalid.

  • AtticusinCanada

    This article could not have got the reasons for renouncing more wrong if it tried! Fact one: Most expat Americans live in high tax countries and are not rich people “off shoring funds. Fact 2.) Most expat Americans are outside the U.S. due to family reasons NOT to “escape taxes” Fact 3.) The country with the highest number of American expats is Canada. Nobody moves to Canada to escape taxes. This article is not only wrong, it is irresponsible!

    People here are renouncing but, most would owe no tax to the U.S. due to the current treaty in place. They are renouncing because of FATCA. Foreign spouses and children are included in this reporting. People who are NOT American. People who pay their tax in the country of their birth and who may happen to have an American spouse or child. In those cases the foreign person objects and rightly so to having their private bank data turned over to a FOREIGN nation to them. In some of these cases the American in the family makes ZERO of the income. Therefore, a foreign person is being reported on to the U.S. for no good reason. Any fine assessed on FBAR would come out of the foreign persons income. This is an incredible hardship on low and middle income expats. The super rich don’t care about this as it is not as big a burden to their family!

    Many of these people don’t “want” to renounce but, are forced to since if you have a spouse who is not American making ALL of your income in a high tax country who objects to the U.S. reaching into their account, you don’t have much choice. Banks will close your local checking accts if you don’t sign away your rights. FATCA violates the Charter of Rights in Canada which is the same as the U.S. constitution. What FATCA does is ask foreign persons who have ONE American in the family to sign away their rights even on zero tax owed. Many people are saying “no” to this.

    Expats are demonized in the U.S. frequently due to irresponsible lies told by the press. This article is one of those irresponsible ones. If you don’t have a clue why a low or middle income expat would renounce *and we are the BULK being forced into this* then ASK someone! American Citizens Abroad has the stats you could have used. Democrats and Republicans Abroad both have organizations but, you didn’t SOURCE anything credible at all! You made very harmful assumptions and then wrote this.