Tuesday, May 15, 2012

1,780 people apparently love money more than they love the U.S.A.

As this article from Forbes point out, the United States has one of the lowest marginal tax rates in the world.  Despite this, as the Miami Herald wrote about here, since 2008 the number of people who have renounced their United States citizenship in order to avoid disclosing foreign account information to the Internal Revenue Service has grown from 226 in 2008, to 1,780 this year.

According to the article this is because the IRS has stepped up efforts to track down and prosecute U.S. citizens who hide money and other assets in foreign bank accounts.  The article notes that the increase began in 2009 because the Swiss Bank, UBS AG agreed to give the United States the names of thousands of Americans who had bank accounts with the bank.

How does one renounce citizenship?  Much to my surprise, the answer to that question is found on the State Department's website.  You have to go to a U.S. Embassy or Consulate and sign an oath of renunciation before the officer tasked with taking renunciations.  Put another way, you cannot renounce your citizenship while still living in the United States.

The State Department's website also points out that renouncing one's citizenship does not have any effect on taxes you might owe at the time of renunciation.  So, it is entirely possible that the 1,780 people who renounced their citizenship did so without achieving the desired effect.  Some would call that poetic justice.

Finally, when I typed in the words "how to renounce" into Google, the top suggestion was "how to renounce US citizenship."  The next suggestion was "how to renounce Catholicism."  If the next suggestion had been "how to renounce loving peanut butter cups," I would have thought that Google knew too much about me.  However, the third suggestion was "how to renounce Russian citizenship."  So instead of being disturbed that Google knows too much about me, I am left wondering if the Google suggestions mean that people are more likely to be unhappy with paying one of the lowest tax rates in the world than they are living in an autocracy.


  1. In short, this is all based on the fact that the US is perhaps the only country in the world that taxes its citizens no matter where they live. It is not as though folks living in Palm Springs can just renounce their citizenship and somehow get out of taxes. This is for people who have left the country and are living somewhere else, thus no longer consuming any governmental resources. And they're still on the hook for an unfair and confiscatory "exit tax"!

    Maybe I'm a weirdo, but I don't see this any differently than when someone moves from Minnesota to Florida in order to avoid state income tax. The salient difference is that Minnesota doesn't force you to renounce your state citizenship to get the more favorable tax treatment.


Comments on posts older than 30 days are moderated because almost all of those comments are spam.