Land of the flee: why, despite Obama's re-election, Americans are renouncing citizenship in droves

Our writer, an American expat, loves her country too much to say goodbye to it forever. But an increasing number of US citizens are turning way from Uncle Sam. Why?

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Not all Americans wrapped themselves in the flag last week, as the world watched our presidential election unfold. Despite shows of hysterical patriotism broadcast on election night, a growing number of citizens have renounced their home country, which they see as having an increasingly anti-expatriate government that’s only interested in collecting cash and giving virtually nothing in return. 

Since President Obama took office in January 2008, nearly 5,000 people have voluntarily surrendered their American passports, according to data made available by The United States Office of the Federal Register. Last year alone, nearly 1,800 US citizens went rogue, compared to about 230 four years ago. Renunciation figures shot up shortly after the UBS scandal of 2008, when the Swiss bank was caught helping thousands of Americans evade taxes, a revelation that led to tighter restrictions on overseas bank accounts. Many in the expat community believe that the US government has gone too far in its monitoring of foreign bank accounts and taxing on assets and worldwide income. And for the defectors, financial freedom has become more important than heritage.

Under US law, Americans are required to pay taxes on worldwide income. Even if they live and earn money outside of the borders of the United States, US citizens must pay taxes on assets and income. The Internal Revenue Service allows for a foreign tax credit to offset the cost of paying taxes in an expatriate’s country of residence. However, the credit only works out favorably if the taxes paid in the resident country are equal to or more than that of the US. But, if the tax bill in the resident country is less than that which would be owed in America, the difference must be paid to the US government.

Resentful

Even more unnerving than paying taxes and receiving virtually no benefits, are invasive reporting edicts, also known as Report of Foreign Bank and Financial Accounts (FBAR), which have turned the term offshore into a dirty word. US citizens must report to the Department of Treasury any foreign financial accounts in which they have an interest or signing authority, if the value of the foreign accounts exceeds $10,000 (£6,000) at any time during the year, according to the IRS. Breaking the rules could result in steep financial penalties or criminal charges.

“There’s this belief that the US is a club that everybody else in the world wants to belong to, and if you’re leaving it, there must be something wrong with you,” said one American-Londoner who asked to remain anonymous because he is still in the process of renouncing his citizenship. “It’s a real pain in the ass to have an American passport nowadays, with the additional requirements of opening a bank account and having a business. I guess there is some bit of me that is resentful that I have to pay taxes in a country that I don’t benefit from the structure that the taxes go to.”

As an American expatriate, I dislike the stress of filing tax returns and financial forms, but I would never renounce my citizenship because I simply love my country too much and am too deeply tied to my Yankee roots. However, living abroad on-and-off for the past seven years has shaped my perspectives on America and the idea of leaving her, and I empathise with my compatriots who feel forced to either pay-up or pack-up. Like most countries in the world, the United States could avoid losing thousands of people by loosening the chokehold on expatriates and allowing us to suspend our tax burden on income earned offshore.

“There isn’t any common sense applied to the law,” said Tristan Brandt, an entrepreneur and dual British and French citizen who renounced his American birthright earlier this year. “You either comply with no upside or you’re in breach of the law. You end up having to take that judgment call. Do you want to be on the wrong side of the law and hope they don’t catch you? The way technology is going, it could be a mine you don’t expect to step on but that blows you up in the future.”

Brandt, 41, who has an American parent, was born in Britain and lived in the United States for about five years after graduating from university. He decided to give up his citizenship after he returned to London as a young adult and started making money and buying property. It wasn’t until he built up some relative wealth that he realised the high cost of maintaining his US citizenship. In the end, he spent about $20,000 (£12,000) to rid himself of it.

Toxic

Aside from the actual duty paid, just keeping compliant demands hours of administrative work filling out forms and thousands of pounds spent each year on professional tax preparers. This hassle factor compounds the anger felt by many long-term expatriates fed-up with the unrequited love from their mother country. And like most parent-child relationships, the situation is complicated—fiscally, administratively and emotionally.

“My father died two years ago, and I didn’t really pursue [the renunciation] until after he died,” said the anonymous American, who has lived abroad for nearly 30 years but grew up in the Southeastern United States and played American football at his university. “I think he would have been disappointed. If I reversed the rolls, I would have felt the same way he did. He grew up and spent his whole life in the real American century at a time when we were truly leading the world.”

A toxic combination of frustration, financial burden and fear of further regulations has created a new anti-American movement among our own people. For those defectors, bitterness has replaced any shred of nostalgia for the United States. If a compromise solution were available, especially for those citizens who intend never to live in the United States, there would be less fleeing and more flag-waving Americans making an impact across the globe.    

“I really remember feeling quite a strong emotion of unhappiness when I was in the consulate having to renounce because I was aware that my affiliation to the US was ending there. I found that to be quite annoying and disappointing,” said Brandt.

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