I try not to get angry and frustrated over the way the U.S. taxes citizens who live abroad. I’m not always successful.
No-one likes paying taxes, but most of us do pay them and I think most of us pay them honestly. We try to maximise whatever legal tax advantages we have. Then, even though we often grumble about it,
In a previous post, Dual Citizenship and the ‘M’ Word (Money), I wrote about paying taxes to both Australia and the U.S. They operate on different financial years, so every six months, I must pay tax to one country or the other.
Soaring Expat Taxes
Last April, the International Herald Tribune wrote about the increasing tax burden on U.S. ex-pats. I don’t mind paying taxes when I think they’re fair. To me, a basic element of fairness would be: if you earn income in country X, you pay tax on that income to country X.
This is not the case with the U.S. As described in the Economist 14 June 2008, “that expats want to leave (i.e., relinquish U.S. citizenship) is evidence of America’s odd tax system. Along with North Korea and a few other countries, Americans are taxed based on their citizenship, rather than where they live.”
I don’t want to give up my U.S. citizenship to avoid U.S. taxes (or for any other reason). I do want to feel that what I’m paying in taxes, to any country, is reasonably fair.
The Cost of U.S. Citizenship
I would call the U.S. tax system more than odd. I’d call it unfair.
Even if all of your income is earned outside the U.S., you must still pay tax on that income to the U.S., after it’s taxed in the country where it’s earned, based on their laws. There are threshold exclusion amounts, but the bottom line is you must pay tax to the U.S. even if none of your income was earned in the U.S.
When I visit the U.S., I am to all intents and purposes a tourist. We hire a car, stay in hotels, and eat out.
The Serenity Prayer
Aside from the practical issue of making time to do one’s tax return (and paying whatever amount may still be due), paying taxes for me raises emotional issues about personal responsibility, loyalty, and allegiance to one’s country or countries of choice.
Clive says he doesn’t know of any other country that charges a large annual fee to be a citizen.
I figure the best I can do is remember the serenity prayer, keep telling myself to accept the things I cannot change, and get on with doing my U.S. taxes.
Grrr. Good luck and bon courage to my fellow American expats as we all do our U.S. taxes, wherever we may be.
Filed under: Family Globalisation |