The Constitution of the U.S. guarantees anyone the right to end their U.S. citizenship, the freedom to live and travel abroad freely, and the right to acquire dual citizenship from other
nations. All of these rights have been upheld by rulings by the Supreme Court.

For nearly twenty years, prior to the tragedy occurring on 9-11 and the start of the War on Terrorism, a significant number of U.S. citizens made the decision to leave this country and went to establish new homes offshore. However, it can’t be stressed highly enough that doing this does not excuse American expatriates from paying their U.S. taxes. It’s been said time and again in other articles that, as long as you are a U.S. citizen or resident alien, it makes no difference where you live: you have to pay your U.S. income taxes!

Lawmakers in the U.S. in the past few years have found a scapegoat in the comparative few ex-U.S. citizens who have renounced their citizenship. Aside from these constant attacks by politicians, what the real issue here is exorbitant taxation. This is the confiscatory rate driving away wealthy Americans who are paying the lion’s share of taxes, are doing the most investing, and are creating the needed jobs.

It was recently reported that the U.S. Congressional Joint Committee on Taxation has published a lengthy review that proves that the IRS has not enforced special tax rules against those individuals who have renounced their U.S. citizenship or permanent residence status in order to avoid having to pay U.S. taxes.

Following a flurry of publicity in 1995, these punitive rules were passed by Congress, naming a few wealthy people who had circumvented paying U.S. taxes by expatriating and acquiring a second citizenship. At the moment, another one of these anti-expatriate tax provisions is concealed in the omnibus highway bill which is now pending in Congress. This bill imposes a huge capital gains tax on all of tax exile's property on the date he officially ends his citizenship.

The reason behind these laws not being enforced is simply because they are unenforceable. How can the U.S. government pass judgment on whether a person intentionally departed the U.S. to avoid having to pay taxes? Furthermore, how can a clerk who works in the immigration department prevent a U.S. expatriate from visiting the US on the same basis? All of this is nothing more than nonsense made into law.

So, instead of punishing the expatriate for taxes, Congress instead should adopt real tax reform and cease from playing for headlines at the expense of the people who do pay the majority of the tax. Because, if Congress fails to do so, these people will leave, and they’ll pay no more.

If you would like more information regarding asset protection, trusts, family limited partnerships or the subject of this article please call or email our office.