Professor Colleen Graffy, "America's Backwards Tax System is Forcing Ex-Pats to Cut Ties with the US" -- The Telegraph UK
Professor Colleen P. Graffy's opinion article, "America's Backwards Tax System is Forcing Ex-Pats to Cut Ties with the US," is published in The Telegraph UK. The article considers that Americans living abroad are subject to tax both in the country where they live, and in the United States.
"America's Backwards Tax System is Forcing Ex-Pats to Cut Ties with the US"
The President of the United States, Joe Biden, could have been meeting with one of America's most influential citizens living in the UK, but, due to short-sighted US legislation, that will not be happening. I'm speaking, of course, about UK Prime Minister, Boris Johnson, who held dual US-UK citizenship until 2016 when he renounced it due to the onerous consequences of US tax laws.
The United States is the only country in the world that taxes based on citizenship, rather than on residency. This means that Americans living abroad are subject, not only to the taxes in the country where they live, but also to the long-armed reach of the US tax authorities. This policy affects not only Americans but their non-American spouses and families as well. It is the reverse of the "Downton Abbey Syndrome." In the past, the titled but impoverished aristocracy would look to wed an American heiress. Now, parents of wealth are understandably horrified if their son or daughter is dating an American. Marriage to an American means that Uncle Sam can charge a capital gains tax on the sale of your family home—even though you already paid the Stamp Duty. It means that your pension can be taxed and that you will pay tax on any gains in the US-UK exchange rate of your mortgage—even though the mortgage was in pounds and never converted to dollars. If there was ever any concern by the Royal Family about Prince Harry's marriage to Meghan Markle, it was likely the tax implications of his marrying an American.
America's citizen-based tax policy combined with the 2010 Foreign Account Tax Compliance Act (FATCA) created conditions that have forced Americans into renouncing their citizenship in the tens of thousands; 2020 saw a 260% increase over 2019. In the ex-pat community, the tales of tears are legion as individuals are driven to relinquish a part of their heritage due to bureaucrats and legislators with no concept of the long-term strategic importance of the public diplomacy role these citizens fill.
Even "accidental Americans" cherish their association with the US and are reluctant to renounce their citizenship. In 2014, Boris Johnson, who was born in the US but left when he was five years old, was asked on NPR why he continued to keep his US passport. He confessed, "it's very difficult to give up." Bipartisanship is alive and well - in the international American community. Democrats Abroad and Republicans Overseas joined with independents and the apolitical to implore Congress to grasp the detrimental effects of this policy. Unfortunately, unlike France and Italy, and other countries, American citizens abroad have no representation in their government. This fact makes a mockery of the debates in Congress over giving 700,000 individuals in Washington, DC statehood when 9 million Americans (if combined as a state, they would be the 11th largest state in the Union) have no voice.
When Biden said, "every [American] over the age of 16 is now eligible to get vaccinated," no one was thinking about Americans abroad. FATCA is also controversial because it applies to non-US financial institutions, which are required to provide information about US account holders—often in contravention of privacy and data protection laws.
Additionally, nations with US citizens lose money that might otherwise be spent and invested in their own country if it weren't sent back to the US. As Biden looks to restore America's leadership role in the world and to rally traditional American allies, he should give a thought to the 9 million Americans living abroad who are a source for American soft power. Many know the culture and speak the language; they represent American values and create opportunities for trade and commerce. They are unpaid goodwill ambassadors who reach all parts of the globe.
Sir Winston Churchill's mother was American, and he was keenly aware and proud of his American connection—as were Americans. Keeping and fostering these connections is strategically wise. Creating the conditions that force people to sever these ties is reckless. In 1963, to the delight of both Churchill and America, President John F. Kennedy conferred honorary citizenship upon Sir Winston. If things go well between the Prime Minister and the US President, perhaps Boris could receive the same honor as his hero, citizenship--but without the tax bill.
The article may be found in The Telegraph UK (registration required)