Paul L. Caron
Dean


Monday, June 13, 2011

Number of U.S. Expatriates Continues to Soar

Following up on my previous post, Number of U.S. Expatriates Doubled in 2010 (Mar. 10, 2011): Andrew Mitchel reports that the number of individuals renouncing their U.S. citizenship (or terminating their long-term U.S. permanent residency) and expatriating from the U.S. continued to soar in the first quarter of 2011:

Chart 1 
Chart 2

Update: Wall Street Journal Wealth Report, Are Taxes Causing the Rich to Renounce Their Citizenship?:

Why is this happening? The IRS doesn’t tell us why people expatriate, or who they are or where they go. Lawyers say most are wealthy Americans who have expatriated to all manner of countries.

One argument is that they are leaving because of President Obama and the nation’s leaders.

“There is growing concern, particularly among the wealthy, about the future financial direction of the country,” said Paul L. Caron, Charles Hartsock Professor of Law at the University of Cincinnati College of Law. “This President constantly demonizes the wealthy, who undoubtedly are concerned about the tax policy that would emerge in 2012 if a re-elected Barack Obama, unconstrained by re-election concerns, finally confronts the budgetary train wreck that he has done so much to exacerbate.”

Other attorneys who specialize in helping the Americans expatriate say the reason is that the IRS is cracking down on overseas bank accounts and offshore income.

https://taxprof.typepad.com/taxprof_blog/2011/06/number-of-us-expatriates.html

Tax | Permalink

TrackBack URL for this entry:

https://www.typepad.com/services/trackback/6a00d8341c4eab53ef01538f1b5f9f970b

Listed below are links to weblogs that reference Number of U.S. Expatriates Continues to Soar:

Comments

You can work until your 80 in the US and retire in your new mobile home in anyville USA, or retire in luxury at 50 on the beach in Mexico, Thailand, or 100 other countries. You pick!

Posted by: JT | Jun 13, 2011 12:43:30 PM

By law, the Treasury Dept is required to publish a quarterly list of persons abandoning US citizenship but there is no such requirement for persons abandoning long-term permanent resident status.

For what it's worth, there is no published data on LTPR "expatriations" and no such data appear to be included in the statistical summaries contained in this post.

The statistics here are citizenship expatriations only.

Posted by: John | Jun 14, 2011 12:39:30 AM

Prof. Caron,

This strikes me as the global equivalent of people fleeing the inner city for the suburbs. how well did THAT work out for cities like Detroit?

Posted by: T | Jun 14, 2011 5:54:11 AM

Alec Baldwin's still here, though.

Posted by: Jim | Jun 14, 2011 5:54:41 AM

Think it's bad now? If Obama gets reelected in 2012 those numbers are going through the roof.

Posted by: J6P | Jun 14, 2011 6:14:56 AM

When I worked for a major semi-conductor company I was responsible for checking educational references for our foreign educated, non-citizen applicants and got to meet and interview them in depth.

Almost every one of them viewed American citizenship as a "hurdle" they had to overcome in order to qualify for the higher paying jobs. None of the ones I spoke with had any intentions of remaining in the U.S. once they retired from the job.

Later in their careers most already had retirement homes in India or China.

A lot of your numbers reflect those engineers I interviewed in the early 90s and I expect you’ll see those numbers increase as more of the better educated foreigners retire and return to their home country, mostly, in my experience, India.

Posted by: RetiredE9 | Jun 14, 2011 6:21:06 AM

You can be an expat without abandoning your US citizenship, though. I've lived overseas for around 20 years now but still value my US passport and still vote in US elections, and there are more than a few of us in that situation. In many countries, you can even take citizenship of the new country and you don't lose your US citizenship unless you specifically renounce it.

I imagine there'd be a lot more people leaving the US at the moment who aren't going to the extreme step of renouncing their US citizenship.

Posted by: SD | Jun 14, 2011 6:24:48 AM

Any sources that say where they go? Don't some older millionaires go to Ireland to avoid estate taxes? Or maybe people going to Canada for healthcare?

In itself- no idea what these numbers mean.

Posted by: Mastro | Jun 14, 2011 6:45:02 AM

Is there a way to tell where they're going?

Posted by: R | Jun 14, 2011 6:59:44 AM

I wonder if these expatriates realize the USG still taxes them for 10 years after they renounce citizenship?

Posted by: Aaron | Jun 14, 2011 7:27:10 AM

The US used to be the nation that everybody wanted to get into. Now, under Obama, if you are productive, is the US becomming a nation that everybody wants to get away from? But dont worry, we will have plenty of poor illegal immigrants to replace them.

Posted by: richard40 | Jun 14, 2011 7:40:18 AM

It's funny how people were threatening to leave the country under Bush but Obama does that job magnificently without anyone threatening to leave the country.

Posted by: Kaitian | Jun 14, 2011 8:04:20 AM

Yes, one could retire to Thailand and such, but if your retirement income is Social Security and it is reduced directly by Congressional decree or through inflation, that foreign retirement might become less desirable. However, it is what I intend to do.

Were I to renounce citizenship but still get USG tax demands, I would just pitch them. Of course, that would be after I had moved all my assets out of Obamanation.

I spent nearly 20 years in Japan and returned to start a new career in the US. Education is a big chunk of that, so the job market is largely irrelevant for me. I work in a factory making $13/hour while waiting for term to start. Increasingly I view life abroad with fondness: better pay, better conditions, no need to drive always, no US TV, longer vacations. If Obummer or the GOP Obama--Romney, GObama?--is elected, I'm heading back abroad and chucking my new career plans, because Obama et. al. will have nipped their chances of coming to fruition in the bud.

Posted by: Comrade_Tovarich | Jun 14, 2011 8:18:27 AM

From the old spiritual:
"oh sinner man, where you gonna run to?"

Where on Earth would anyone leaving the USA want to expatriate?

Stay here, make our stand, throw out Obama, cut the Federal government in half, and run Liberals out of the MSM, Universities and Government. Save America First.

Posted by: Paul A'Barge | Jun 14, 2011 8:30:15 AM

What we need is a way to keep people from leaving, like an Iron Curtain or something...

Posted by: John | Jun 14, 2011 8:48:08 AM

Maybe they are leaving before the U.S. hits the proverial iceberg and can't get off. I would if I could afford it.

Posted by: robertsgt40 | Jun 14, 2011 9:09:01 AM

>You can be an expat without abandoning your US citizenship, though. I've lived overseas for around 20 years now but still value my US passport and still vote in US elections, and there are more than a few of us in that situation. In many countries, you can even take citizenship of the new country and you don't lose your US citizenship unless you specifically renounce it.

>I imagine there'd be a lot more people leaving the US at the moment who aren't going to the extreme step of renouncing their US citizenship.

I am an expat and in fact a US tax expert living overseas. The issue is you can live overseas without giving up your US citizenship (which is what I do, I have a US passport with a UK Visa).

However, a US citizen or green card holder must pay US taxes on world wide income even though they live outisde the US. Credits for foreign taxes paid and exclusions for foreign earned income reduce my US taxes, but I still have to fill in a form. Some ex-pats are finding that they owe no taxes, but get hit with big penalties for never filing a return.

Another issue alluded to above is FATCA -- which even if you are complying with US law makes a foreign bank or brokerage account more expensive.

A friend of mine is a US tax person in Switzerland. He said the waiting list at the US consulates there was so long he sent someone to another country to renounce his citizenship.

Posted by: Room 237 | Jun 14, 2011 9:31:56 AM

Despite some pretty stupid comments within the WSJ article quoting Paul, there is one commenter that makes sense and provides a good link on the subject.

9:08 pm June 13, 2011
Marc wrote:

Anyone who has an interest in this and cares for the future finacial health of the United States, and in order to set the record straight as to why so many U.S. citizens are now renouncing their citizenship, you must read the article, whose link is: http://www.aca.ch/joomla/images/pdfs/taxnotes.pdf Poor reporting, as in the article above, only serve to give people the wrong perceptions as to why so many thousands of U.S. citizens are renouncing their U.S. citizenship. Again, for the vast majority, IT IS NOT BECAUSE THEY ARE TRYING TO AVOID PAYING TAXES…NOR BECAUSE THEY ARE RICH!!! That may be true for a very small minority. The majority want out because U.S. tax policy is so out of synch with the world that we are living in, that it has made it nearly impossible for any middle-income American wanting to lead his or her life abroad (usually married to a foreign spouse), paying their taxes in their country of residence, to even open a bank account or get a bookkeeping job. Americans are the new global outcasts among foreign employers and bankers. These are the same Americans who would happily create businesses abroad, importing U.S. goods and services and creating jobs back home. But no, the U.S. Congress and the IRS continue with policies that destroy U.S. exports and destroy the image of overseas Americans, to banks, to potential business partners, to their foreign employers and in the media. That the WSJ doesn’t even read-up on such an important topic is shocking, as the article above only perpetuates stereotypes about the rich American avoiding taxes. It’s all rubbish! The U.S. has to wake up and act on this current situation, otherwise the thousands of Americans living abroad waiting to renounce will grow into hundreds of thousands. Incidentally, the waiting time to renounce at all the major European U.S. Consulates now nears two years!!! That’s right, a two year wait to renounce U.S. citizenship, because the line is getting longer by the day. Do something!

Posted by: Woody | Jun 14, 2011 10:12:54 AM

Just because one expatriates, doesn't automatically mean they've physically left America. It might be instructive to bounce this statistic against the number of non-resident aliens in America. I believe there is much more to this statistic than just latter-day white flight.

Maybe the number of Americans is rising while the number of USonians (hat tip to Buckminster Fuller) is falling.

"If you want to know what America will be like tomorrow, look at what airports are like now."
--L. NEIL SMITH


Posted by: MikeyD | Jun 14, 2011 10:16:04 AM

It is not just the rich leaving the sinking ship. There are many expats who left and got married and just stayed and never bothered to notify the USA government about it.
I know people who had a modest 30-50k saved up and moved on. No, not Europe, Thailand, beaches of Mexico, but being single males they have used their imagination. Basically, with a little nest egg, anywhere is better than a westernized country. I will not name those countries. Once the word gets out, those places will get ruined.
On a side note, yeah, even India is better, considering that 10k will get you a house, bakery business and a wife in rural India that will never divorce you. You can run everything through the wife and pay no tax. Now, that is a life. I wonder how the USA will tax those who do it this way. Is Obama going to tax the foreign wives? That would be the joke of the day.
Anyway, I am all for voting by feet(walking away from bad deals). This happened before in the Eastern Block.

Posted by: jack | Jun 14, 2011 10:34:05 AM

Paul, your quote is way off base.
The two biggest reasons for the fiscal train wreck (and potential default by the Treasury because of the failure to agree on raising the debt ceiling) were the two wars started by Republicans (Bush and his willing enablers in Congress) and the 2001 and 2003 tax law changes, which were extended by Obama because the Republicans literally put a gun to Obama's head by tying the tax rate changes for dividends and estate tax to the extension of benefits to the long term unemployed who have had their lives destroyed by the recession.
Check out the percentage of income tax to GDP. It hasn't been this low in decades.


It isn't about Obama demonizing the rich, it is probably the rich with their millions stashed in Switzerland seeing some of their fellow rich possibly get carted off to jail like these clowns:

http://www.irs.gov/newsroom/article/0,,id=110092,00.html

Posted by: Justin the part time lawyer | Jun 14, 2011 11:14:39 AM

There's no longer the 10-yr tax, now it is a gross asset tax.

Posted by: horn | Jun 14, 2011 1:59:42 PM

"Justin the part time lawyer" and full time Obamabot, who thinks that Obama should always be able to blame his failures on someone else...

CBO: Eight Years of Iraq War Cost Less Than Stimulus Act


Posted by: Woody | Jun 14, 2011 6:22:57 PM

Two things.

1. "The reason is that the IRS is cracking down on overseas bank accounts and offshore income."

So let me get this straight. There are some U.S. citizens committing tax crimes. The government decides to have a go at stopping it, to help ease the burden on ordinary and honest taxpayers. A few of these criminals get huffy and leave.

Sorry, is there a problem with this?

2. There's a budget deficit that needs to be filled. The government decides to target criminals as a means of increasing revenue. A few of these criminals - a tiny handful - decide to leave.

Is there a problem with this?

Posted by: Nicholas Shaxson | Jun 15, 2011 12:06:20 AM

The problem, Nick, is that you don't understand the situation. This is not about illegal activities.

Posted by: Woody | Jun 15, 2011 9:42:04 AM

Obama - shama! Doesn't matter if it was this guy or President McCain - People are leaving the country and taking their stuff with them because of the economy and what is going to happen (or not happen might be better) and it is now clear what that will be with the blame game and do nothing status in DC now. The wealthy are doing it because they can afford it and countries will take them. Us plain old -what use to be- middle class folks looking to get out are left with trying to acquire desired skills on long term needed profession lists before we get too old for them to want us.
Of the 6 expats we know:
2 - retired oil guys (w/family) in South and Central America (wealthy in 5 percenters terms) - Love/hate it
4 - 30 to 40s (w/family) In New Zealand, Oz and Canada - middle class (was making USD before 2008 $40,000 to 90,000), college ed, liberal - love it over all but complain about price of food.

Stay and hope you are the most buoyant rat on the sinking ship...

(Joking)I would like to know where all the "wealthy" are going...Europe=taxes for the most part; South/Central America/Caribbean=Instability and govs that will take your stuff away when they want; Middle East=too close to other crazies; Asia=see central America - seems like you would need multiple citizenship to cover yourself...

Posted by: WallyWallyding | Jun 15, 2011 9:31:02 PM

Seriously? You can not compare TARP to the wars (and forgotten pharmaceutical gimme for the AARP)! Tarp was about bailing out investment banks allowed by the repel of Glass- Steagall (and S&L and many many other deregulation moves by Republicans and Democrats alike at the behest of their corporate campaign fund contributors/retirement job for politicians providers) to play around with credit default swaps (and use the shadow banking system, whack out leverage ratios and take rehypothecation to new heights) - that just happened to be using sub-prime as a vehicle (it is other things now) to prevent the collapse of the global banking system - not necessarily what I would have done - but it doesn't matter if the reps or dems were in charge - the FED (read Investment bankers and buddies)wanted it and it was going to get it - to argue otherwise is purely delusional.
Speaking of which - CFTC has gotten its way in delaying the credit default regulation that was to go into effect July 16 - to move to sometime in Dec (don't hold your breathe on that one boys)- just the time when 600 Trillion (loosely figured mind you because it is all unregulated) of CDS are due....
I will be investing in Vaseline - lube up American Middle Class taxpayer - BOHICA.

Posted by: WallyWallyding | Jun 15, 2011 9:56:35 PM

499 people? Seriously?

Posted by: Rob Kiser | Jun 16, 2011 5:30:11 AM

These trivial numbers of expaits are only significant depending on the amount of revenue lost with businesses and jobs that they are taking with them when they leave the country and stay.

THAT is the major economical issue that must be addressed if we are to survive in the US. Jobs! New businesses that employs others and meets the needs of the populace here in this country.

If the IRS was taking 1.3 of every 2 of the dollars you respectfully earn, wouldn't you also seek to find a location where you could have some incentive to do that hard work, that was taking much less taxation away from your reward efforts?

Whether it is the uber rich, or the middle class that is moving, they have ALREADY EARNED and paid for their keep here and now want desperately to retain some of that hard earned value that they put away, in a safer and friendlier economical environment.

STOP for just a few seconds, and ask yourself, who is the more foolish for staying if they have the means to go?

Just sayin'

Posted by: skep | Jun 16, 2011 9:28:52 AM

Massive undercount in these figures. The government is required by law to publish statistics only for "high net worth" renunciants -- the so-called "covered expatriates". This doesn't include the merely well-off, nor most of the mass-affluent, and completely misses LPRs who give up their green cards. It's also been pretty well established that the government doesn't even count the folk it's supposed to accurately. This 499, then, is just the very tip of the iceberg.

Posted by: Anonymous | Jun 16, 2011 10:00:48 AM

As an American law firm in Thailand, we have certainly seen a rising tide of Americans choosing to leave the US and come to Thailand for a variety of reasons. These usually include either financial reasons or lifestyle choices or some combination of the two. The trend has been increasing over the last decade and seems to run parallel to declining economic conditions in the US. The US expat community in Thailand was once a small ripple in the ocean of Thailand’s multi-ethnic community, but is now a major demographic.

We doubt that the majority of Americans are leaving simply to avoid paying US taxes, or that they have decided to cash in their bets and flee America due to Obama’s stance on the wealthy and the possibility of tax penalties skyrocketing.

Most of the new expats are middle class and are earning below the foreign earned income exemption.

The new American tax law (The Foreign Account Tax Compliance Act) is unlike anything in existence and unlike any tax law currently being enforced by other countries around the world. This law, as stated in the comments above, will also likely make it much more difficult for Americans to go about their daily life if they are living abroad, even if they are doing nothing wrong and peacefully abiding by tax laws already in place. The law could serve as a catalyst that will eventually lead to Americans finding their bank account applications denied, or other banking services becoming much more burdensome than necessary. Many American expats are simply middle class men and women that chose to live abroad for their own personal reasons, to achieve lifetime goals, and not to thwart the US tax system.

There are, of course, the small number of wealthy US expats that leave the United States for the reasons this law was created to address. Numerous US expats now living in Thailand reportedly have renounced their US citizenship based on tax concerns.

The burden of US taxes on US expats is a particular sore point when US expats chat with their compatriots from other countries, who do not have anywhere near the tax burden that US nationals have.

It seems, in the eyes of many US expats, to be yet another example of an overreaching government system that is eroding our liberties and in particular our rights to privacy.

Posted by: Joe | Jun 24, 2011 1:16:15 AM

I thought expatriation was something the rich did to avoid the double taxation imposed on expats by the US. I'm a dual national with essentially no ties to the US. With income low enough to not have to pay double taxes, I figured that was other people's problem. But out of nowhere the FBAR has shown up to show me how wrong I am. Most expats I've talked to have also never heard of the FBAR unless they had significant US ties. I have had virtually no contact with English speakers in my 27 years in Europe, but suddenly I am being threatened with a 25% penalty per year on my bank accounts here. That the bank accounts have been properly included on foreign and US tax declarations is apparently irrelevant. In the first 5 minutes with my new accountant, he asked why in the world hadn't I given up my US citizenship? I'm so sorry that I'm an American now. But I will rush to change that, but not without sadness, like an unwanted divorce.

Posted by: Marta | Jun 29, 2011 6:46:02 AM