Wednesday, April 1, 2015
Wall Street Journal editorial, Checking the IRS Overseas:
Senator Rand Paul this month introduced a bill to repeal Fatca, and a coalition of U.S. taxpayers will soon challenge its constitutionality in federal court. ...
Fatca has created a wave of Americans renouncing their citizenship—a record 3,415 last year, up from 482 on average during the George W. Bush years. A University of Kent study last month concluded that 31% of American expats have considered handing in their passports. “In contrast to what is commonly thought, income is not a key factor,” the study found. More significant are “increasing reporting requirements, fears of ‘draconian’ penalties and increasing inability to hold a bank account.”
For all these costs, Fatca promises little benefit to Washington, unless you think hiring 800 new IRS agents is progress. Even the Obama Administration says the law would capture only $870 million a year in additional tax revenue, which is probably overstated given changes in behavior by Americans and their overseas employers.
Mr. Paul has some backing in the House for his repeal effort, but American expats vote across the 50 states and have little muscle in Congress. Most U.S. residents may not realize that the U.S. is the only developed country that taxes its citizens at U.S. rates no matter where they reside and earn income.
The other challenge to the law is a court case to be filed in May by plaintiffs supported by Republicans Overseas, including Roger G. Johnson, a retired U.S. Army major living in the Czech Republic, and Marc Zell, a lawyer in Israel. Among their claims: Fatca violates Fourth Amendment privacy rights and Eighth Amendment protections against “excessive fines.”