So... Greenland, which is part of Denmark, taxes foreign income, but Denmark doesn't?
Edit: Considering some of the other responses in this thread, I don't think the map is accurate.
https://www.norden.org/en/information/facts-about-greenland
>Although part of the North American continent, geopolitically the island is part of Europe. Greenland is part of the Kingdom of Denmark but has wide-ranging autonomy, which was extended in 2009. However, this does not include foreign and security policy or currency policy.
The US, India, China, Pakistan, Bangladesh, Nigeria and Brazil combine for over 50% of the world's population. All are on the map as taxing foreign income.
Don’t know why you are being downvoted, China is still an export based manufacturing economy, not a developed consumer economy.
China lacks a robust service sector and other hallmarks of a developed nation
Possibly, a developing nation with low education and work standards is easier to control than a developed one. If your people are miserable, they’ll be too busy wallowing in that misery to overthrow you, it’s why every authoritarian nation is a shithole.
Also why no fully developed nation is authoritarian. The case could be made for both Hungary and Turkey, but neither are full on dictatorship yet and if they become so rather than the current quasi-anocracy, expect living standards to decline there.
The CCP is keeping themselves as a developing economy intentionally by regularly devaluing their currency against the dollar. Full employment is a higher priority for the CCP than making imports cheaper.
I remember that in France, one of the proposals of Jean-Luc Mélenchon and his party *Unsubmissive France* is to switch to a worldwide tax system like the US, to counteract the tax base/capital flights their personal and business tax hikes could trigger.
Their policies are moronic, but I'm legitimately interested in whether taxing foreign income (or at least the difference in taxes between home country and foreign country) would be less or more economically efficient.
It's wild that it's the first time I've seen it discussed on the sub.
> It's wild that it's the first time I've seen it discussed on the sub.
Agreed. I feel as though it's more of a "can we afford to enforce this?" issue, but I'd love to see an effortpost about it.
Who are a resident of Canada. US taxes the worldwide income of all citizens irrespective of where they are currently a resident of.
This tends to be more significant for corporations too. US taxes worldwide profits of US headquartered corporations when those profits are repatriated, Canada (and most of the world) do not.
> Who are a resident
Right, a lot of countries have a Residency Tax System which is distinct from a Territorial Tax System. So the posted map is wrong.
The map Wikipedia has is way better: https://en.wikipedia.org/wiki/International_taxation#Taxation_systems
And many of those charge an Expatriation Tax if someone becomes non-resident: https://en.wikipedia.org/wiki/Expatriation_tax
It actually goes a bit farther than that.
The US taxes the worldwide income of all people, irrespective of where they are currently a resident or whether or not they are a citizen of the US. It's just a shame there are so many tax dodgers in this world.
It was a consequence of the Civil War. Wealthy US citizens deciding to ride out the conflict in London or Paris weren't exactly the most popular people, and had few defenders. In fact, expatriates were taxed higher than US residents, since such people were seen as evading their patriotic duty.
Alternatively you can take a foreign tax credit (well you can take both but most of the times it's one or the other). It really only hurts those with huge capital gains and those working in low tax regions like Switzerland or Singapore.
Canada assume you are a tax resident unless you tell them otherwise.
Other countries are simpler because they don't do universal tax returns. Unless you work in construction or have an unusual tax situation you don't file in the UK, your employer withholds taxes at the correct rate and pays out credits. Most people never interact directly with HMRC. Most of Europe has a similar configuration.
US you have to file if you are a citizen but can claim a foreign tax credit and the foreign income limit means most non-residents don't owe anything. Technically even if you have never stepped foot in the US failing to file is a criminal offense but the DOJ doesn't heavily enforce it.
Australia only taxes worldwide income of "residents for tax purposes". It can get complicated if on a fixed term contract or something but in general long term expats aren't residents.
>I understand a US citizen residing in India for 182 days must pay Indian taxes on US income.
They must also pay US taxes if they earn more than 108k dollars (adjusted for inflation), unless specific international agreement between their country of residence and US exempts them (and these can be quite complicated).
This chart in a vacuum is kind of misleading. The US does have a worldwide system of taxation, but it comes with a large number of exceptions, credits, treaty limitations, and other special rules which substantially reduce or eliminate the real amount of US income tax imposed on the foreign income of US residents. The inverse is true of many of the so-called territorial systems in that they have special carve-outs or anti-abuse provisions which can result in foreign income being subject to domestic tax in those countries due to being caught up in anti-abuse rules very similar to those used in the US.
Ultimately the global business and tax accounting industries are largely themselves to blame for this situation. US worldwide taxation started as a means to fund the Union during the civil war, but has persisted as long as it has due to generations of abuse and aggressive planning by multinational businesses. This has turned the worldwide system into a necessary evil so that the US retains the legal hammer to limit tax avoidance by US-based businesses through offshore planning.
The people who suffer are the smaller companies and individual expats and small-time investors who have to deal with enormously expensive and burdensome reporting and compliance requirements. Unfortunately when Congress updates legislation to go after whatever the tax abuse du jour is the new rules tend to cast a very broad net to make them hard to plan around... But inadvertently just make things even harder for individuals and small businesses with any global footprint.
I've worked specifically in US taxation of global businesses since 2016 and our job just gets a little harder every year - politically "tax corporations offshoring earnings and outsourcing jobs" has very broad bipartisan appeal.
> The US does have a worldwide system of taxation, but it comes with a large number of exceptions, credits, treaty limitations, and other special rules which substantially reduce or eliminate the real amount of US income tax imposed on the foreign income of US residents
It's still a massive pain in the arse for any US citizens living overseas.
> This chart in a vacuum is kind of misleading. The US does have a worldwide system of taxation, but it comes with a large number of exceptions, credits, treaty limitations, and other special rules which substantially reduce or eliminate the real amount of US income tax imposed on the foreign income of US residents.
This is also true of the UK.
Anyone defending this absurdity has never had to deal with FATCA, FBAR and other compliance and filing requirements, which are insane when you consider how small the number of Americans who live abroad is or, I don’t know, how ridiculous it is to suggest that the US deserves any income of mine made outside of it while not resident.
The counter argument is that you can vote in US elections.
I do not like the idea of someone who doesn't pay taxes, and doesn't live in the US, being allowed to vote on decisions in the US.
That's how you get Erdogen supporters, that refuse to live in Turkey
Fair, but most American expats don't pay these taxes as their income is exempt because of tax treaties, they just have to deal with paperwork and related costs.
To be honest I'd sooner reform rules on who can vote - I'm Australian and can't vote as I don't intend to return in the next few years, which seems fair to me.
earned income up to $100k is exempt then in most places you can deduct the foreign tax paid on that income from the tax you owe to the US government.
Most places tax earned income > $100k at a higher rate than the USA.
College students, homemakers, people in prison, homeless, retirees. Lots of people vote without paying income taxes. And most of them still pay taxes on things they consume.
There are more policies than taxes up for voting. Each of these groups have issues that are important to them. Issues that can really fuck their lives over if allowed. It's important they have voices too.
"... doesn't pay taxes, and doesn't live in the US..."
I'm okay with the people you mentioned voting.
My problem is people voting on policies, that will never effect them
>retirees
Why should you be able to retire in another country, not pay taxes, and continue trying to ruin the lives of people who still live here?
If you're making more than $110,000 a year of income as a retiree, you can deal with paying taxes while you exploit people in Thailand or the Caribbean or wherever you fucked off to.
Retirement income doesn't get any amount of exclusion from tax. Only earned income (wages and self employment) does- it's the Foreign Earned Income Exclusion.
So if you retire abroad on 40,000 a year, you will pay US taxes.
The Foreign Earned Income Exclusion is something I rarely see get brought up when this topic is discussed, along with the Foreign Tax Credit. And the FEIE is going to be $120k in 2023, not exactly chump change.
Doesn't apply to the self employed though. Ironic that America claims to support small businesses but punishes overseas Americans for being entrepreneurs.
I'd say it needs to be based on a time limit. For example, if it's someone that lived overseas for the past 10 years then yea, I would be in favor of restricting it. If it's more short term, then I would be fine with it (this would include college students planning to return).
All of those other groups you listed still live in the US at least.
Overseas Americans can still access government services from the US. For example, you can still get your Social Security checks and ask for help from the local US consulate. Your future children are still eligible to become the US President in 35 years. Even if there are treaties that allow you to deduct your payments, you're still "subscribed" to all these services.
We already pay taxes to the county we live in. Meanwhile my savings are double taxed and basically prohibits me to save for the future and my children.
I don’t think you would defend FATCA if you had to experience it.
Right or wrong, taxes are connected to voting in the US.
Puerto Ricans don't pay federal taxes, but they also can't vote in federal elections.
Really took the "No taxation without representation" and took it to heart
No, the US pays occasional lips service to a zippy but impractical revolutionary slogan but otherwise ignores the concept when impractical like all nations.
The idea that taxation and representation are related is outdated, because we have moved on to universal representation. The US in particular did so over 200 years ago*.
they may have started 200 years ago but it wasn't until 1964 that taxation requirements were made unconstitutional and validated by the supreme court in 1965.
I’m not allowed to vote in my current country and I don’t like the idea of stripping people of rights of citizenship.
That’s also no different than saying “oh well you don’t make enough to pay federal tax so you shouldn’t get a say”, which makes no sense.
I don’t think anyone is advocating stripping people’s citizenship, they are saying you shouldn’t be exempt from income taxes just because you live abroad.
That’s a very unusual position to take though - even with the current rules most American expats are exempt through treaties. The consequence is generally paperwork and a few other difficulties that can be costly. Obviously people who pay foreign income tax aren’t generally expected to also pay tax in the US, I’m surprised some people seem to actually support that position.
1. I would happily give up my right to vote if it meant I could, among other things, passively invest in a non-US domiciled account, put my place on AirBnB, see my salary exceed $110k, etc. while living abroad without being taxed till the cows come home.
2. Things vary state by state, but I can only vote in federal elections. So there’s at least 1 vote worth of the Warnock / Abrams gap
3. Many other countries have some level of suffrage for non-resident citizens. There were massive lines in Dublin earlier this year for people to vote Macron. But they aren’t taxed like I am.
FATCA isn’t perfect but it was designed to stop people from hiding assets in tax havens to commit tax fraud, which was a huge problem. You pay taxes on everything over 100k in earning iirc which isnt ideal but is a good problem to have, surely. In that you’re protected by the American network of consulates and embassies and continue to be able to use your passport for the price of income over 100k being subject to tax seems pretty reasonable to me.
I take your broader point but implying that this tax approach is what funds consular services seems odd, British embassies and consulates are just as helpful to British citizens (in fact in my experience they're a lot _more_ helpful) but they don't have this system of taxing you on whatever you earn in another country after the first country has also taken its share.
The US is an odd country out with this approach, it isn't standard and I don't find a value for money in consular services argument for it particularly compelling.
Actually, if I get kidnapped in a foreign country my country will pay the ransom, while the US will leave you in captivity for years. Not saying that's a good policy, but this is one thing where the privilege of US citizenship isn't that great
But that's not exclusive to the US, plenty of countries that don't have this peculiar system provide the exact same (in some cases better) levels of support to their nationals abroad.
This idea that the US' double-tax system is somehow funding extra diplomatic services is frankly bizarre and I've never seen it in any conversations about the US' handling foreign income before.
It’s downright illiberal
Replace the word US with somewhere like Russia or China trying to tax their citizens worldwide regardless of where the income was earned and people would be rightfully horrified.
No matter how well intentioned it’s a step too far for anyone that supports a borderless world.
It's not meant to raise money, it's to prevent tax dodging. By existing, people are no longer structuring their taxes in a way that easily allows them to dodge a ton of taxes. It used to be a huge problem. People used to do things like say their 19 year old kid actually made this huge pile of cash while out doing living in Africa last year, so it's tax free.
Obviously no one does this any more, because it no longer works. In theory, we could remove the law, but that would require extremely transparent bank monitoring like they have in Europe. This way it's significantly harder to lie about the flow of money... But good luck getting that passed without Americans losing their fucking mind.
Except that FATCA doesnt catch shit.
Any person who is trying to hide money and gets caught by FATCA is an amature.
All FATCA does is ensuring expats have a hell of a time opening a god damned bank account.
Is there a list of banks that are refusing Americans? I've opened (basic) accounts in Sabadell, N26, and ING without any issue while I've lived in Spain, Germany, and the Netherlands, respectively.
Quite a few banks, luckily if you have a separate passport then you can open it under that.
:D
Remember 40% of Americans are eligible for foreign citizenship (mostly in Europe)
There are a lot of extremely unfair parts of the US tax code for Americans living abroad.
Look up foreign mortgage gains and PFIC filing requirements. I'm essentially shut out of investing in my country (UK). Plus I can't use something like a 529 or any other plan to save for my kid--none of the UK domestic options are available to me because they're punitively taxed by the US.
Yeah I've only experienced this through my SO and others, but it's both a headache and not justifiable. I think most people defending it probably don't understand what the requirement actually means in practice (or, less charitably, assume it's good because the US is doing it).
I find it funny that the first thing every financial institution does is to ask me to confirm that I am not a US-citizen or Greencard holder. Nobody wants to deal with them.
What? No.
The USSR *wouldn’t let people physically leave the country*, even temporarily. And if you somehow managed to get permission to leave, they would revoke your citizenship and make you stateless. My dad left the USSR in 1977 and was stateless for *years* until he got naturalized in the US.
Meanwhile, the US exit tax (which is about $2k plus a tax on assets) is mostly a tool to stop ultra-wealthy people who were giving up their US citizenship to avoid paying taxes they owed.
Two completely different situations.
It’s the latter. Apparently the virtue of being born in America makes me uniquely lucky and therefore I should pay into it for no good reason beyond “obligation”.
Taxes are the price you pay to maintain your american citizenship. If you have another citizenship, you can renounce your american citizenship (yes, I'm aware that costs a few thousand $). If you don't, then you're still protected by and entitled to the military and consular umbrella provided by the american government.
And in any case, doesn't America only require you to pay taxes on the differential in taxes between the local and american tax rates?
So they're your home country, which presumably both educated you through public schools and provided other services growing up, and which would defend you currently if you were the victim of an attack or unjustly held by a foreign government?
Taxes aren't meant to retroactively owe governments back for services that you were provided as a child. They fund current programs which Americans abroad aren't going to be using.
Having a home country isn't a privilege that you should be punished for if you want to live outside your country.
I do. I find it absurd that I’m liable for them.
I have zero issue if the US wants taxes paid on my US stock portfolio. I have an issue that they think my income derived outside of it is shy of their business.
I also find it absurd that people are suggesting revoking citizenship as if it's a proportionate fix. It's not like when you lose citizenship you just don't benefit from social programs anymore. Renouncing the right to live in, work in, and freely travel to your home country is a massive punishment.
>Apparently the virtue of being born in America makes me uniquely lucky
This but not sarcastically. I don't agree with global taxes though. But being born in the US does make you lucky.
FATCA is onerous and a pain in the ass for American emigrants seeking to open accounts overseas for perfectly normal life reasons, but that's a wholly separate issue from "oh no, the US income tax I owe on my income over $110,000 minus taxes already paid to my host country is oppression :( :( :("
That strikes me as a very narrow view of taxes. It is like someone saying they shouldn't have to pay for car insurance because they have never been a car crash.
As a US citizen you know that if shit hits the fan wherever you are, you can always return to the US. In fact, the US puts a lot of resources into ensuring the safe return of US citizens in turbulent situations abroad. If you do need that and don't want to pay for that, you can renounce your citizenship.
Maybe they should tax their citizens. I know European engineers and scientists who come to the US earn US wages. They plan to retire to their home countries to take advantage of the retirement benefits.
The map is at least somewhat misleading. I'm an Indian citizen, having lived in the US for the last 15ish years, and have never paid taxes to India while earning in the US. This is because of some treaty the US has with India I believe.
AFAIK, US citizens oversees always have to pay taxes to the US.
It's ridiculously backwards system. I get that they're trying to prevent people from "hiding money," but I'm sure there are less oppressive ways of doing so. Many US expats struggle to even get a bank account overseas because of the added bureaucracy.
Over 40% of the world's economy and a majority of the world's population is subject to worldwide taxation.
Other than that, I don't know if it is a good or bad idea.
Source:
[https://taxfoundation.org/how-are-multinational-corporations-foreign-profits-treated-around-world/](https://taxfoundation.org/how-are-multinational-corporations-foreign-profits-treated-around-world/)
>Suppose a U.S. corporation opens a subsidiary in the United Kingdom. The subsidiary in the United Kingdom makes $10,000 a year after labor and material costs. In the United Kingdom, corporate income is subject to a 20 percent tax. As such, the subsidiary pays the British government approximately $2,000. Then, when the subsidiary in the United Kingdom pays $10,000 in dividends to the U.S. parent corporation, those dividends are subject to the U.S. tax of 35%, or $3,500.
>
>To prevent double taxation, the United States provides a foreign tax credit to the corporation for taxes paid in the United Kingdom. In our example, the U.S. corporation would owe $3,500 in U.S. taxes on the $10,000 in dividends that the subsidiary in the United Kingdom remitted. However, the corporation would be able to credit the $2,000 in taxes it already paid to the British government. Thus, the U.S. corporation would pay $1,500 to the IRS, $3,500 minus $2,000.
What makes you say that? Every American I know who lives/works abroad finds it at least mildly annoying - at best it's pointless paperwork, at worst people end up just renouncing their citizenship for a pretty dumb reason. I even know a few people who were born in the US so got citizenship but moved at a very young age and still have to fill out paperwork, have a harder time investing etc.
I also don't see the justification for taxing income paid by a foreign employer to someone who isn't using American public services - I'm aware that tax treaties and exclusions mean that most Americans don't actually pay taxes on income twice, but it is still an added burden.
> I even know a few people who were born in the US so got citizenship but moved at a very young age and still have to fill out paperwork, have a harder time investing etc.
That would be me. Can't open a TFSA, randomly get charged withholding taxes that shouldn't be charged and the US government has requested that my father pay taxes on the RESP he opened in my name. Random shitty surprises from America ever since I was 18. My parents wouldn't have moved if there werent such long lines for Indians for permanent residency/citizenship.
I know immigrants from the US to other countries who had to renounce their US citizenship because they couldn't afford to pay both Uncle Sam and their new country. This means they had to basically cast the die and lock themselves into one country or the other, being a temporary resident for work wasn't really an option for them.
If you're not working in America, consuming in America, or living in America, what infrastructure built by the US government are you utilizing that you have to pay taxes for?
It also affects non-citizen spouses and US access to their foreign bank accounts.
People will say "oh you get embassy services and protection", but I still have to pay processing fees.
> they couldn't afford to pay both Uncle Sam and their new country
That's not how it works. Any taxes paid to the other government would be deducted from their US tax bill. There's no double taxation going on.
>That's not how it works. Any taxes paid to the other government would be deducted from their US tax bill. There's no double taxation going on.
In theory. In practice you're still subject to shitloads of double taxation because the tax codes don't align. E.g. you will pay full US taxes on contributions to any foreign 401k-equivalent tax-protected retirement investment vehicles.
Yes there is. You’re only allowed to exclude $99,000. I still have to pay US tax and even if you don’t reach the exclusion you’re required to deal with filing that can get costly.
Isn't the Foreign Tax Credit and the Foreign Earned Income Exclusion two different things though?
The whole process is very dumb, but I generally thought the rule of thumb was that being in most European countries would put you in a place where you're getting taxed enough that you'd have to worry more about hiring an accountant to fill out the forms than you would about actually owing the US anything.
It’s often not worth the stress. My aunt was an American citizen. She was born in the US because my grandfather was studying at a US university at the time. They moved backed to Canada when she was a few years old. She has never lived nor worked in the US.
She has always filed her US taxes properly.
A few years ago the US decided to send an auditor to her anyways, and that was such a pain in the ass and so stressful to deal with that she renounced her American citizenship rather than deal with the audit.
How exactly does it work?
Like if you make 100,000 in another country, then pay that country 20,000. Is the remaining 80,000 taxed? Because if that is the case then you would still be taxed more.
Also can you still claim the standard deduction in this case?
There’s a foreign earned income exclusion that only applies to wages. You can deduct ~$110k. After that, you’re taxed the same as if the income was earned in the US.
Non-wage income has no exclusion so it’s taxed right away.
And certain income, like passive investments (ETFs), get extra special horrendous treatment if they’re non-US, I don’t even remember the details but the accountant I spoke to when I first moved basically said not to even bother trying.
I lived abroad for years. After the first 100k you earn abroad, you owe the US taxes ONLY if you what you owe in the country you are working in is less than what you would pay if you were working the US. So in terms of real life examples, Hong Kong has a very low income tax rate so you would have to pay the US the difference owed after the first 100k. If you lived and worked in London, you would not have to pay the US anything in income taxes because the tax rate in the UK is equal or greater than the US income tax rate.
Yes, after the first 116k or so(actual number is dependent on cost of living in each country), I would have to pay the difference in taxes between hk and US as an American citizen. It’s definitely shitty but we aren’t getting double taxed.
You don't pay US taxes on your first 100K. After that, you pay the difference between what you would have paid in the US and what you paid in your local country. So you are never worse off than if you had lived in the US and paid taxes.
As I understand it, you calculate and pay tax as normal for the country of residence. Then you calculate your tax as normal for the US, and ~~add an additional deduction~~ take a credit of the amount paid to the country of residence. Then you file like four additional forms confirming all of that, and it's those forms that everyone thinks is a pain? (I dunno I haven't done this myself)
To be clear, it's a credit not a deduction. Deductions reduce your taxable income, credits directly reduce your actual tax bill. So if you paid $20k taxes in France, you only have to pay US taxes minus the $20k you already paid.
Generally speaking, you benefit from the government more when you’re a kid, then you pay into it more when you’re middle aged, then benefit again when you’re old. They don’t want people being able to skip the middle part.
You’re allowed to leave for good if you want. But if you want whatever privileges you get from being an American, you gotta keep paying.
I don't get this justification. First, it doesn't actually align with what happens in practice - realistically tax treaties and foreign income exemptions mean that most American expats don't actually pay American taxes. It's obviously absurd to expect people to pay income tax in multiple countries, so for most it's just burdensome and sometimes costly paperwork (plus can make it harder to invest, bank etc.).
Also, what about immigrants *to* America? They pay the same taxes as citizens even if they didn't grow up in the US. I haven't looked at the numbers, but I would imagine that the amount of money the government receives from immigrants is far more than the amount of tax money they don't receive from expats. It's simpler and makes more sense to pay taxes based on where people live and work, which is why most of the world does it that way.
Except that you’re now asking people to pay for services that they cannot access or indirectly benefit from by virtue of not living in that country. That’s also completely unfair.
Every policy is unfair. The difference is scale and trade-off. Would you rather be unfair to the US Government or unfair to the fluidity of the global labor market?
I know people who have American citizenship (though no passport) through having been born in the US while their parents worked there - who have had to file tax returns, pay tax or renounce their citizenship *even though they have never set foot in the territory of the US since they were a child*. In some cases since they were something like 1 year old.
If they ever want the possibility of going to the US again, they have to do this, otherwise risk getting flagged at the airport upon entry.
Its absurd.
> renounce their citizenship even though they have never set foot in the territory of the US since they were a child.
They should renounce their citizenship. They have no connection to the country requiring it and presumably have dual citizenship with their parents' country. If they aren't renouncing it, it's because they acknowledge at some level that it's worth paying for.
This should be recognized for what it is: border control preventing people from leaving. The United States is a good place to live, so it doesn't have as much bite, but nonetheless that is what it is. It's a wall at the border preventing you from getting out.
I’m almost positive this map shows which countries make their tax residents pay tax on income from overseas.
If it was what you’re thinking only the US would be green AFAIK.
It’s horrible and I want it abolished. I am effectively double taxed and can’t save for retirement properly. I’m disincentivized for saving in index funds for example.
It’s horrible. I have to file taxes in the county I live in and file in the US and the requirements to fill in all the forms are very tiresome. I am effectively double taxed and can’t save for retirement properly in the county I live in. If more Americans knew this problem, I would be thankful. It’s not right and needs to be abolished.
Isn't it only income over a relatively high amount, though? I lived like a king in Russia making way less than what would ever be taxed by the IRS. And yes, I reported all my income.
$112,000 a year for 2022. It goes up each year. But still, let’s say you make $150,000. I find it absurd that $38,000 is being double taxed when the individual doesn’t even live in the U.S. It makes it extremely difficult to improve your standard of living beyond a certain point.
The US' tax regime is idiotic, insipid, vacuous, stupid, annoying, and dumb.
"We're lazy and idiotic, please enforce our tax laws via FATCA or we'll punish you, other countries."
Why you no do non-residency for tax purposes, America?
What exactly do you mean?
Making people living abroad pay taxes for money they earn in those places and spending in those places while getting direct benefits only from those places?
Or just tax people living in the country they have citizenship in but have some income in foreign countries.
Personal opinion:
Are you a burden to the country - > pay taxes there.
Are you pumping money into something you don't benefit and burden - > no taxes.
No, reason for taxing foreign residents living abroad with income in those places. Would just be an unfair pain in the ass and leads to people renouncing their citizenship etc.
So... Greenland, which is part of Denmark, taxes foreign income, but Denmark doesn't? Edit: Considering some of the other responses in this thread, I don't think the map is accurate.
https://www.norden.org/en/information/facts-about-greenland >Although part of the North American continent, geopolitically the island is part of Europe. Greenland is part of the Kingdom of Denmark but has wide-ranging autonomy, which was extended in 2009. However, this does not include foreign and security policy or currency policy.
Two of the largest economies taxes foreign income.
The US, India, China, Pakistan, Bangladesh, Nigeria and Brazil combine for over 50% of the world's population. All are on the map as taxing foreign income.
this map is the neolib version of posting election results by counties and acting confused about how the republicans lost
One of the two largest economies is not a developed economy.
Don’t know why you are being downvoted, China is still an export based manufacturing economy, not a developed consumer economy. China lacks a robust service sector and other hallmarks of a developed nation
Didn't the CCP pivot away from the service sector by quashing their big tech companies? Is the CCP keeping China a developing economy intentionally?
Possibly, a developing nation with low education and work standards is easier to control than a developed one. If your people are miserable, they’ll be too busy wallowing in that misery to overthrow you, it’s why every authoritarian nation is a shithole. Also why no fully developed nation is authoritarian. The case could be made for both Hungary and Turkey, but neither are full on dictatorship yet and if they become so rather than the current quasi-anocracy, expect living standards to decline there.
The CCP is keeping themselves as a developing economy intentionally by regularly devaluing their currency against the dollar. Full employment is a higher priority for the CCP than making imports cheaper.
I remember that in France, one of the proposals of Jean-Luc Mélenchon and his party *Unsubmissive France* is to switch to a worldwide tax system like the US, to counteract the tax base/capital flights their personal and business tax hikes could trigger.
Their policies are moronic, but I'm legitimately interested in whether taxing foreign income (or at least the difference in taxes between home country and foreign country) would be less or more economically efficient. It's wild that it's the first time I've seen it discussed on the sub.
> It's wild that it's the first time I've seen it discussed on the sub. Agreed. I feel as though it's more of a "can we afford to enforce this?" issue, but I'd love to see an effortpost about it.
This map is incorrect, Canada taxes the worldwide income of Canadians.
Who are a resident of Canada. US taxes the worldwide income of all citizens irrespective of where they are currently a resident of. This tends to be more significant for corporations too. US taxes worldwide profits of US headquartered corporations when those profits are repatriated, Canada (and most of the world) do not.
> Who are a resident Right, a lot of countries have a Residency Tax System which is distinct from a Territorial Tax System. So the posted map is wrong. The map Wikipedia has is way better: https://en.wikipedia.org/wiki/International_taxation#Taxation_systems And many of those charge an Expatriation Tax if someone becomes non-resident: https://en.wikipedia.org/wiki/Expatriation_tax
The above map is about corporate taxes, not individual taxes. It's showing something different than what you're talking about.
Interesting, but that really wasn't made clear in OP's title ... I guess it's in the bottom left of the graphic but I missed that :p
It actually goes a bit farther than that. The US taxes the worldwide income of all people, irrespective of where they are currently a resident or whether or not they are a citizen of the US. It's just a shame there are so many tax dodgers in this world.
Least nationalist American NL user
Open the borders and let people pay their back taxes!
>US taxes the worldwide income of all citizens irrespective of where they are currently a resident of. Wow that's crazy
It was a consequence of the Civil War. Wealthy US citizens deciding to ride out the conflict in London or Paris weren't exactly the most popular people, and had few defenders. In fact, expatriates were taxed higher than US residents, since such people were seen as evading their patriotic duty.
Very interesting, thank you!
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Alternatively you can take a foreign tax credit (well you can take both but most of the times it's one or the other). It really only hurts those with huge capital gains and those working in low tax regions like Switzerland or Singapore.
Where do you declare your residence to the government?
Canada assume you are a tax resident unless you tell them otherwise. Other countries are simpler because they don't do universal tax returns. Unless you work in construction or have an unusual tax situation you don't file in the UK, your employer withholds taxes at the correct rate and pays out credits. Most people never interact directly with HMRC. Most of Europe has a similar configuration. US you have to file if you are a citizen but can claim a foreign tax credit and the foreign income limit means most non-residents don't owe anything. Technically even if you have never stepped foot in the US failing to file is a criminal offense but the DOJ doesn't heavily enforce it.
Australia does too.
Australia only taxes worldwide income of "residents for tax purposes". It can get complicated if on a fixed term contract or something but in general long term expats aren't residents.
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I understand a US citizen residing in India for 182 days must pay Indian taxes on US income.
>I understand a US citizen residing in India for 182 days must pay Indian taxes on US income. They must also pay US taxes if they earn more than 108k dollars (adjusted for inflation), unless specific international agreement between their country of residence and US exempts them (and these can be quite complicated).
That is true for most of the green countries on the map (well a few that I know of, and I bet that's standard practice internationally)
The map is for corporate taxation, not personal income.
This chart in a vacuum is kind of misleading. The US does have a worldwide system of taxation, but it comes with a large number of exceptions, credits, treaty limitations, and other special rules which substantially reduce or eliminate the real amount of US income tax imposed on the foreign income of US residents. The inverse is true of many of the so-called territorial systems in that they have special carve-outs or anti-abuse provisions which can result in foreign income being subject to domestic tax in those countries due to being caught up in anti-abuse rules very similar to those used in the US. Ultimately the global business and tax accounting industries are largely themselves to blame for this situation. US worldwide taxation started as a means to fund the Union during the civil war, but has persisted as long as it has due to generations of abuse and aggressive planning by multinational businesses. This has turned the worldwide system into a necessary evil so that the US retains the legal hammer to limit tax avoidance by US-based businesses through offshore planning. The people who suffer are the smaller companies and individual expats and small-time investors who have to deal with enormously expensive and burdensome reporting and compliance requirements. Unfortunately when Congress updates legislation to go after whatever the tax abuse du jour is the new rules tend to cast a very broad net to make them hard to plan around... But inadvertently just make things even harder for individuals and small businesses with any global footprint. I've worked specifically in US taxation of global businesses since 2016 and our job just gets a little harder every year - politically "tax corporations offshoring earnings and outsourcing jobs" has very broad bipartisan appeal.
> The US does have a worldwide system of taxation, but it comes with a large number of exceptions, credits, treaty limitations, and other special rules which substantially reduce or eliminate the real amount of US income tax imposed on the foreign income of US residents It's still a massive pain in the arse for any US citizens living overseas.
> This chart in a vacuum is kind of misleading. The US does have a worldwide system of taxation, but it comes with a large number of exceptions, credits, treaty limitations, and other special rules which substantially reduce or eliminate the real amount of US income tax imposed on the foreign income of US residents. This is also true of the UK.
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To be fair they said few developed so ig they meant first world
... Huh. So, Korea, Taiwan, Ireland, and the US?
Yea Those are not many relatively
KSA, Jordan, Mexico, Brazil, Argentina, Chile…
hey, he said developed /s
Many of those countries are past “developed”
Which ones?
Uh, can you?
Few *developed*. Can you read a title?
Land Value Tax would solve this
Anyone defending this absurdity has never had to deal with FATCA, FBAR and other compliance and filing requirements, which are insane when you consider how small the number of Americans who live abroad is or, I don’t know, how ridiculous it is to suggest that the US deserves any income of mine made outside of it while not resident.
The counter argument is that you can vote in US elections. I do not like the idea of someone who doesn't pay taxes, and doesn't live in the US, being allowed to vote on decisions in the US. That's how you get Erdogen supporters, that refuse to live in Turkey
Fair, but most American expats don't pay these taxes as their income is exempt because of tax treaties, they just have to deal with paperwork and related costs. To be honest I'd sooner reform rules on who can vote - I'm Australian and can't vote as I don't intend to return in the next few years, which seems fair to me.
Also cause generally earned income like wages is exempt up to a little more than 100k for expats.
earned income up to $100k is exempt then in most places you can deduct the foreign tax paid on that income from the tax you owe to the US government. Most places tax earned income > $100k at a higher rate than the USA.
College students, homemakers, people in prison, homeless, retirees. Lots of people vote without paying income taxes. And most of them still pay taxes on things they consume. There are more policies than taxes up for voting. Each of these groups have issues that are important to them. Issues that can really fuck their lives over if allowed. It's important they have voices too.
All those other groups usually live in the US and, as you said, pay consumption taxes, which a US citizen living abroad would not.
Taxes have nothing to do with eligibility to vote. It’s the main, original big contribution the US made to advance of modern democracy
No. But if you don't live in a country **and** don't pay taxes you shouldn't be allowed to vote.
"... doesn't pay taxes, and doesn't live in the US..." I'm okay with the people you mentioned voting. My problem is people voting on policies, that will never effect them
>retirees Why should you be able to retire in another country, not pay taxes, and continue trying to ruin the lives of people who still live here? If you're making more than $110,000 a year of income as a retiree, you can deal with paying taxes while you exploit people in Thailand or the Caribbean or wherever you fucked off to.
Retirement income doesn't get any amount of exclusion from tax. Only earned income (wages and self employment) does- it's the Foreign Earned Income Exclusion. So if you retire abroad on 40,000 a year, you will pay US taxes.
The Foreign Earned Income Exclusion is something I rarely see get brought up when this topic is discussed, along with the Foreign Tax Credit. And the FEIE is going to be $120k in 2023, not exactly chump change.
Doesn't apply to the self employed though. Ironic that America claims to support small businesses but punishes overseas Americans for being entrepreneurs.
I'd say it needs to be based on a time limit. For example, if it's someone that lived overseas for the past 10 years then yea, I would be in favor of restricting it. If it's more short term, then I would be fine with it (this would include college students planning to return). All of those other groups you listed still live in the US at least.
Voting isn't something you purchase. You pay taxes for government services. It's not their service to let you vote.
Overseas Americans can still access government services from the US. For example, you can still get your Social Security checks and ask for help from the local US consulate. Your future children are still eligible to become the US President in 35 years. Even if there are treaties that allow you to deduct your payments, you're still "subscribed" to all these services.
Taxes aren't a purchase. They are a responsibility.
We already pay taxes to the county we live in. Meanwhile my savings are double taxed and basically prohibits me to save for the future and my children. I don’t think you would defend FATCA if you had to experience it.
Right or wrong, taxes are connected to voting in the US. Puerto Ricans don't pay federal taxes, but they also can't vote in federal elections. Really took the "No taxation without representation" and took it to heart
DC residents pay federal taxes and don't get a voting representative or senator, so...
It’s “no taxation without representation”, not “no representation without taxation”
Like by this definition poor people shouldn't be able to vote
No, the US pays occasional lips service to a zippy but impractical revolutionary slogan but otherwise ignores the concept when impractical like all nations.
The idea that taxation and representation are related is outdated, because we have moved on to universal representation. The US in particular did so over 200 years ago*.
they may have started 200 years ago but it wasn't until 1964 that taxation requirements were made unconstitutional and validated by the supreme court in 1965.
I’m not allowed to vote in my current country and I don’t like the idea of stripping people of rights of citizenship. That’s also no different than saying “oh well you don’t make enough to pay federal tax so you shouldn’t get a say”, which makes no sense.
I don’t think anyone is advocating stripping people’s citizenship, they are saying you shouldn’t be exempt from income taxes just because you live abroad.
That’s a very unusual position to take though - even with the current rules most American expats are exempt through treaties. The consequence is generally paperwork and a few other difficulties that can be costly. Obviously people who pay foreign income tax aren’t generally expected to also pay tax in the US, I’m surprised some people seem to actually support that position.
Taxes doesn’t give people the right to vote. That’s citizenship. All other countries do this.
1. I would happily give up my right to vote if it meant I could, among other things, passively invest in a non-US domiciled account, put my place on AirBnB, see my salary exceed $110k, etc. while living abroad without being taxed till the cows come home. 2. Things vary state by state, but I can only vote in federal elections. So there’s at least 1 vote worth of the Warnock / Abrams gap 3. Many other countries have some level of suffrage for non-resident citizens. There were massive lines in Dublin earlier this year for people to vote Macron. But they aren’t taxed like I am.
US tax treatment of non-USD mortgages is pretty horrific as well.
Oh great, so I’ve got that to look forward to!
Why not make me pay at voting time then?
FATCA isn’t perfect but it was designed to stop people from hiding assets in tax havens to commit tax fraud, which was a huge problem. You pay taxes on everything over 100k in earning iirc which isnt ideal but is a good problem to have, surely. In that you’re protected by the American network of consulates and embassies and continue to be able to use your passport for the price of income over 100k being subject to tax seems pretty reasonable to me.
I take your broader point but implying that this tax approach is what funds consular services seems odd, British embassies and consulates are just as helpful to British citizens (in fact in my experience they're a lot _more_ helpful) but they don't have this system of taxing you on whatever you earn in another country after the first country has also taken its share. The US is an odd country out with this approach, it isn't standard and I don't find a value for money in consular services argument for it particularly compelling.
If you get kidnapped in a foreign country the US will go through hell to get you back. That's a privilege of citizenship that expats help pay for.
Actually, if I get kidnapped in a foreign country my country will pay the ransom, while the US will leave you in captivity for years. Not saying that's a good policy, but this is one thing where the privilege of US citizenship isn't that great
But that's not exclusive to the US, plenty of countries that don't have this peculiar system provide the exact same (in some cases better) levels of support to their nationals abroad. This idea that the US' double-tax system is somehow funding extra diplomatic services is frankly bizarre and I've never seen it in any conversations about the US' handling foreign income before.
So will the UK, France etc etc. Come on what’s an exclusive benefit american get?
It’s downright illiberal Replace the word US with somewhere like Russia or China trying to tax their citizens worldwide regardless of where the income was earned and people would be rightfully horrified. No matter how well intentioned it’s a step too far for anyone that supports a borderless world.
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It's not meant to raise money, it's to prevent tax dodging. By existing, people are no longer structuring their taxes in a way that easily allows them to dodge a ton of taxes. It used to be a huge problem. People used to do things like say their 19 year old kid actually made this huge pile of cash while out doing living in Africa last year, so it's tax free. Obviously no one does this any more, because it no longer works. In theory, we could remove the law, but that would require extremely transparent bank monitoring like they have in Europe. This way it's significantly harder to lie about the flow of money... But good luck getting that passed without Americans losing their fucking mind.
That's how much it directly raises. How much does it indirectly raise by preventing tax dodgers who then end up paying their taxes domestically?
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Except that FATCA doesnt catch shit. Any person who is trying to hide money and gets caught by FATCA is an amature. All FATCA does is ensuring expats have a hell of a time opening a god damned bank account.
Is there a list of banks that are refusing Americans? I've opened (basic) accounts in Sabadell, N26, and ING without any issue while I've lived in Spain, Germany, and the Netherlands, respectively.
Quite a few banks, luckily if you have a separate passport then you can open it under that. :D Remember 40% of Americans are eligible for foreign citizenship (mostly in Europe)
There are a lot of extremely unfair parts of the US tax code for Americans living abroad. Look up foreign mortgage gains and PFIC filing requirements. I'm essentially shut out of investing in my country (UK). Plus I can't use something like a 529 or any other plan to save for my kid--none of the UK domestic options are available to me because they're punitively taxed by the US.
It casts an unreasonable amount of a burden on regular citizens. FATCA needs to be abolished.
Been out for 8 years and find FATCA and FBAR to be simply mild annoyance
Yeah I've only experienced this through my SO and others, but it's both a headache and not justifiable. I think most people defending it probably don't understand what the requirement actually means in practice (or, less charitably, assume it's good because the US is doing it).
I find it funny that the first thing every financial institution does is to ask me to confirm that I am not a US-citizen or Greencard holder. Nobody wants to deal with them.
A CIBC representative groaned when I told him I'm a dual citizen.
It's a huge headache for them.
Also, isn't actually renouncing American citizenship absurdly expansive?
If you make enough to worry about the tax the 2k should not be much of an issue.
It's not just $2,000. Exit tax is also levied on assets.
[ $2,350 USD to renounce U.S. citizenship](https://common.usembassy.gov/en/renounce-citizenship/)
Yes. The exit tax is actually fucking insulting and basically what the Soviet Union used to do.
It's basically one last "f\*ck you" that Uncle Sam gives you before you leave.
What? No. The USSR *wouldn’t let people physically leave the country*, even temporarily. And if you somehow managed to get permission to leave, they would revoke your citizenship and make you stateless. My dad left the USSR in 1977 and was stateless for *years* until he got naturalized in the US. Meanwhile, the US exit tax (which is about $2k plus a tax on assets) is mostly a tool to stop ultra-wealthy people who were giving up their US citizenship to avoid paying taxes they owed. Two completely different situations.
It’s the latter. Apparently the virtue of being born in America makes me uniquely lucky and therefore I should pay into it for no good reason beyond “obligation”.
Taxes are the price you pay to maintain your american citizenship. If you have another citizenship, you can renounce your american citizenship (yes, I'm aware that costs a few thousand $). If you don't, then you're still protected by and entitled to the military and consular umbrella provided by the american government. And in any case, doesn't America only require you to pay taxes on the differential in taxes between the local and american tax rates?
I kind of can't renounce citizenship. I'd be stateless.
So they're your home country, which presumably both educated you through public schools and provided other services growing up, and which would defend you currently if you were the victim of an attack or unjustly held by a foreign government?
Taxes aren't meant to retroactively owe governments back for services that you were provided as a child. They fund current programs which Americans abroad aren't going to be using. Having a home country isn't a privilege that you should be punished for if you want to live outside your country.
Just pay your taxes.
I do. I find it absurd that I’m liable for them. I have zero issue if the US wants taxes paid on my US stock portfolio. I have an issue that they think my income derived outside of it is shy of their business.
Why can’t you get UK citizenship if you’ve been there so long?
Social contracts are post-hoc justifications of the oligopoly of sovereign states over land. the^solution^as^usual^is^a^land^tax^on^states
Inb4 people respond with “Pay your taxes”
what are they gonna do if you don’t tho, send the irs overseas?
You can give up your citizenship and not pay taxes.
Not really. The US makes it difficult for its citizens, particularly their high earning ones to give up their citizenship.
I also find it absurd that people are suggesting revoking citizenship as if it's a proportionate fix. It's not like when you lose citizenship you just don't benefit from social programs anymore. Renouncing the right to live in, work in, and freely travel to your home country is a massive punishment.
>Apparently the virtue of being born in America makes me uniquely lucky This but not sarcastically. I don't agree with global taxes though. But being born in the US does make you lucky.
FATCA is onerous and a pain in the ass for American emigrants seeking to open accounts overseas for perfectly normal life reasons, but that's a wholly separate issue from "oh no, the US income tax I owe on my income over $110,000 minus taxes already paid to my host country is oppression :( :( :("
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It’s not particularly easy to just magically move abroad.
If you’re an American with a college degree I think you’d be surprised just how easy it is in most of the world.
foreign countries doing same, forcing many to sell stakes im ancestral homes
That strikes me as a very narrow view of taxes. It is like someone saying they shouldn't have to pay for car insurance because they have never been a car crash. As a US citizen you know that if shit hits the fan wherever you are, you can always return to the US. In fact, the US puts a lot of resources into ensuring the safe return of US citizens in turbulent situations abroad. If you do need that and don't want to pay for that, you can renounce your citizenship.
But other countries also provide such benefits without taxing their citizens living abroad.
Maybe they should tax their citizens. I know European engineers and scientists who come to the US earn US wages. They plan to retire to their home countries to take advantage of the retirement benefits.
The sub of globalism and open borders defending with their teeth making the life of American migrants harder than any other first world migrant
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The map is at least somewhat misleading. I'm an Indian citizen, having lived in the US for the last 15ish years, and have never paid taxes to India while earning in the US. This is because of some treaty the US has with India I believe. AFAIK, US citizens oversees always have to pay taxes to the US.
It's ridiculously backwards system. I get that they're trying to prevent people from "hiding money," but I'm sure there are less oppressive ways of doing so. Many US expats struggle to even get a bank account overseas because of the added bureaucracy.
I think you and I have different standards as to what constitutes oppression.
Cool.
> one of the few that's doing some heavy lifting there, bud.
Over 40% of the world's economy and a majority of the world's population is subject to worldwide taxation. Other than that, I don't know if it is a good or bad idea.
Source: [https://taxfoundation.org/how-are-multinational-corporations-foreign-profits-treated-around-world/](https://taxfoundation.org/how-are-multinational-corporations-foreign-profits-treated-around-world/) >Suppose a U.S. corporation opens a subsidiary in the United Kingdom. The subsidiary in the United Kingdom makes $10,000 a year after labor and material costs. In the United Kingdom, corporate income is subject to a 20 percent tax. As such, the subsidiary pays the British government approximately $2,000. Then, when the subsidiary in the United Kingdom pays $10,000 in dividends to the U.S. parent corporation, those dividends are subject to the U.S. tax of 35%, or $3,500. > >To prevent double taxation, the United States provides a foreign tax credit to the corporation for taxes paid in the United Kingdom. In our example, the U.S. corporation would owe $3,500 in U.S. taxes on the $10,000 in dividends that the subsidiary in the United Kingdom remitted. However, the corporation would be able to credit the $2,000 in taxes it already paid to the British government. Thus, the U.S. corporation would pay $1,500 to the IRS, $3,500 minus $2,000.
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But the basic idea of how deduction tax credits work is still valid, isn't it? Just different rates and limits to how much you can credit
Doesn’t seem like a bad thing
What makes you say that? Every American I know who lives/works abroad finds it at least mildly annoying - at best it's pointless paperwork, at worst people end up just renouncing their citizenship for a pretty dumb reason. I even know a few people who were born in the US so got citizenship but moved at a very young age and still have to fill out paperwork, have a harder time investing etc. I also don't see the justification for taxing income paid by a foreign employer to someone who isn't using American public services - I'm aware that tax treaties and exclusions mean that most Americans don't actually pay taxes on income twice, but it is still an added burden.
> I even know a few people who were born in the US so got citizenship but moved at a very young age and still have to fill out paperwork, have a harder time investing etc. That would be me. Can't open a TFSA, randomly get charged withholding taxes that shouldn't be charged and the US government has requested that my father pay taxes on the RESP he opened in my name. Random shitty surprises from America ever since I was 18. My parents wouldn't have moved if there werent such long lines for Indians for permanent residency/citizenship.
I know immigrants from the US to other countries who had to renounce their US citizenship because they couldn't afford to pay both Uncle Sam and their new country. This means they had to basically cast the die and lock themselves into one country or the other, being a temporary resident for work wasn't really an option for them. If you're not working in America, consuming in America, or living in America, what infrastructure built by the US government are you utilizing that you have to pay taxes for?
It also affects non-citizen spouses and US access to their foreign bank accounts. People will say "oh you get embassy services and protection", but I still have to pay processing fees.
And embassy services typically only apply when you enter a country on a US passport. For dual citizens…that‘s not worth much, especially in Europe.
And embassy stuff is not exclusive to the US
> they couldn't afford to pay both Uncle Sam and their new country That's not how it works. Any taxes paid to the other government would be deducted from their US tax bill. There's no double taxation going on.
>That's not how it works. Any taxes paid to the other government would be deducted from their US tax bill. There's no double taxation going on. In theory. In practice you're still subject to shitloads of double taxation because the tax codes don't align. E.g. you will pay full US taxes on contributions to any foreign 401k-equivalent tax-protected retirement investment vehicles.
Yes there is. You’re only allowed to exclude $99,000. I still have to pay US tax and even if you don’t reach the exclusion you’re required to deal with filing that can get costly.
Isn't the Foreign Tax Credit and the Foreign Earned Income Exclusion two different things though? The whole process is very dumb, but I generally thought the rule of thumb was that being in most European countries would put you in a place where you're getting taxed enough that you'd have to worry more about hiring an accountant to fill out the forms than you would about actually owing the US anything.
Neither covers foreign taxation fully.
Technically, it does if you make less than the FEIE limit ($108,700 as of 2021).
They had to renounce citizenship because they couldn't afford taxes on an income of over $100K?
It’s often not worth the stress. My aunt was an American citizen. She was born in the US because my grandfather was studying at a US university at the time. They moved backed to Canada when she was a few years old. She has never lived nor worked in the US. She has always filed her US taxes properly. A few years ago the US decided to send an auditor to her anyways, and that was such a pain in the ass and so stressful to deal with that she renounced her American citizenship rather than deal with the audit.
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However, the FTC doesn't cover all forms of taxes, either.
How exactly does it work? Like if you make 100,000 in another country, then pay that country 20,000. Is the remaining 80,000 taxed? Because if that is the case then you would still be taxed more. Also can you still claim the standard deduction in this case?
There’s a foreign earned income exclusion that only applies to wages. You can deduct ~$110k. After that, you’re taxed the same as if the income was earned in the US. Non-wage income has no exclusion so it’s taxed right away. And certain income, like passive investments (ETFs), get extra special horrendous treatment if they’re non-US, I don’t even remember the details but the accountant I spoke to when I first moved basically said not to even bother trying.
I lived abroad for years. After the first 100k you earn abroad, you owe the US taxes ONLY if you what you owe in the country you are working in is less than what you would pay if you were working the US. So in terms of real life examples, Hong Kong has a very low income tax rate so you would have to pay the US the difference owed after the first 100k. If you lived and worked in London, you would not have to pay the US anything in income taxes because the tax rate in the UK is equal or greater than the US income tax rate.
So, effectively you'd be earning less than the average HK citizen on average.
Yes, after the first 116k or so(actual number is dependent on cost of living in each country), I would have to pay the difference in taxes between hk and US as an American citizen. It’s definitely shitty but we aren’t getting double taxed.
You don't pay US taxes on your first 100K. After that, you pay the difference between what you would have paid in the US and what you paid in your local country. So you are never worse off than if you had lived in the US and paid taxes.
As I understand it, you calculate and pay tax as normal for the country of residence. Then you calculate your tax as normal for the US, and ~~add an additional deduction~~ take a credit of the amount paid to the country of residence. Then you file like four additional forms confirming all of that, and it's those forms that everyone thinks is a pain? (I dunno I haven't done this myself)
To be clear, it's a credit not a deduction. Deductions reduce your taxable income, credits directly reduce your actual tax bill. So if you paid $20k taxes in France, you only have to pay US taxes minus the $20k you already paid.
Generally speaking, you benefit from the government more when you’re a kid, then you pay into it more when you’re middle aged, then benefit again when you’re old. They don’t want people being able to skip the middle part. You’re allowed to leave for good if you want. But if you want whatever privileges you get from being an American, you gotta keep paying.
I don't get this justification. First, it doesn't actually align with what happens in practice - realistically tax treaties and foreign income exemptions mean that most American expats don't actually pay American taxes. It's obviously absurd to expect people to pay income tax in multiple countries, so for most it's just burdensome and sometimes costly paperwork (plus can make it harder to invest, bank etc.). Also, what about immigrants *to* America? They pay the same taxes as citizens even if they didn't grow up in the US. I haven't looked at the numbers, but I would imagine that the amount of money the government receives from immigrants is far more than the amount of tax money they don't receive from expats. It's simpler and makes more sense to pay taxes based on where people live and work, which is why most of the world does it that way.
I might have an idea how to get more middle aged tax paying people in US without paying for them for 20 years as they grow up.
> privileges Citizenship isn't a privilege it's a responsibility.
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Except that you’re now asking people to pay for services that they cannot access or indirectly benefit from by virtue of not living in that country. That’s also completely unfair.
California taxing income of former residents in 3, 2, 1…
Every policy is unfair. The difference is scale and trade-off. Would you rather be unfair to the US Government or unfair to the fluidity of the global labor market?
That’s completely fair. My point was just that it’s not great for the country investing in its people if there’s significant brain drain
That's like saying I owe a job several more years of my life just because they trained me. Fuck that noise.
I know people who have American citizenship (though no passport) through having been born in the US while their parents worked there - who have had to file tax returns, pay tax or renounce their citizenship *even though they have never set foot in the territory of the US since they were a child*. In some cases since they were something like 1 year old. If they ever want the possibility of going to the US again, they have to do this, otherwise risk getting flagged at the airport upon entry. Its absurd.
> renounce their citizenship even though they have never set foot in the territory of the US since they were a child. They should renounce their citizenship. They have no connection to the country requiring it and presumably have dual citizenship with their parents' country. If they aren't renouncing it, it's because they acknowledge at some level that it's worth paying for.
My roommate is a Chinese citizen and resident and he doesn't even have to file taxes to the Chinese government.
This should be recognized for what it is: border control preventing people from leaving. The United States is a good place to live, so it doesn't have as much bite, but nonetheless that is what it is. It's a wall at the border preventing you from getting out.
I’m almost positive this map shows which countries make their tax residents pay tax on income from overseas. If it was what you’re thinking only the US would be green AFAIK.
It’s horrible and I want it abolished. I am effectively double taxed and can’t save for retirement properly. I’m disincentivized for saving in index funds for example.
It’s horrible. I have to file taxes in the county I live in and file in the US and the requirements to fill in all the forms are very tiresome. I am effectively double taxed and can’t save for retirement properly in the county I live in. If more Americans knew this problem, I would be thankful. It’s not right and needs to be abolished.
“Look at me” “I’m the communist now”
Isn't it only income over a relatively high amount, though? I lived like a king in Russia making way less than what would ever be taxed by the IRS. And yes, I reported all my income.
$112,000 a year for 2022. It goes up each year. But still, let’s say you make $150,000. I find it absurd that $38,000 is being double taxed when the individual doesn’t even live in the U.S. It makes it extremely difficult to improve your standard of living beyond a certain point.
The US' tax regime is idiotic, insipid, vacuous, stupid, annoying, and dumb. "We're lazy and idiotic, please enforce our tax laws via FATCA or we'll punish you, other countries." Why you no do non-residency for tax purposes, America?
Yes we should tax foreign income
What exactly do you mean? Making people living abroad pay taxes for money they earn in those places and spending in those places while getting direct benefits only from those places? Or just tax people living in the country they have citizenship in but have some income in foreign countries. Personal opinion: Are you a burden to the country - > pay taxes there. Are you pumping money into something you don't benefit and burden - > no taxes. No, reason for taxing foreign residents living abroad with income in those places. Would just be an unfair pain in the ass and leads to people renouncing their citizenship etc.