Robert Frank – Wall Street Journal June 13, 2011
According to the latest Internal Revenue Service report, the number of Americans renouncing their U.S. citizenship (or terminating their long-term permanent residency) has increased nearly ninefold since 2008.
In the first quarter alone, 499 Americans expatriated through the IRS, meaning they probably won’t have to pay U.S. taxes anymore. That compares with a quarterly average of 384 in 2010. And 2010 marked a significant jump from 2009 and 2008, with quarterly averages of 186 and 58, respectively.
These are small numbers of course. With 300 million Americans, 499 expatriates is hardly a drop in the ocean. Yet the trend is almost a straight line up.
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. There is a population of U.S. citizens who live overseas and may never have paid U.S. taxes on their non-U.S. earnings and non-U.S. accounts. Now that the IRS is enforcing the rules, with criminal penalties for scofflaws, the overseas residents would prefer to expatriate rather than pay.
“I think this is coming to the forefront because of offshore reporting and banker reporting issues,” said Peter Connors, a tax attorney in New York. “there is a price to being a citizen of the U.S. and at a certain point the price may not be worth it.”
Whatever the case, the numbers are clearly headed in the wrong direction.
Why do you think Americans are expatriating?