Why I renounced my US citizenship (Hint: it’s not because I’m avoiding taxes!)
After my American Studies lectures, amid the clamor of students packing up and making their way out of a crowded lecture hall, a few students often line up to ask me individual questions. Usually these are practical: to explain an absence or to ask about course requirements.
One day last September, though, a tall young man approached me with a different question. He was polite but direct in what he wanted. “I hope you don’t mind my asking, but why did you move to the Netherlands?”
“My husband is Dutch,” I replied, as I have for the last 18 years.
He looked at me with something like pity. “Because you speak about America as if you really love it…”
I nearly wept there and then, shoving my notes into my bag. Swallowing the lump in my throat, I deflected his query and changed the subject, but the irony of his remark stung.
I had just that morning received the date for my renunciation of US citizenship at the consulate in Amsterdam.
Let’s get this straight: I love the US. I grew up there and, despite the 18 years I have lived in the Netherlands, and the fact that I have Dutch citizenship, I still feel more American than Dutch.
So why would I want to give up my US citizenship? Because of unjust, onerous US laws that treat me like a suspected criminal: entitled to fewer rights than other Americans.
I used to feel blessed to have the US citizenship that so many people, including my own immigrant grandparents, were so desperate to have. Now, every time I think about my renunciation last November, I am angry. I resent that I was put in that position. I feel unjustly persecuted. I spent many nights sleepless from worry about what I was being asked to do by the US government, and, eventually, got tired enough to let go.
Violation of Privacy
Overseas Americans like me cope with a violation of privacy that homeland Americans are not exposed to. Because I did my banking locally, I was required to submit a form called FBAR (Foreign Bank Account Report). On this form, I had to report the highest balance (over $10,000 in each account or the aggregate) of the year in every local account that had my name on it. What that meant was that my husband’s salary also got reported because we have a joint account. Why is it any of the US government’s business what my Dutch husband earns? If US citizens living in the US had to report the balance of every account they had in their local bank — all their assets, in other words, not just their income — they would be up in arms, protesting the government’s intrusion in citizens’ private business.
So why do Americans living overseas have to report their balances? The FBAR is required by the Financial Crimes Enforcement Network (FinCEN). In other words, by living abroad, we are automatically suspected of breaking federal laws to avoid taxes. US citizens who live in the US do not have to report their local account balances unless they are suspected of a crime. To get the same records in the US, law enforcement would have to get a subpoena.
At the same time, the US has worked out Intergovernmental Agreements (IGA’s) with many countries, including the Netherlands. Under this agreement, the Dutch government requires our local banks to report Americans’ account information to the US government. Presumably this is so that the US can compare the banks’ accounting with our own FBAR reporting. If they do not match, the US threatens excessively large fines, entirely out of proportion to the totals reported in those accounts, enough to wipe out one’s entire savings. Many banks, meanwhile, are beginning to refuse to do business with US citizens in order to lower their compliance costs.
Citizenship-based Taxation
This state of affairs comes about because the US bases its taxation system on citizenship, unlike the rest of the world, where taxation is residence-based. In other words, while I live in the Netherlands, pay taxes in the Netherlands, and receive services in return for my taxes from the Netherlands, I was also expected to pay in the US, despite the fact that I received no services for my tax dollars.
The Foreign Account Tax Compliance Act (FATCA), passed in 2010 and in effect since 2014, was intended to catch “tax cheats”: billionaires living in the US who send their money abroad to hide it from the IRS. The problem is that people like me, who have moved abroad for jobs or for love, are persecuted as a consequence of that effort.
This does not mean that I was trying to avoid paying my “fair share,” the misleading phrase often used by politicians and repeated by the press. Because of a treaty between the US and the Netherlands (and many other countries), I only had to pay US taxes if my income was higher than about $100,000, which, as a teacher, it will never be. Instead, I pay where I live. I am in the 42 percent tax bracket here in the Netherlands, and my husband’s income puts him in the 52 percent bracket. That is much higher than it would be in the US, so I cannot be accused of avoiding taxes. If I wanted to do that, the Netherlands would be the last place I would live.
Nevertheless, I had to fill out US tax forms every year, plus extra forms to claim my foreign tax exemption, all to prove that I in fact do not owe any US taxes.
I repeat: I love the US. But I had to fill out lengthy forms (or rather, I spent almost a thousand euros a year to pay an accountant to do them for me), exposing my and my husband’s accounts to US government scrutiny, and I risked losing the ability to do the sort of banking that any middle-class American would normally take for granted.
Lack of Representation
At the same time, I particularly resent that no one hears the complaints about this law coming from the approximately 9 million US citizens living abroad: a population the size of New Jersey. They can vote in the last place they were registered, which, in my case, was California, where I have not lived in more than 18 years. Because of this structure, their votes are diluted over the 50 states. No one represents our unique needs as Americans living overseas.
Does “No taxation without representation” sound familiar?
Accidental Americans
Among the approximately 9 million Americans living overseas, there is a growing population of “accidental Americans.” Many of these “accidental Americans” are Canadians who were born in US hospitals just over the border. They were brought home to Canada when they were newborns and have lived their lives since then in Canada as Canadian citizens. By the US definition, they are US citizens as well, and should have been filing US income tax forms every year. Many only discovered this recently and are now under threat of huge fines if they do not get compliant with the US taxation laws. The same goes for children of US citizens, like my son, who are born abroad but qualify as US citizens.
Some reading this might say “Fine, you chose to leave the US. Deal with it.” In my case, that is true: I chose to move away to be with my husband. In the case of “accidental Americans,” it is not.
The Cost of Renunciation
But dealing with it by giving up citizenship — an obvious solution for accidental Americans as well as Americans living overseas permanently like me — is difficult. The US recently increased the fee to renounce citizenship from the already-ridiculous $450 to $2350. Supposedly, this is to pay the costs of processing a renunciation. I suspect that, instead, the intention is to prevent us from renouncing. Many Americans living overseas simply cannot come up with that kind of money.
Raising the fee and other requirements to renounce is not going to achieve what it is ostensibly meant to achieve: to bring in more tax dollars. It might initially raise some cash as overseas Americans scramble to get compliant. However, wealthy Americans residing in the US but hiding money overseas will still be able to hide money overseas. And they can afford to hire accountants to get compliant, while the fee to renounce is pocket change to them.
They get away scott-free, while the rest of us — law-abiding, patriotic Americans who happen to live overseas — feel so burdened that we reluctantly renounce citizenship.
I’ve had conversations in the last year with many colleagues, students, friends and family about my emotions surrounding renouncing my citizenship: my longing for relief from an injustice that felt like persecution, and, at the same time, my grief at such a final parting from the US. Their consistent response has been “Rachel, you’ll always be an American.” I definitely still feel American, but flawed, punitive US policies have forced me to give up my legal claim to the citizenship I carry in my heart.
I am grappling with a deep sadness. I love the US.
Yet I have had no choice but to say good-bye.
Rachel Heller is a teacher living in Groningen, The Netherlands. She blogs at Rachel’s Ruminations about travel and other topics. This article is a slightly altered version of the statement she submitted to the US consulate along with her application to renounce.
