America’s bizarre relationship with citizenship
As a person that has spent a few decades overseas, I see my blue passport as a vital travel document. Over that time, I had had it with me when I crossed countless borders, been through a zillion passport controls, and had to copy it for numerous local government forms and applications. But my Passport is only a travel document to me. My citizenship is much deeper than a document. No matter if I have a blue passport or not, I will always be American. Nobody can take that away from me.
I am writing this for that reason. This post is not an expression of my feelings; it is more of an intervention. Somehow, the whole notion of citizenship has become a twisted game of manipulation. We have turned something good into a tool to abuse targeted people.
I may anger a few people with this next statement, but even though I am a proud American, I look at how our country is dealing with the topic of citizenship and have to wonder if people have people lost their minds. I find the whole notion of “American Exceptionalism” one of the most unpatriotic things ever said. Pure pandering. It is almost like saying that you are “entitled” to have a first-place medal, even if you get last-place. All you have to do is show up to the game, and you automatically won. That’s nonsense. If we want to be exceptional, we need to try to be exceptional every day. Saying that America is entitled, somehow, seems to have created a highly twisted viewpoint that allows us to do stupid stuff. America has been exceptional. We have some exceptional people and institutions. The US is the most influential country in the world. But saying “exceptionalism” is just arrogant and seems to be designed to keep people from being critical. This is 100% unpatriotic. We cannot afford to continue the arrogance. We can start with the topic of citizenship.
American Exceptionalism and citizenship
This whole American Exceptionalism jargon seems to have lead to a bizarre set of rules about who is in the “exceptional” club, and who not. Additionally, if you want to remain in the exceptional club, you will need to do certain things beyond what any other country demands from its citizens. And if you ever want to leave the exceptional club, you will be punished. It means that not only can you be kicked out of the club if a group in power decides that you are not wanted, or maybe even you are the wrong color or demographic, the exceptional club reserves the right to take away some of your most basic rights like freedom of movement or right to privacy.
There are three groups of people as examples;
1) the people who are Americans and want to remain Americans, but cannot,
2) the people who are not Americans but are forced to be American, whether they like it or not,
3) the group of Americans that want to remain Americans, but are being abused and discriminated against because of it.
Americans who are American, want to remain American, but cannot
On one side of my family, I have a grandfather who came over from Sweden at a time where a large part of Sweden was immigrating to the US. I didn’t know him well, but I do know that he had little qualification when he moved. Somehow, my Grandfather received training as a mechanic at GM. At the time, being an automotive mechanic must have been like getting a job at Google today. Cars were new and a hot topic. He worked hard and contributed. He had five daughters and one son that fought bravely in WWII. I know that my Grandfather was very proud of his citizenship. It was likely one of his most treasured accomplishments. Once received and earned, nobody could take it away from him.
I do not want to go into detail about what has been in the news. But there are cases of the Government going so far as to question the US citizenship of groups of people. Others believe that they are citizens, but are being tracked down and deported because of some technicality. It seems that, for some, exceptionalism is mainly a demographic thing. Suddenly, citizenship is something that someone can lose, even if they contribute.
In 2000, the US passed the Child Citizenship Act. Among other things, this law allowed for automatic citizenship for children being born abroad to one US citizen, but with a lot of hoops thrown in. For example, a child or baby adopted by an American family and brought to America years before, would not have automatic citizenship if they were over 18 on the date that the law took effect. What? That would leave out around 20 to 50K people that thought that they were American. These people grew up and spent nearly all of their lives legally in the US. Suddenly our Government deports them, perhaps even leaving them stateless. It is easy to understand that if these people never heard about the law change, they would never know that they were not legal. Their age was not their fault. They were adopted, brought to America legally, on purpose, grew up, and contributed. 100% American. Now, they can be in their late 30’s and deported?
Other groups of people include many who either served in our military or are the family of military members. So you can serve the US and still get thrown out? Your spouse thrown out? Contributions to our country are no longer important to citizenship? And we say that we love our veterans?
Then you have the midwife controversy in southern Texas. The number of documents that were falsified to say that a newborn child was born in the US is unknown. But so is the number of valid documents. Because of this unknown number, it seems that our current administration wants to use that as an excuse to throw out all of them. It could end up being thousands of people. Even many of those, who were born in the US and lived their entire lives in America, contributing to our country, are having their citizenship questioned. All of this happened because someone in the Government didn’t do their job and check what was happening. Now, an entire group of people can get deported after living and contributing to our country for decades? News reports of US citizens detained as illegals are also increasing.
No matter the technicality that is being sought out to get rid of these people, the bottom line is that they grew up here, contributed, work and, pay taxes. For all practical and moral purposes, these people are American, want to be American, but specific groups don’t want them. Where does this stop? Is this a slippery slope? Wait until your group is suddenly considered unexceptional enough to have your citizenship taken away. Yes, it is a slippery slope.
Non-Americans who do not want to be American, but are being forced to be American
Meanwhile, in Europe, there is a group of French people that call themselves the Accidental Americans. This group spent their entire adult lives in France, and are French nationals. Suddenly, these people are being forced in to being American citizens, against their will. They have taken the fight to the European Parliament. It is not just French people. It seems that there are thousands of people around the world that are finding out that they are “American,” even if they have no connection to the US and do not want to be American. Sound pathetic?
Baring being born under certain midwives in Texas and a few other newly pushed technicalities, if you are born in the US, you are considered an American citizen. Since the beginning of our country, people come to the US temporarily for countless reasons; guest professor, to study, on a project, as a guest worker, it goes on and on. If during their stay, they have a child, that child is automatically considered American. Most of those people return to their home country, live their lives there, and consider themselves a citizen of that country. They are no longer connected to nor contribute to America.
Over the last few years, the Foreign Account Tax Compliance Act (FATCA) of 2010 (part of the HIRE Act) has been implemented. FATCA forced foreign banks, under threat of huge penalties, to report all “foreign” bank accounts of “Americans” to the IRS and Treasury. According to our Government, FATCA had the intention of catching wealthy Americans hiding money overseas. Sounds ok, right? The problem is that the US is the only industrialized country in the world that taxes people based on citizenship, no matter where they may live. In other words, the US imposes the entire US tax code on “Americans” even if they live under another country’s tax code. It is as if you were born in New York City and moved to Texas, New York city and state will impose their entire tax system on you in Texas for the rest of your life. And no, you do not get a break from Texas.
FATCA even went further. FATCA demanded that foreign banks report all American citizens to the Financial crimes units of the Treasury. If the bank did not report correctly, they would be fined an enormous amount of money by the US. The implementation of FATCA made every American citizen living abroad with a local checking account or a mortgage completely toxic. Checking accounts and mortgages canceled and lives ruined. The damage to all Americans abroad has been immense. But it gets worse.
Many Accidental Americans didn’t even know that they were American until they provided their banks with their birthplace information. For their entire lives, they thought that they were French (only). They had no connection to the US other than their birthplace. Suddenly, not only did the banks want to cancel their bank accounts, these people were forced into the US tax system on top of their French system. Additionally, they have not been filing FBAR and FATCA forms to the IRS because they didn’t know that they were American. These forms reported their bank “now foreign” accounts. Many faced penalties from the US that were many times the amounts that they had in there bank accounts. Logic says that these bank accounts are not “foreign,” they are local. Why should you have to report your local bank account to a foreign country? Why does your bank account have to be reported three times (FATCA, FBAR and by your bank)? On top of that, nearly all faced having to pay a very expensive US-CPA to try to get them caught up enough on their US taxes so that they could renounce their citizenship. The tax catch-up could easily be tens of thousands of dollars.
A brand new, highly complex tax code to go along with your current one
The people caught up in the Accidental American fiasco also found themselves having to deal with incredibly complex, special US tax rules that were imposed on top of their French tax rules and mixed with a tax treaty. The combination of tax codes and tax treaty can be devastating. For example, some French social benefits payments would be considered as passive income in the US and double taxed by the IRS. If the French person owned a simple mutual fund, it could be viewed as a “Passive Foreign Income Company” in the US, which can be double taxed at the highest possible rate.
Then, because of the American exceptionalism kicking in, they found out the renunciation wasn’t $50 or $100, like in most other countries. The fees were raised 500% to $2350, and that could go up if you had any legal question, too many assets, etc. Add, the legal fees, tax filings, etc.; the cost would run into the tens of thousands of dollars.
One of the most famous accidental Americans was Boris Johnson. Johnson had to pay the IRS capital gains tax on the sale of his apartment on London before he renounced his US citizenship. Yes, that’s right; Boris Johnson was an American citizen, while that Hispanic US Army soldier gets deported. Boris Johnson paid his way out of the citizenship that he didn’t want.
As mentioned before, the French group has been fighting back. Other country groups are popping up. Their movement has gained momentum, and the issue has been taken up by the EU parliament. The EU has found that FATCA likely violates the privacy rights of EU residents. Others in the EU parliament are saying that it breaks other fundamental rights. The EU wants to help their citizens be able to get rid of their “exceptional American citizenship,” without having to go bankrupt to do it.
On one side, we take away citizenship from people who want it, while we force citizenship on people who do not want it — as long as we can scam money out of them. Now let’s look at the most oppressed group of citizens.
Americans that want to remain Americans, but get abused for it
I recently discussed with a woman who was born and raised in the former GDR (East Germany), in the former East Bloc. She told me the primary driver of protests in East Germany that brought the Berlin wall down in 1989 was the desire of the people to have freedom of movement. Yes, there were issues with the economy and the State security police (STASI). But during that time, the US, over Voice of America and Radio Free Europe was broadcasting into the East Bloc how Americans enjoyed the freedom to be able to travel or live where they wanted. The East Germans didn’t have that, and they wanted it. That is a big reason why the Wall fell, and the Cold War ended.
Today, the former East Germans have freedom of movement. US citizens do not.
Punishing Americans Abroad
As mentioned, regarding the Accidental Americans, the United States is the only country in the world (exception of Eritrea) that imposes extraterritorial taxation on its citizens, even when they live outside of their jurisdiction. The double-taxation goes way beyond paying taxes; it imposes a set of laws, codes, and regulations on citizens that decide to leave the US to live. No other Government in the world tries to impose their will on its citizens when they leave their jurisdiction as the US does. The origins of this law go back to the Civil War when the US Government attempted to punish Americans for leaving the US to avoid fighting. But even then, it was limited to taxation for income made in the US.
Since then, many in Government attempted to portray US Citizens abroad as being rich people. Later, the statements from others in Government called Americans abroad jet-setters and claiming that the only reason they would want to leave is to avoid paying taxes. It doesn’t matter that that statement is nonsense. Most American citizens abroad pay higher taxes in the country where they live than they would if they stayed in the US. Even the term FATCA came from the notion that Americans abroad were “fatcats and tax cheats.” These statements are not only untrue; they are at the same outrageous discriminatory level as saying that all black people are criminals or all Mexicans are rapists. Most people abroad do not earn enough to owe US taxes, but still get the US code put on top of them. Is that freedom of movement?
Congress needs to pay for spending Bills or Tax Cuts by showing an income source to make up spending (PAYGO rules). Americans abroad have been used to show additional revenue. Every major spending or tax cut Bill passed through Congress since 2000 has had some element of punishing Americans abroad. Is this an accident? Here are a few:
American Jobs Creation Act 2004,
Tax Increase Prevention and Reconciliation Act (TIPR) 2005,
Heroes Earnings Assistance and Relief Tax Act 2007,
Hiring Incentives to Restore Employment Act (HIRE) (FATCA) 2010,
Fixing America’s Surface Transportation Act or the FAST Act 2015,
Tax Cut and Jobs Act (TCJA) 2017
All of the above laws passed by Congress had a revenue element supposedly paid for by new tax regulations and fines on Americans that live abroad. Even more Bills were proposed and not adopted. The Democrats have a new bill, HR1932 (under the mantle of stopping foreign tax havens), that will multiply penalties for non-reporting of a bank account by 10x, to a minimum of $100K. That will not hit the rich. They can shift money around. It hits people who are stationary or local, close to their bank account. Normal people. That may hit the student, studying overseas and having $11K to pay his/her tuition in their foreign bank account for a short period, and not knowing about the form. $100K fine? That has nothing to do with tax collection. It is a bank account balance form. The addition to already excessive penalties is a revenue source created by designing a more substantial penalty for a rule with no purpose (reporting bank accounts three times). If these laws were aimed at US residents trying to hide money abroad, it would be understandable. But it mainly (almost exclusively) hits the little guy that lives abroad with their local bank account.
If you are thinking about Paul Manafort, I will note that he has been a US resident. His foreign bank accounts were indeed “foreign.” But no, let’s throw everyone who lives and works overseas in the same bundle as someone from the US hiding money abroad.
Much like the midwife crisis in Texas, let’s make them all guilty. Punish them all.
It is an easy sell for Congress to make because the voting numbers of Americans abroad are spread out thinly across all States and Congressional districts. They will not lose their election because of the abuse of these American citizens. Congress can pass legislation without bothering its real constituents and donors. But the problem is that the numbers calculated as revenue-generating are just as overestimated as the numbers of Americans that they say live abroad. On paper, it may seem reasonable, but the calculation of the cost to the taxpayer to collect and manage this highly complex set of laws likely outweighs income brought in. In essence, the overestimates on the returns creates more debt for all Americans. HR1932 seems to be designed to pump up the penalties for average income people to keep Congress from looking too idiotic on what they are collecting. But that is at the cost of poor and middle-class people that live abroad.
When these citizens complain, the few times that they get a response, they are called “tax cheats.” This group gets told it needs to pay its “fair share.” But when you say that you are already paying 45% tax where you live, and you ask what a fair share is, you are ignored. Other times, many people tell us that the US Government protects us abroad as if Seal Team 6 will come to rescue us. This is a fallacy. The Governments in countries where Americans abroad live have sovereignty over their protection (that they pay for). And as for the State Department, I never walk into a Consulate without my credit card in hand. You pay for everything. For long-term Americans abroad, there is no Social Security. The protections are only in Hollywood, and there are no benefits.
Because of this massive double tax system complexity, an industry of tax compliance people has popped up. Americans abroad reported tax preparation costs anywhere from $800 to $4000, on top of their local tax preparation.
The Tax Cut and Jobs Act brought in a whole new level. Small locally owned businesses were caught up in the effort to repatriate money from the likes of Amazon and Google. These small business owners were forced to recalculate their earnings dating back to 1986 (just like a large multinational corporation). The tax preparation for this alone could be easily in the tens of thousands of dollars. The retroactive tax will likely bankrupt thousands.
Additionally, because of FATCA and regulations on “foreign” corporations, many locally employed Americans find themselves in jeopardy of losing their job if they have non-beneficial signatory rights on their local company’s bank account. If the citizen is American, this could force the entire local company into the US tax system reporting requirements. No company wants that.
There is much, much more to this. It is really like the US Government wants you not to have a particular job, does not want you to start a business, does not want banks dealing with you, and even wants to make a potential spouse think twice about marrying you.
The US system of taxation and the US Government’s obsession with tracking “foreign” bank accounts has had a devastating impact on families, marriages, people’s jobs. Thousands have been forced to decide between their citizenship or staying with their families, undergoing financial ruin, limitations on the job markets, being able to retire or even more. Freedom of movement?
The result of this is that thousands of American citizens have been forced to renounce their citizenship and many, many more (if not most) are considering it.
All of this because this group of people wanted freedom of movement? No other citizen on the planet has those restrictions, costs, penalties, fines, and paperwork. Punishment. Discrimination. US Citizenship.
But the fact that our Government can so ruthlessly pick on this group of people, just for being citizens, is another reflection of the bizarre take on its citizenship.
Because of this exceptional attitude, we have groups of Americans that can be thrown out, groups of people that get forced in, and groups of people that get punished.
Historical Value of US Citizenship
I wonder what our founding fathers would have thought about our selective removal of something as solemn as citizenship to people that have already been granted citizenship and have earned it. I wonder what they would think about forcing citizenry on to people who do not want it and do not live in the US. I also wonder what they would think of the arrogant handling of citizens abroad, that is precisely comparable to how King George treated the Colonists.
American exceptionalism seems to be thinking that whoever is in power can manipulate something as profound as citizenship to fit their own needs. A group of people, or someone’s base, doesn’t like the demographic development, throw out the ones you don’t want. Need to get some money, find some new ones and force them in. Do you want to pay for a Government spending increase or a tax cut without bothering your real constituents? Go after the ones that are too far away to fight back.
Being an American citizen used to be something that was highly valuable. But how our Government and specific groups are using US Citizenship devalues it to just travel papers. If that is American exceptionalism, it has failed.