Why Being An “Accidental American” Can Be Extremely Frustrating
Having been born and spending my entire life so far in the UK, the fact that I am also an American citizen has never really been something that I have thought about. Of course, it has proven useful occasionally when travelling to the US to visit family (anyone who has waited in line for US immigration will get what I mean) and I feel a sense of national pride as an American. Since turning 18, however; I have realised that being a dual national that does not reside in the US means that in the eyes of the government and the IRS, you are a second-class citizen.
I understand that for many, being given the opportunity to move to the USA is one that they may spend years striving for. After all, the country is the land of opportunity; but I still think it needs to be said that there are some serious penalties that come attached with being a US citizen who chooses not to reside in the USA.
The US government insists on imposing some of the harshest and most unfair taxation rules on its citizens in the entire world (this is no exaggeration). These policies severely affect the financial standing of Americans who choose to live abroad, and attempt to impose taxation on those living abroad who do not have any representation.
Aside from Eritrea, the USA is the only country in the world to impose taxation based on citizenship as opposed to just residency. This is both undemocratic and violates the right of “no taxation without representation”. The US Census does not consider those who live outside the United States, and therefore they are not considered when determining how many representatives are selected for each state based on population. Furthermore, there is no congressman for Americans living in Europe, Asia or anywhere else in the word.
This seems unfair, as this mandates citizens to file taxes who will not reap any of the benefits that those taxes are used to fund. It seems that this is something that no political official has shown much interest in fixing. Is it perhaps that Americans who are living abroad are too little of a lobby and do not provide enough of a political presence to bring about any change? Well why should I, as a low income earner in the UK be forced to offer up what little interest I generate from my savings account to the US government, despite the fact I have few ties to the US and have never lived there?
Not only do these policies force non-US residents to hand over a portion of their income, but they also put severe limitations on how Americans can save and invest their money. Since FATCA (Foreign Account Tax Compliance Act) was introduced several years ago, this has mandated that all foreign financial institutions report the assets and identities of anyone listed as a US person to the US Treasury. This has resulted in a large portion of financial institutions refusing to accept US citizens, due to the associated administrative costs of ensuring that all details are correctly reported to the US Treasury. This leaves many Americans feeling financially helpless, as they are unable to save their money or use it to generate wealth and it punishes those that have found their future as somewhere outside of the United States.
Having to file a 1040 every year knowing that I will not be living in the US to benefit from it has become cumbersome, even after just a few years. The US government should not have the power or authority to harass and take from citizens who do not reside in the country.
For the so dubbed “Accidental Americans” there appears to be no easy solution in sight. The Trump Tax Reform Plan initially was going to contain plans to alter FATCA and change the law regarding taxing US citizens residing abroad, but it never came to fruition. This leaves many US expats feeling frustrated, as there seems no way to bring about any change as someone not residing in the US. Renouncing US citizenship seems the only option, but even that has gotten expensive, rising from ~$700 to over $2000 over the last several years in response to mass renunciations (likely caused by the introduction of FATCA).
As someone who is proud to be a citizen of the USA, renouncing is something that I do not want to do. I love the US, despite never having lived there and my family would be aghast if I were to tell them that I am giving up my citizenship. Sadly, the intrusive and negative impact that this has on my life has left me feeling that there is no other option. I feel that I can either uproot my life and move to the US to prevent this from being an issue, or cut all ties and throw away my citizenship.
There is a voice crying out for reforms to these archaic tax policies, but it is a disjointed and scattered one. Sadly, it seems as if there is nobody in Washington that is willing to listen.