In one comment a FATCA supporter asked a very good question, "So if you folks hate FATCA, what is your counter-proposal?"
Aside from the obvious, "We would like you to kill FATCA. Go Rand Paul!" I thought of a few things that might mitigate some of the worst effects of this law and some of the other reporting requirements. Feel free to rip them apart. I'm putting them forward, not because I need to be right, but because we are at risk of falling into a dialogue of the deaf. Time to do some creative thinking here - it's getting ugly, folks. So here are a few modest, simple ideas.
1. Redefine "Foreign Accounts": Here is the comment I left in response to the Mother Jones article:
At issue here are "foreign" accounts where Americans are alleged to have stashed money in order to escape taxes. But for an American residing in London, that checking/savings account is local. Why can't American tax law reflect that? Why can't we just say that if the account is located in a country where a US citizens lives and/or works, that account is a local, not a foreign, account in the eyes of the US government? This would get rid of many truly useless reporting requirements like the FBAR (which has a very low threshold of 10,000 US or about 7,500 Euros). FATCA could be changed to reflect that as well. Only non-resident accounts of US citizens in the homeland would be subject to reporting. This would mean that the people in the US who have accounts abroad would still have to report them and be subject to reporting but those who are living abroad would be exempt.Think about it, folks. In one bold stroke we would eliminate all that useless and onerous paperwork and save everybody (US citizens and Green Card holders abroad and Americans in the homeland) a chunk of change. No more FBARs, no more form 8938's for US citizens who are residents or who work abroad. Since the requirements for Americans living in the US to report their accounts abroad would still stand, this ought to be sufficient to catch those who make their money in the US and "park" it elsewhere to evade taxes.
I think of this every year as I send my FBAR (Foreign Bank Account Report) off to Treasury. And I just have to laugh because of what possible interest is my daughter's 200 Euro savings account to the US government (unless you want to argue that a 17 year old US citizen living abroad is already suspected of being a tax evader :-). And I laugh even harder when I think that some poor government worker back in the US (paid by the US homeland taxpayer, of course) has to sort through all of this to no purpose whatsoever.
2. "No Questions Asked" Renunciation: As US citizens and Green Card holders have educated themselves (with precious little help from the US government) about the US tax and reporting requirements, many wish to renounce and become citizens of the countries where they live or turn in that Green Card and move on. As many have discovered, this is easier said than done. So, why not make it easy? One trip (instead of several) to the local US Embassy, cut the form down to one page that can be filled out in 5 minutes, no fees, and let the person renounce on the spot if he or she wishes to do so. The Certificate of Loss of Nationality should also be issued at the same time as the renunciation. Forget the tax forms - does anyone seriously think that the US government is going to track down the citizen of another country to make him or her pay a non-filing fine?
Again, this would save everyone a lot of money and Life Credit Units. Fewer useless forms to fill out and less burden on Embassy staff. For those who argue (and they are legion) that if Americans abroad don't like FATCA or citizenship-based taxation, they should just renounce, this would remove the barriers and everyone (Americans abroad who wish to renounce and those at home who don't think they are "real" Americans anymore) would get what they want.
This would also solve the problem of those "Accidental Americans" - those who may have been accidentally born in the US and left as children or those who were born abroad to a US citizen parent. If they don't want to be Americans then let them go and wish them well. A winner all around.
And give up the idea that the US can shake them down (fine the bejesus out of them) before they get their "Get out of jail free" cards. That is not only stupid but it is a petty act unworthy of any democratic nation-state.
3. Amnesty and Education: Most Americans abroad didn't comply with the US tax and reporting requirements because they didn't know about them. The path to compliance is complex and of what possible use to anyone are years of back tax returns with nothing but zeroes on them? Or FBAR's with "foreign" (local to us) savings and checking accounts or children's college funds or pensions?
I know that "amnesty" is a bad word in the U.S. but wouldn't it be simpler and easier to just ask Americans abroad to start filing now? And that means this year or the next. Forget the past - it's too complicated to sort out and the US government deserves some of the blame here for 1. Sitting on the law for years and not trying to enforce it, 2. Making no attempt to educate Americans citizens living abroad about their reporting obligation and 3. Not providing a clearer path to compliance for those Americans abroad who are willing to do so voluntarily.
Let's start over with a clean slate. And let's start thinking of ways we could avoid the problem altogether by providing people with information: What about:
- A short note explaining the tax and reporting obligations of Americans to be slipped into the passport when any American leaves the country.
- The same note slipped into a new passport issued to any American abroad or to someone picking up a Green Card at their local US Embassy.
- Full disclosure of these tax and reporting requirements to be made at all classes preparing immigrants for US citizenship. And a note to be sent to them before they take the oath to be sure that they understand what the US will be asking of them once they become citizens.
It doesn't have to be a novel - just an outline with links to more information. It won't reach everyone but I'm looking for progress, not perfection.
And if people don't care for it, well, they would have options like renouncing or not becoming a US citizen or remaining one and working through the political process to get it changed.
Sure, surely, all this is possible?
What do you think, folks?