FATCA: The American Diaspora and Homeland Politics

"The source of tension in this sphere may be the unwarranted opinion held by most homeland leaders, as well as the rank and file, that the very raison d'être of "their" diasporas is to stay in close contact with them, express unfailing loyalty, and provide the homeland with various resources and services."

Gabriel Sheffer
Diaspora Politics:  At Home and Abroad

The Foreign Account Tax Compliance Act (FATCA) was passed in 2010 by the U.S. Congress and signed into law the same year by President Barack Obama.  The repercussions of the law (which was actually hidden inside a much larger bill called the HIRE Act) on Americans living outside the United States were noted almost immediately by both individual Americans abroad and the organizations that work on their behalf (American Citizens Abroad, the Association of Americans Resident Overseas and the Federation of American Women's Clubs Overseas).

Diaspora Politics and FATCA:  These established lobbying organizations - some of whom have existed for over 40 years - used their usual channels to bring these problems to the attention of the U.S. government (Congress and the different agencies like Treasury and the IRS).  And they asked their members to use the traditional methods that worked in the past to support their efforts:  writing letters, voting, and putting pressure on elected representatives back in the U.S.

At the same time some Americans abroad who were either not affiliated at all with these organizations, or who wanted more direct action, sought to create other organizations using the new communication tools that technology made available to them:  internet forums, email lists, LinkedIn, and other social media like Facebook and Twitter.  One website in particular really took off and has become a very popular and powerful voice:  The Isaac Brock Society.  Following a blitz of media attention in Canada, the site was getting 10,000 hits a day and the all-time number of hits from Americans and other U.S. Persons all over the world, is now over 6 million.

All these diaspora groups have very similar goals:  the repeal of the FATCA law and citizenship-based taxation (the ideal) or mitigation of both to make them less onerous.  The constraints they operate under, however, are very different.

Traditional Diaspora Organizations and Their Constraints:  The established diaspora organizations are committed to working through the homeland political system and that constrains them:   there are a number of things they cannot say or do lest the people in Washington cut off their access.  On the other side they have a membership of Americans outside the U.S. they are accountable to and they must be actively fighting on their behalf and not seen as agents for U.S, policies that are contrary to the interests of their members.

They are centralized top-down organizations with structure, rules and a lot of history.  This kind of organization has been successful in influencing the U.S. government on all kinds of topics of interest to Americans abroad like citizenship and voting rights.

The New Diaspora Organization:  Constrast them with the Isaac Brock Society which is a relatively recent decentralized bottom-up Internet-based organization with almost no structure and very few constraints.  There are no leaders, the structure is very loose, and the members speak for themselves.  The Brockers are not  interested in access in the U.S. and their existence does not depend on a dues-paying membership (though they are depending on another currency which is attention).

They have been successful in three areas:  raising awareness of FATCA and CBT worldwide, facilitating renunciations of U.S. citizenship (they are not directly responsible for the rising numbers but they offer a safe haven and resources for those who are thinking about it) and influencing the host country governments, in particular Canada where they are making FATCA a political problem for the Canadian government as it negotiates its IGA with the U.S. government.

It is the last two that put them at odds with the established American diaspora organizations who are A. not in the business of helping American citizens to become citizens of other countries and thus gutting their own membership and B. do not use the political arena in the host countries to act against what the U.S. government perceives as its interests abroad.

That is the landscape as I see it today.  Full disclosure:  I belong to all of these organizations and also use this blog as my own independent forum for my thoughts - nothing you read here should ever be taken as coming from any of these organizations.  What I have said above is no more, I think, than what any outside observer with a penchant for politics might see.

Impact on Homeland Politics:  All of this is happening under the radar of the American homeland public.  They seem a bit bewildered by the comments they see, the articles they read and the renunciation numbers reported by homeland and international media alike. The answer that seems to satisfy most of them is that this movement is simply a bunch of rich tax-fleeing expatriates and none of it should be taken too seriously.  Before them is dangled the rather enticing notion that they will pay less in taxes if those Americans outside the United States pay "their fair share."  This reminds one of the gullibility of the homelanders a few years ago when they bought hook, line and sinker Bush's assertions that the Iraq war would pay for itself .

In that context U.S. politicians feel pretty comfortable ignoring the anti-FATCA movement.  For Democrats it is a matter of supporting the president and maintaining the U.S. public's perception that they are siding firmly with the 99% against the 1% (and it is assumed that all Americans abroad fall into the latter category).  To the extent that the Republicans are fighting an image of collusion with the rich, they didn't necessarily want to be associated with it either.  In spite of all the furor outside the United States about FATCA after 2010, it never became a political issue in the 2012 presidential election.

There are signs that this may be changing.  The main U.S. political parties (Nassim Taleb calls it the "beastly two-fossil system") have had a presence abroad.  They solicit votes and contributions from Americans outside the United States and act as way for Americans abroad to support their parties and perhaps even have some influence in homeland party politics.  Neither the Republicans or the Democrats in the United States are completely oblivious to Americans abroad and will occasionally (discreetly) nod in their direction at strategic moments in the homeland election cycle.

Of the two, Republicans Abroad was much less visible and it looks like it's been disbanded and a new organization has been founded called Republicans Overseas.  That is interesting, but even more so are the reports that the Republican National Committee (the homeland organization) will be voting on a resolution that calls for the repeal of FATCA.  And that finally brings the issue right smack into the middle of the American homeland political landscape.

Democrats Abroad reacted by sending out emails and updating their web site to assure everyone that:  "The [FATCA] Task Force has been working for more than three years to outline to legislators and regulators the nefarious implications of FATCA compliance and to promote reforms that both preserve the law’s intent and provide relief to law-abiding overseas Americans excessively burdened by it."  They have characterized the Republican move as a cynical political maneuver.

That reaction raised a few eyebrows.  Perhaps it was a bit much to expect that Democrats Abroad would take the side of Americans abroad over their own party and sitting president, but their behaviour was (and is) perceived as being self-serving and protective to the point of doing their best to keep Americans abroad and their concerns about FATCA as quiet as possible until after the 2012 elections.  That may be an unfair characterization but, frankly, the perception that Americans abroad were already the victims of a cynical political maneuver by Democrats at home and abroad is widespread and that presents the Democrats with a credibility problem.  One which I personally have no sympathy for.  As Ruby said in Cold Mountain:  "But they made the weather and then they stand in the rain and say 'Shit, it's raining!'"

The Gabriel Sheffer quotation at the beginning of this essay sums up beautifully, I think, the expectations that the American homeland has of its diaspora.  Getting the American public  and leaders to admit that there are a few million Americans out there who are not "temporary" inhabitants of distant lands but permanent residents, requires a mental leap on their part (one that they are loathe to make). But if an American must live outside the United States, they seem to be saying, then he or she has the obligation to prove over and over again that he is loyal and ready to sacrifice himself on behalf of the homeland. And this seems right and just to them.  Not so much to us.

And so, the American Diaspora Tax War is at an impasse with the U.S. government and the American public doing their best to ignore the entire business while traditional diaspora organizations try to work within the constraints they have to find a political solution that everyone can live with.  The two wild cards here are the Isaac Brock Society and the millions of Americans abroad who are not members of any diaspora organization on or off-line but who are quietly watching what happens and discreetly formulating their strategies.  The first is a many-headed Hydra that cannot be silenced, and the second, an enigma inside a conundrum.