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Wednesday, May 9, 2012

American Citizenship - a Cost Benefit Analysis

The U.S. has a new export that is really taking off:  Americans.  In 2010 a record number of U.S. citizens decided to renounce their citizenship.  A mere drop in the bucket (under 2000) but a trend that has some people worried and others horrified and angry.  This topic has finally hit the mainstream media with articles in the New York Times and the Huffington Post.  Any discussion of why this is so tends to degrade very quickly into an emotional argument with lots of exclamation points, capital letters and a "don't let the door hit you on the way out" mentality.  It's a subject that hits all of us (homelanders and expatriates) right where we live.

I think we have a failure to communicate here and so perhaps it might be instructive to use my own case as an example in order to dispel a few myths about why some Americans abroad are considering renouncing.  What follows here is my own situation and my own reasoning - a cost benefit analysis, if you will.  My case is definitely not representative of all Americans abroad but I'm sure it will resonate with some.

I left the U.S. in 1989 for France when I was 23 years old - right after I graduated from the University of Washington. I was married to a French citizen in 1990 and though we have expatriated to other countries during that time, the majority of our life has been spent here in Europe.  When I left the U.S. I had no money and no assets since I had just finished school and had not yet started my working life.  Today not one dime of my savings was earned in the United States and I currently have no property or savings in my home country.  Everything I have in France was earned in France or in Japan.  I have had a modest but good career as an IT manager in those two countries and I have paid taxes in every country I've lived in and worked.  I have two children who are dual nationals (French/US citizens).  My husband is a French national and has neither US citizenship nor a Green Card.  As of  this time I am not a French citizen though I currently hold long-term EU resident status. Our family has no intention of returning to the U.S. to live though we have never ruled that out as a possibility for the future.

Given my situation (and looking at it with cold reason) what are the costs and benefits of holding American citizenship?  Let's start on a high note and talk about the benefits:

Voting in U.S. Elections:  As an American citizen abroad, I have the right to vote in Federal elections (president and congressional representatives).  The way the American system works, I must vote in the State of Washington (my last state of residence) and will do so as long as I remain outside the country. Since our numbers are few, our impact is negligible and I don't feel terribly well represented in the United States but I will concede that I do have this right which I can exercise or not as I wish.

Right of Return:  My U.S. citizenship gives me the right to return to the United States at any time to live and work.  As a practical matter however, my ability to exercise this right is limited since I am married to a foreign national and I would not think of returning unless my spouse could (and wanted to) come with me and I was assured that he would receive a warm welcome in the U.S.  From the news reports we are getting from the States, it seems rather evident that the "welcome" is not what it was.  Another factor is that I have one minor child (dual US/French citizen) at home and if I chose to return to the U.S. without my spouse, I would have to have his permission to take her to the U.S. Needless to say that just wouldn't happen and both the U.S. and French courts would forcibly return my daughter to France were I to try this.

Opportunity:  With a U.S. passport and EU residency I have the possibility of working on two continents (Europe and the U.S.) with a minimum of hassle.  This is tempered by the high unemployment rates in both countries and the lack of benefits and worker protections in the U.S.  Given U.S. work laws it is quite conceivable that I could return to the U.S. for work and find myself unemployed with no benefits the day after I arrive.  So moving to the U.S. one day might be a grand opportunity or a complete catastrophe.  I am not complaining about this, mind you, just pointing out that at 46 it is not an obvious decision to pack up and seek a rather risky opportunity on the other side of the Atlantic.  But my U.S. passport does give me access to the U.S. job market which is not a small thing.

These are the benefits that I currently enjoy as a US citizen.  What about Social Security, you might ask, or the right to pass American citizenship onto my children or consular protection?  Well, the first does not apply since I never worked in the U.S. long enough to qualify for benefits.  The only pension plan I am vested in is the French national system.  As for the second, my children are already U.S. citizens and it's irrelevant at this point whether I remain a citizen or not - they will keep their US citizenship regardless of my status. And finally the third just doesn't exist.  If I am accused of breaking the laws in my host country (France) the only help I will get from the U.S. embassy is a visit (if I wish) from a consular officer and help finding an English-speaking lawyer.  Concerning the latter, my French is fluent and I already have a very good lawyer here so I don't really envision needing that service.  As for a U.S. passport being a useful bit of protection when traveling, I think that time has come and gone, my friends.  It's certainly not worth more then an EU passport these days.  Most places I've visited have either been strictly neutral about my pretty blue passport or slightly hostile (perhaps that was my imagination but I did sense a rather cool reception in a few places.)

Against these benefits, let's look at the costs:

Tax Compliance:  It is costing me between 500 and 1000 USD per year to be compliant with all the tax and reporting requirements of the U.S. government.  This is not a huge amount of money but, as I start saving for retirement, the complexity of my tax situation will grow and I will surely have to pay more just to keep up.  I've had estimates from 1000 to 10,000 USD depending on the amount, types of investments and so on.  There will also be taxes to pay in the U.S. in addition to what I pay in France.  Not all French taxes count as a tax credit in the U.S.  Capital gains (on the sale of a house, for example) are a direct hit.  I would need a professional to quantify this for me in a more precise manner but what is sure is that I will pay more and more every year (unless, of course, I throw caution to the wind and stop saving for retirement at all).

Discrimination:  I have already had one interview with a U.S. company here in Europe that didn't even want to talk to me until I showed that I was a long-term EU resident.  Clearly the fact that I was an American citizen was not a point in my favor.  I have also had my bank give me trouble over certain kinds of investments because I am a U.S. citizen.  From the stories circulating among other U.S. expats here in Europe it seems that Americans are becoming persona non grata in the banking communities in our host countries.  From what I am hearing, I am probably safe for now with my existing accounts but may have trouble opening new ones which means not being able to change banks.

Lost opportunities:   I have always wanted to work as an independent or start my own business here in France.  A quick look at the U.S. tax rules for Americans living abroad who do this sent me running for cover.  Ouch!  Very complex.  Potentially very costly.  In addition, just as Americans are becoming pariahs to the local banks, local business is becoming less then eager to start up a venture with an American partner because of the onerous reporting requirements.  And, finally if I have trouble opening new bank accounts here in my host country, I may be seriously limited as to the kinds of local investments I will be able to make in the future.

Stress:  The FBAR/FATCA fiasco came out of nowhere for many (if not most) Americans abroad.  The U.S. Congress is constantly cooking up all kinds of brilliant ideas that impact us and we are usually informed after the fact.  I have to wonder what else they have planned for us.  Over the past few months I've seen some pretty persistent people trying desperately to get the U.S. government, politicians, and the public to listen to our grievances and to take them seriously.  While I am so grateful to all of the organizations and individuals who are tirelessly working on the behalf of all Americans abroad,  I'm not seeing much traction.  I feel like a pigeon waiting to be plucked with very little say over the next surprise to come out of Washington.   I greatly fear that next year's (or the year after) legislation will financially ruin me and my family.

Rejection:  I am also getting very tired of reading headlines about how we are "tax evaders" and "ingrates."  Clearly homeland Americans do not love their diaspora.  Since there seems to be a large number of homelanders who think we should "shut up and comply" or "get the hell out" I have to wonder why I'm even bothering to maintain my membership in the club as they seem perfectly happy to see me and others go.

On a last note, to be brutally honest with you, I'm just very tired.  Tired of writing letters, tired of explaining, tired of fighting.  There is so much about this that I simply cannot change.  I cannot make homeland Americans feel differently about their expatriates.  My influence (even as a U.S.voter) is practically nil. I have lost all faith in the U.S. government (Obama and company included).  I no longer think it will improve - on the contrary I can think of a hundred ways it could get worse.  And I have slowly come to the realization that American citizenship and globalization are an imperfect fit these days.  Perhaps it will get better with time but that, it seems to me, is something I can hope for for my children's sake but not something I am coming to believe that I can realistically expect to have for myself.


Tim said...

One thing I'll say is a lot more people are considering renouncing or giving up their green cards than is commonly thought its just a lot of people don't want to talk about it publicaly. My sense is at some point you have to vote with your feet. The situation might get better for your kids someday and they don't really have to make the choice with same urgency. I guess one question is have you thought about when you get French citizenship are going to consider that a relinquishing act or do you still plan to stick around and vote in November. I also believe if you vote with your feet you should insist on your name being published in the Federal Register.

Anonymous said...

You have put into words some of the things I wonder about. Thanks

Just Me said...

As usual Victoria, you say it so very well. It is the tired part I feel too, but then I think of Roger Cronklin and how long he has been on the mission, and I feel a need to help out.

Also, I saw this little video trailer, and I see we have some other little person on a mission trying to make a difference, and feel I should continue doing what I can...

Fools on the Hill

Anonymous said...

Another thoughtful, intelligent and well written article. Thank you Victoria.

I married a Frenchman and have lived in France for 43 years. At that time, acquiring French citzenship was quasi-automatic for foreign spouses of French citizens. Despite the stern warnings and threatening language from the US Dept of State, I became French.

When the USA citzenship based tax silliness rose its ugly head once again, I researched, dithered, wrung my hands with anguish, soul searched, discussed with friends and family and made a decision. I renounced.

Unlike you, I had just retired and so no need for a back-up plan for alternative job markets. I also hold citizenship of two other countries. Even if I had a desire to do so, I could not afford to return to America as a retiree, the cost of medical insurance is prohibitive and I would not benefit from Medicare nor social security.

What I can tell you is that the sky did not fall. I realized that there wasn't much of the American in me anymore. The USA is a wonderful country with amazing people but after so many years in Europe I no longer agree with many of the basic principles that I will refer to as "the American way of life". I am a passionate French woman - Liberté, Egalité, Fraternité.

As I am no longer a US Person, I am free to manage my finances without having to consider nor understand US tax policies nor worry about the next bill that US legislators might dream up to punish overseas Americans. I have safeguarded my family as my succession is no longer subject to the whims of Capitol Hill. As I grow older and, one day, less capable to manage my affairs, I am removing an additional burden for myself and my loved ones.

I have followed your blog since last Fall and enjoy it very much. It has been reassuring to watch as you have gone through the same thought process that I did. I guess it is our American education and upbringing.

I bear no ill feelings towards the USA, we have simply grown apart. I have been a good ambassador for America but there comes a point where you realize that without reciprocity, it just does not make any sense. The USA's treatment of its diaspora is immature. Homelanders are raised to believe that "foreign" is bad rather than embracing the amazing, exciting and wonderful diversity of the global world we live in.

Evolution (with a touch of revolution) lies ahead as the functionning of the US political system and economic model are in great need of an overhaul.

I wish you well Victoria and hope that whatever decision you may take ( or none!) will bring you peace and happiness.

Victoria FERAUGE said...

Thank you all so much for your comments. I think Tim is right and there still is some reticence to talk about this though I've heard more from the American diaspora in the past year then in the past 20.

@Just Me I'm a great admirer of Roger (and of you too by the way) and I plan to keep writing. If not for my sake but for the Frenchlings.

Thank you so much for telling your story, Anonymous and I so appreciate your following the Flophouse. A year ago I would have not have considered for one moment giving up US citizenship but now (and I loved the way you put it) "we have simply grown apart." Not the end of the world and perhaps the start of something better. All the best to you.


Victoria FERAUGE said...

And I just received this Citation du jour from my friend Jean-Jacques which I think is perfect for the occasion:

“The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.”

"Le pessimiste se plaint du vent; l'optimiste espère qu'il va changer; le réaliste ajuste les voiles. "

William A. Ward (1921-1994)

Working Overseas Tax said...

Great post! A lot of people are feeling the same way as you! I don't think the government is trying to go after Expats, they are just trying to go after the people that have money in foreign bank accounts that still live in the US and expats have another obstacle to go through well living abroad.

RogerC said...

Working Overseas said "I don't think the government is trying to go after Expats, they are just trying to go after the people that have money in foreign bank accounts that still live in the US and expats have another obstacle to go through well living abroad."

Whether or not expats were even thought about when this legislation was drafted and enacted, the fact is the cannon is aimed straight at them, and its enfocement literlly destroys them.
I wonder why the US government so strongly endorses the UN Universal Declaration of Human Rights when it comes to supporing UN resolution 2023 on December 5, 2011 which condemned Eritrea for violating the himnan rights of its cizens living abroad by subjecting them to a 2% income tax on their world wide income, yet the US turns a blind eye to the US taxation of its citizens abroad, which is far more devastating for them. It guess it just matters whose ox is being gored. We worry about the human rights of non-Americans but totally ignore those of our own citizens.

Victoria FERAUGE said...

Have to agree with Roger here. Whatever the original intentions of the US gov, the consequences are falling on us. All efforts to write letters, call Congressmen and women, attend hearings and lobby (ACA and AARO) have come to nothing. In fact, some of the folks in the Treasury department seem to find our efforts rather amusing.

Anonymous said...

Interesting post but I believe it's a shame to look at that through a cost benefit point of view...
I'm French AND American - although, I was only born in the US and raised in France after that - and I plan to live and work in the US without giving up either my French or my American citizenship! For me, your analysis is kind of depressing...

John Doe

Victoria FERAUGE said...

Dear John, I agree with you that this is pretty depressing. Took me a long time to come to terms with it but I didn't really have much choice. These days the US government is forcing people like me (and perhaps eventually people like you) to make some tough decisions. Choosing to comply if one wishes to remain both French and American is a perfectly reasonable decision but it needs to be made in full knowledge of the facts. Alas one of the unfortunate results of all this is that it's not entirely a personal decision - it involves the family as well. Every year for the past two year *we* (my French husband and me) write a check to the US government and *we" must fill out a stack of forms a centimeter thick (1040, various schedules, the FBAR and the new assets form). The look on my French husband's face when I told him that I had to turn over his information to the IRS was not a pleasant moment in our marriage. So I decided to apply some cold reason to the situation and this is what I came up with. Whatever I eventually decide, it will at least be a thoughtful measured decision.

All the best,


Anonymous said...

Well, I have to acknowledge that my situation is not as tricky as yours: I'm a French student and I don't earn any wage - except for some part-time jobs in the summer - so, I don't have to file a tax income revenue... Maybe I shouldn't have been so judgmental.
My only concern is to register in order to vote for the 2012 election - oh, and more important, find a way to intern in a US consulate or embassy.


John Doe

John Doe

Victoria FERAUGE said...

John, you and my daughter are in similar situations. :-) She also has U.S. citizenship. This year she will be going to the U.S. for a couple of months to work at her grand-father's company but next year she would like to intern at a law enforcement agency there. Neither of these things means that she will have to file a tax return thanks goodness.

Amd good for you for registering to vote! If you need some help voting from abroad the Overseas Vote Foundation is a big help.

All the best to you,


Anonymous said...

Just some encouragement to keep on writing what a lot of us experience, think, and feel. At least we now know that we are not all alone with these issues and problems.

Victoria FERAUGE said...

Thank you so much for the encouragement and for reading the Flophouse. We are not alone - there are millions of people facing this. We need to find our voice and that I think will happen when we all start telling our stories, raising issues and pushing back against some of the disinformation coming out of the homeland.

What I wish for however (and I aspire to this whenever I write) is that we try and practice maitri (loving kindness and a wish that all people be well and find peace). This doesn't mean that we stay silent and put up with abuse, it just means that we remember that those who disagree or who argue with us are not evil. Just Me is, for me, is the epitome of what I'm talking about. No matter how angry the conversation becomes or how bitter and angry the article, he always answers with kindness and politeness. Something to emulate because it works. Means that we can have a conversation and not a fight. And the former is what we need to have with the homeland, in my humble opinion.

All the best,


Rosy said...

As usual, excellent posts by Victoria and all of the above. I'm a bit late since I've been discovering this great blog. My name is Rosy and I've decided to be a bit less anonymous now. I guess you can say that I'm mad as Hell and I'm not going to take it anymore. My head isn't as cool as yours, but after 40 years in France and as a dual citizen, I can't believe what the banks - and the US Congress, if that really exists - are doing to us. I also may be renouncing, so I'm not going to vote this year. At any rate, no matter who wins, nothing will change for us. That may be a short-term view, but I'm a US Civ instructor and I've been preparing students for international communication and business (and this profits the US too) and just don't feel like an ingrate or tax evader. At the origin, in the early 70's I could not get a job in the US teaching French and Italian because nobody was learning those languages. It was all Spanish for commercial reasons and German for scientific ones. So I came to France where I had already studied. I liked being able to go out with at night and not being afraid to go home by public transport which wasn't the case in NYC at the time. Then came marriage and the rest. Although I have my gripes with France - I've been precarious all these decades and can only hope for minimal retirement, if I ever get to it, I just can't imagine living with the double taxation which can wipe us out. I'm voting with my feet too. Not happily, but I'm doing it. If anybody feels the same, I'll be glad to communicate. We can share our experience. See you soon ? :-(

Victoria FERAUGE said...

Hi Rosy, Thanks so much for stopping by and for your comment. I just voted but, like you, I don't have much hope that things will change anytime soon.

Loved your comments about France. Yes, the quality of life here is outstandingly good and worth every penny I pay in taxes. :-)

Thanks for sharing your experiences and I would love to meet up with you some time if you are in or around the Paris region.

All the best,


P Moore said...

Another well balanced and outstanding post. Whenever you reach the final decision regarding USC, it will be well founded.
Good luck

Victoria FERAUGE said...

Thank you. I really tried to put some thought into it and to take off the rose-colored glasses. I have to ask myself honestly why in heaven's name am I still a US citizen after so many years outside the country? I sure don't plan on going back to the US and that has less to do with the US itself and a lot more to do with France being "home."

I'll keep thinking on it but I'm favoring renouncing myself.


Inky and the Fish said...

Thank you so much for your wonderful blog. I've just discovered this whole mess, and I too, like Rosy, am mad as hell. I've been a UK resident (and naturalized in 2011) for 26 years and have religiously paid my taxes and even, in some cases, NOT partaken in tax avoidance schemes that other UKCs have done so I'm furious at the implication that I'm a tax dodger simply because I choose to live outside of the US. I've read up on what I can, have started approaching US tax gurus (TWO ACCOUNTANTS!! WHY SHOULD I HAVE TO PAY TWO ACCOUNTANTS????) to catch up on my back taxes at which point I will formally relinquish, though it seems that naturalizing has meant I've informally done so. Stupidly, I voted in 2012 because I thought I should, but if I'd known before I wouldn't have. I'm certainly never using my US passport again (I wasn't born in the US, so that's shouldn't throw up any questions at immigration). I want to speak to a lawyer about relinquishing before I do anything else, though.

Thank you for taking the time to put together this blog, to inform the ill-informed (homelander and diaspora alike) and I wish you all the best with your own battles, health and otherwise.

Victoria FERAUGE said...

@Broken, Just catching up here (was laid a bit low recently). Thank you for your comment. Yes, the way the situation is framed right now is infuriating. The equation Expatriate equals tax dodger unless one proves otherwise is deeply unfair but seems so deeply entrenched in the mentality of the homelanders that I despair that we will ever succeed in getting it changed. All the best to you, Victoria

Anonymous said...

Great post, Victoria.
Maybe it is time for a US citizen residing on US soil to weigh in.
I have been filing income tax returns since I was a teenager. So that is roughly 35 years. In every subsequent year, the forms seem more numerous and instructions less understandable. I think of the income tax as the means by which the US guv seeks to intrude into our personal lives and impose their preferences upon us. Why should I potentially pay less in taxes because I paid mortgage interest?
Two recent events, the NSA surveillance via Snowden and the IRS denial/delay of approval for Tea Party organizations have convinced me that those in power (regardless of party affiliation) are interested only in enhancing their own power. "Freedom" has become the shiny object that officials use to distract us.
So while I follow all the tax rules, I long for an existence that is simpler, less bureaucratic.
We have accumulated quite a bit in assets and would likely have to forfeit 40% in a renunciation. Given our age, we are not necessarily attractive to other countries. Although we might be able to "buy" our way in.
I have learned that there is a thin line separating Patriotism from the Stockholm Syndrome.
In all likelihood we will continue to pay tens and tens of thousands of our earnings to feed the beast.
To all you ex-pats out there, please accept my apologies. It is a beast I would prefer died of starvation.