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Thursday, January 23, 2014

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.


A broken man on a Halifax pier said...

Thanks for this, Victoria -

One difference between the two cultures is that ACA, DA and so on are made up of real expatriates, in the traditional sense, while sites like IBS are a hub for a very heterogeneous group of people who have some sort of U.S. status, and not unusually are indignant about it. (An improbable number of Canadians turn out to have born in the United States and brought home as infants, and apparently all of them have arrived at IBS. :-) )

Having said that, I'm interested that official American expatriate culture, as represented by ACA, is very non-judgmental about renunciation, and tends to blame the government more for making it necessary.

Anonymous said...

Thank you for turning your ever fine writing and analysis to this topic (which can also be seen in the growth and ebb and flows of discussion and content over the evolution of Isaac Brock and the more recent Maple Sandbox).

It is astonishing that no-one else in academia or journalism has evidenced even a passing interest in how social media has allowed us to do what we could not accomplish with traditional means. This is a story of organizing to effect social change, and I think would make a very fine and important case study for someone in the social sciences, political science, etc. but as far as I can tell, no-one of that type understands why it is significant.

Anonymous said...

I admire and respect the history and the work of the ACA and AARO, though I did not know they existed until I discovered them more recently - via IBS.

I understand and acknowledge the real world restraints they operate within. Because of the similarities, proximity and historically close interrelations between the US and Canada, they are not active - or perhaps have been perceived as not as necessary to the second largest population of US citizens 'abroad' (after Mexico) as far as I can tell.

Democrats Abroad and the Republican equivalent do not have my respect - even if some part of our concerns overlap in result if not in intent and motive. After having attended a local DA meeting years ago, when I and so many others desperately needed help in grappling with these issues, I realized what their serious structural and ideological limitations were and continue to be. At the beginning and end of a tax information session they sponsored, the organizers noted how important it was to re-elect Obama, whom I had voted for in 2008. This was their primary reason to be - though they were addressing an audience who were demonstrably full of confusion, anxiety, and fear. At no time did they mention the existence of and potential assistance of the IRS Taxpayer Advocate - though their report says that they have had years of contact with the TAS in the course of their lobbying on the tax and financial reporting issues. I do not intend this as partisan rant, because I know perfectly well from looking at the past history of these issues that the mistrust, misinformation, punitive measures and slandering of those abroad as designed and enacted by the US apparatus has BI-partisan authorship, participation and support.

Anonymous said...

I am no longer a US citizen. And I feel that I was forced - against my will to give up my birthright.

And I am not speaking of birthright as some mythical access to streets paved with gold as some people think of when they think of US status. I speak of the right to claim a symbolic and actual part of one's personal and family history. To belong to somewhere. To remain in connection with family left behind. Or as in the Robert Frost poem 'The Death of the Hired Man'; "“...Home is the place where, when you have to go there, They have to take you in...”" Even if in this case it is largely unrealized as many of us are permanently at home outside the US. Still, it was once a nice thought - that one had a birthright home, and had the right to return to assist family when necessary.

We are vilified by both US homelanders and fellow citizens of the other country where we live for 'taking advantage' of US or dual citizenship - and our potential access to the land with the golden avenues (or is that arches?) - merely by virtue having been born with US citizenship.

I was very bitter and angry that I was FORCED to give up my US citizenship - an integral part of my sense of self and personal history, and I paid very dearly in savings, and mental and physical health, and family wellbeing for the right to do so as my only actual remedy for the unbearable and painful burden the US has imposed on us from afar. I am a casual lower wage worker and for years was also caregiver to my child and an elderly parent. I do not and have never owed the US any taxes. I barely make enough to file where I live or in the US. I pay what I owe in full faithfully where I live and where I receive actual benefit and services.

But I could not continue to live with the anxiety, the fear and the very real and disproportionate expense and jeopardy of the incomprehensible forms and potentially bankrupting penalties and the confiscatory and punitive nature of ALL the interactions I would have to look forward to forever with the US. My actual permanent home (for > a half century) is not the US, and now my home of sentiment and ancestors is closed to me. I visited recently and was numb. I could not see it the same way anymore. The surface appeared the same, with no sign of the jeopardy it so carelessly and capriciously posed to me and my non-US family. There has been a death in our relationship, and apparently, the grief is felt only on my side.

This is not reflected in any of the communications and actions I see from the Democrats abroad or the Republicans. And some of the actions that the ACA,AARO etc. would like to pursue would only also entrap my child - and tie them to a land which I can no longer follow them to.

The US is dead to me. So be it.

Victoria FERAUGE said...

@Broken Man, Interesting point. Clearly Brock is very inclusive and many members are US Persons which is not necessarily mean US citizen. Even the citizens contain a fair number of Accidentals. But there are also long-term residents in there as well and quite a lot of overlap with people joining all these organizations. Isaac Brock is the hardest to pin down in terms of membership. Agree with your non-judgemental comment. I don't see anyone judging those who expatriate.

Anonymous: I've had exactly the thought. I even wrote to Castells and suggested that he might be interested. No response.I think it's important for us to do this from time to time for our own benefit. How do the pieces fit together? Where are the risks and opportunities? Stuff like that.

@anonymous, Very important to honor the work of ACA, AARO and FAWCO. What you say about DA has been said to me in many a private conversation. They really blew it.

@anonymous, I am so sorry. Trying to get that message out -that we are not ultimate talking about abstractions but real people. I get infuriated by messages I see from homelanders that say "well, just give up your citizenship." We are talking about ties and identity. That this choice is being foisted on many of us calls into question (for me anyway) the basic goodness of the American people.

Unknown said...

What a thoughtful and powerful essay!

May I reproduce it here in the expat community in Brazil.

Most people here are in a state of denial/ignorance regarding FATCA.

Victoria FERAUGE said...

@James, Hi there. You bet. Go right ahead and I'm honored that you asked. Here's the link to all the posts I've written about this subject over the years. Take whatever you like. And, yes, I'm wordy. :-)

P. Moore said...

I have read so much about this issue in so many places including several blog posts right here. The issue is getting hotter and hotter and well described by you, Victoria. What I find interesting is that the REAL HEAT has yet to start...I expect to see some serious flame throwing when the actual implementation starts and the consequences begin boiling to the top. Sure, many 'US persons' abroad are already being denied banking services and many who owe no taxes are being assessed nonsensical penalties, but the surface is barely being scratched, in my view. Wait until millions are directly confronted with this nonsense by their FIs...wait for the lawsuits in various countries...wait for the political backlash in various countries when citizens understand they are paying the tab for a foreign government to impose taxation in their countries, on their citizens and residents. These are early times for this story.

Anonymous said...

I voted against George Bush in 2008, and I lost. Big time. I lost everything

Tim said...

My understanding is that in the past(20 years ago) there has been conflict between American Citizens Abroad and Democrats Abroad. Remember ACA was founded by Andy Sundberg(head of Democrats Abroad) and Patric Hale( head of Republicans Abroad) back in the 1970s. Eventually Andy Sundberg as head of ACA wanted to make a big push against CBT in the 1980s and early 1990s. This was opposed by Democrats Abroad and their leadership in particular Peter Alegi who wished to keep citizenship based taxation in place. Peter Alegi and some others formed a competing group to ACA that on paper was non partisan but in reality was just a front for Democrats Abroad. Additionally this now defunct front group(it was something like Federation of Americans around the Globe) run by Peter Alegi was heavily involved in a sleazy fundraising effort to sell its membership lists to phone companies for them to solicit pre-paid calling card customers among American expats.

So in some sense there has always been conflict between ACA at least and Democrats Abroad on how much to push on tax issues. Some of it to was I think Andy Sundberg despite being head of Democrats Abroad at one point became more politically conservative later in life as head of ACA.

stars said...

Wonderful post, thank you. After a lifetime of voting Democrat I feel betrayed and bitter. FBAR penalties, for Americans whose homes and livelihoods are outside the States, and FATCA make it impossible for any American living abroad to vote for the Democratic party.

Janet said...

The first thing I do every morning is to check your blog to see if there is a posting. All postings are very good but this one is excellent. Thank you.

Anonymous said...

Having lunch last spring with some Democrats Abroad and other U.S. expats I raised the subject of FATCA just to gage awareness of the others Some had never heard of it.

A Dem. Abroad woman in the group did an angry eye-roll (as though I was talking some tin-foil hat conspiracy theory). She demanded that we "talk about something else."

Dems. Abraod here have a policy of sweeping FATCA under the rug.

Patrick said...

Some years ago, on BBC radio, I remember DA was trying to get people who "had fallen out of American life" to vote in the 2004 US election. The BBC presenter joked that these people had "gone native?". At the time, I questioned the morality of voting in an election in a country I no longer considered my home and (as I thought at the time) the result of my vote would have no impact upon my life in my adopted country but may affect the lives of people living in the US. I suppose that is the distinction between an 'expat', who is only 'abroad' temporarily to either work or study, and (what I now consider myself) an immigrant in an adopted country, and there is no longer an 'abroad'. One may have well asked of the DA rep what possible benefit it is to the immigrant to vote for the DA-approved candidate in what is essentially a 'foreign' election? The DA rep knew distinction (between expat and immigrant, though maybe not in those terms, but the "fallen out of American life" comment gave it away) and I now view their past (and current) tactics as completely duplicitous and self-serving. Given the present situation and their current position, I think the next time DA try to court us assimilated immigrants they are going to get the two-fingered salute. They can go peddle that nonsense to the people who plan to be back in the States next year.

And I am not a 'wealthy expat' or whatever label they use for us. I struggle to hold down a job, facing possible redundancy and try to care for a disabled child.

allou said...

Hallo Victoria - I want you to know that the best thing that has come out of my OMG experience when I realised I should have filed US taxes for decades, and hadn't, was the serendipity of discovering IBS and your blog - keep up the excellent analysis - allou

Victoria FERAUGE said...

@P. Moore, Oh yes it is heating up. This is one that governments would have preferred to keep quiet until it was a fait accompli. Seeing it finally making its way into homeland politics is very encouraging. It means that at least there will be a debate about it. I think more will come. I'm convinced that any French bank that tries to squeeze the dual French/US citizens (espcially those who are Accidental Americans) will provoke a backlash.

@Tim, Fascinating. Lot of history there in the traditional diaspora orgs.

What I've heard from the un-affiliated (those who wouldn't touch ACA or AARO with a ten foot pole) is a lot of suspicion. I've heard criticisms that these people are not properly integrated into the host country culture and that their ties to the US government are troubling. Something to address in a future post I think.

@stars, Yeah, Dems abroad did not exactly shine here. I'm hearing a lot of folks express their disappointment. In fairness I doubt that the homeland organization would have allowed them the luxury of open dissent. The election was the priority. And now with Obamacare going south they really don't need more criticism right now. That said my ties with DA were fleeting - I gave up on them relatively early on.

@Janet, Thank you so much for reading. I realize that the Flophouse is a bit chaotic at times with me jumping from one subject to another. Whatever the subject I try to be thoughtful. Good to hear that there are readers who LIKE that. :-)

@anonymous, I've heard reports of that. I also saw forums where people tried to bring up FATCA and they were censored - comments deleted and people kicked off for asking questions about it. Didn't give me a good feeling about DA or the Dems in the US.

@Patric, Ah, interesting thoughts. I've had similar questions about voting in the US on topics where I don't have any skin in the game.

@allou, Thank you so much for reading and for your comment. I'm a fan of IBS too. It's a very empowering place.