The Flophouse is Doomed

Open Culture just posted a link to this 1954 video, The House in the Middle.  It is a scream.

Did you know that poor housekeeping and an untended yard may mean that you and your loved ones may not survive a nuclear attack?

It's true, mes amis, they tested it and then they made this video to spread the word.



If my grandmother were alive and watching with me I'm sure that she would feel vindicated - "No one is ever too poor to pick up his yard!"  No fan of slum-dwellers was she.

Looking at the Flophouse, I'm sure she'd be very disappointed in me.  It's not dirty but it's not exactly one of those brightly painted houses with a perfect picket fence, a golf course quality lawn and order within.  And did I mention the little mouse we caught the other day under the DVD player?  The younger Frenchling trapped it in a Tupperware container and released it in the garden.

And now I learn that my (and perhaps your) slovenly ways are a direct threat to the survival of my little Franco-American family.

Who knew?

There is only one appropriate response to this news as far as I'm concerned:  Surrender.

This means a direct march to the living room where I will grab a book from one of the many piles on the coffee table (thus scattering papers everywhere), pile up the pillows from the floor onto the couch (where I will read in blissful comfort on my covered-with-cat-hair couch) and share a chocolate ice cream cone (crumbs falling on the carpet to feed the mouse if he decides to come back) with my younger Frenchling until the heat of the afternoon passes.  Time enough tomorrow to get out the vacuum cleaner and swamp out the house if I feel like it because as Ed Ricketts once said:

"We must remember three things:
Number one and first in importance, we must have as much fun as we can with what we have.
Number two, we must eat as well as we can, because if we don't we won't have the health and strength to have as much fun as we might.
And number three and third in importance, we must keep the house reasonably in order, wash the dishes and such things. But we will not let the last interfere with the other two."

Ed Ricketts quoted by John Steinbeck in The Log from the Sea of Cortez

Hadopi

Opened up the EU Observer this morning and lo and behold there was this headline:

France scraps online piracy law.

They are referring to what is commonly called "Hadopi", which is actually the name of the government agency, the Haute Autorité pour la Diffusion des Oeuvres et la Protection des Droits sur Internet.  The French law behind it was first proposed in 2008 with the support of many film, music and book authors (the "creatives") because it was designed to stop illegal downloading and to protect their rights to their artistic and literary property.

However,  the rather draconian penalties which included cutting the Internet access of repeat offenders, were widely criticized.  In the English language media Hadopi was often referred to as a "three strikes law."

Though it was fiercely debated in France, and there were many accusations of "dirty tricks",  it did pass parliament in 2009, and a version of it survived scrutiny by the French Conseil Constitutionnel (Constitutional Council).

In a rather ironic twist, when the Hadopi agency unveiled its new logo in 2010, it turned out that the font they used was under copyright and owned by France Telecom.  Not a terribly auspicious beginning.

But they soldiered on and Hadopi went live.  What has been the result?  It took them millions of Euros and three years to get one conviction. Valéry Marchive reported on it in this article in ZDnet back in 2012:

For the first time since its difficult birth in 2009, the work of France's anti-piracy authority Hadopi has resulted in a conviction. Earlier this month, a man known as Alain P was convicted of having failed to effectively secure his home internet connection and will have to pay a fine of no less than €150 as a result. 

Calls to repeal the law have been getting louder.  In addition to those who always thought it was a bad idea (I was one of them) many of those who liked it or were ambivalent about it were admitting that it was not efficient and has not worked as intended.  The Rapport Lescure released in May called for the suppression of the Hadopi agency and lightening up some of the penalties.

So does this mean that Hadopi is dead?  No, the article in the  EU Observer is a bit misleading.   What the French government did was issue Décret n° 2013-596 du 8 juillet 2013 which eliminates only one of the penalties for illegal downloading (albeit the worst one):  the possibility to cut the Internet access of people who have been warned but who persist in downloading intellectual property in violation of the law.  The fines are still there and I've heard that Hadopi will be absorbed into another government agency which will take on the responsibility of enforcement.

But most importantly, the intent - the original objective - is still there.  Lescure's mission was called "L'acte II de l'exception culturelle" and his report is revealing.  Hadopi may be on the ropes but there are other methods to achieve its goals that are less punitive and more positive.

What I did like however about Lescure's report was the number of stakeholders consulted and the different views that were expressed.  Some of the proposals are quite good and show the incredible creativity of the French.  I'm not so sure about the tax they propose on connected devices but that might be a good compromise.  I wouldn't rule it out until I see the details.

But do you know what I admire the most?  Yes, millions of Euros were spent and a lot of time and energy expended on everyone's part but, when it became clear that it was not working, they were willing to face that and consider making a course correction.  In a situation like this one the "sunk cost fallacy" can be an important deterrent to doing the next right thing - just because one has spent a million euros doesn't meant it's rational to spend a million more just to try and save something that cannot be saved.

Here's hoping that the French, with their usual deftness and intellectual agility, have steered clear of the trap.

American Citizens Abroad: Proposal For Residence-based Taxation

American Citizens Abroad has been doing some excellent work to try and get the U.S. system of citizenship-based taxation changed to residence-based taxation.

What's it all about and why would this be good for Americans abroad and Americans at home?  Let's begin with a quick and dirty explanation of the difference between CBT and RBT.

Citizenship-based taxation (CBT):  The U.S. is the only country in the world other than Eritrea that taxes based on citizenship and not on residency.  This means that wherever  in the world that an American citizen (or Green Card holder) is living and working, he must report his "foreign" (local to him) bank accounts, file tax returns and pay U.S. taxes in addition to the taxes he pays locally in the countries he resides in.  An example:

An English teacher in France:  Makes a modest salary, has French checking and savings accounts, and a small studio apartment.  Because she lives in France she files French tax returns and pays national and local taxes to the French government and to the city she lives in.    But because she is a U.S. citizen she must then turn around and report her French accounts to the US Treasury, file tax returns to the U.S. IRS and, depending on the circumstances, pay taxes to the U.S. government even though not one dime of her money came from the U.S. - it was ALL earned in France and deposited into local French bank accounts.

Residence-based taxation (RBT):  Under this system a resident of a country may still be required to report on his worldwide income (depends on the country), but a non-resident only pays taxes on local income.  An example:

Take the same English teacher in France and imagine she has a few investments in the U.S. that she left behind her when she moved   Because she is a tax resident of France she would pays French taxes on what she earns and saves in France but she would only file tax returns and pay taxes to the U.S. on the income that is actually earned in the United States.  Her French income would not be taxed by the U.S. because she is a resident of France and not of the U.S.

Sounds pretty straightforward (and sane) to me.  To make it even easier to understand ACA has produced this excellent short video about their proposal which explains all the advantages the U.S. would have if it changed systems.



And for a bonus, here is an interview with Jackie Bugnion of ACA that provides more details:



Well done!

My take on the CBT vs. RBT debate can be found in my 2012 post:
Diaspora Taxes:  Citizenship-based Taxation.

Flophouse Review: Embers of War

Last time I darkened the door of the American Library in Paris, I picked up a book with an intriguing title:  Embers of War:  The Fall of an Empire and the Making of America's Vietnam by Fredrik Logevall.

The war in Indochina (or as the Americans call it, "Vietnam") is of personal interest to me.  Not from the American point of view as no one I know in my American family ever served there but from the French perspective.  My father-in-law, a French army officer whose career follows the fortunes of France as a European and colonial power in the 20th century, volunteered for la Compagne d'Indochine.  As a result, some time in the early 1950's he found himself in southern Laos where he was the chef d'Etat-Major du Génie du Laos which I think means chief of staff of the Engineering Corps of Laos.

Embers of War covers the period from the end of World War I to 1959 with an emphasis on the period from the Libération of France to the independence and partition of Indochina. And it includes the very beginning of the United States' direct military involvement in the region in the late 1950's.

Logevall spins a fine tale - the book is not only well-researched but well-written, too.  He successfully achieves the goal of historians who write for a general audience:  finding the right balance between historical facts and telling a good story.  There is an excellent bibliography as well which lists popular works like Bernard Fall's Street Without Joy but others as well that may be  less known but still well worth the read.   Logevall's talents were recognized this year in April when he won the Pulitzer prize for this work.

Embers of War filled in many of the gaps in my knowledge about France and her colony in Indochina.  My U.S. education did include the history of the region but it was as if the history really only began in the late 1950's when the Americans arrived and there was very little mention of what went on before other than brief remarks about the area being a former French colony.   Today with the Americans long gone, and national memory of the war fading fast, the region is hardly ever mentioned anymore in the U.S. and I note that it is not exactly a topic of general conversation in France either.

In my personal library I have a copy of Hachette's 1889 book, Nos colonies which has a chapter devoted to Indo-Chine.  The reactions to the book sitting on my shelf or my attempts to ask questions about it are pretty consistently met with embarrassment and sometimes mild hostility.  The former I could understand since the U.S. has many periods that we Americans are ambivalent about, but I was confused about the latter.  Legovall's book gave me one possible explanation for why that is.

The United States' involvement in the region goes back much father than I knew - something I'm sure those of you who are better read on this topic already understood quite well.  The U.S. was not in it up to her national eyeballs (and drowning) until the 1960's but was already influencing events  since at least World War II.  In defense of the U.S. there was probably no way they could have stayed entirely out of it since it was the only power left standing after the war. It is fascinating to read just how many actions and reactions of the actors on all sides of the conflict were based at least in part on what the U.S. might do.  When the U.S. did respond with policies and statements that vacillated depending on the administration, it seemed that someone was always left bitterly unsatisfied.

However, the U.S. action that is often cited by older people I've talked to here was Dien Bien Phu.  This was a French base in the north that was surrounded and besieged for 57 days in 1954.  As the situation worsened the French quietly asked the United States for support in March.  Then in early April, Prime Minister Laniel and his Foreign Minister made an official request directly to the U.S. ambassador in Paris.:

On behalf of the French government, he hereby requested that the United States intervene immediately with heavy bombers capable of delivering two-ton-or-heavier bombs, in order to save the entrenched camp at Dien Bien Phu.  No other option existed.

The answer from Washington was "no" and the French were indeed out of options.  On May 7th the remaining French troops were overrun and the Viet Minh took over 11,000 prisoners.  Many of them did not survive the forced marches and prison camps.

Not a high point in French/U.S. relations and easy to see why some residual bitterness might remain.  And imagine, if you will, an American like me bringing up the subject with friends and asking naive questions without having any understanding of the context.  Did they think of this as a variation of Alden Pyle's sinister innocence?

One has to wonder if the French had these past events somewhere in the back of their minds when they in turn said "No" to the U.S. in 2003.  Perhaps that is a stretch but clearly the relationship between the two countries has included moments like these. It is absurd for Americans to say, "Well, the French are always so critical and say 'no" to everything" - on the contrary the record shows a great deal of agreement and mutual assistance between the two countries.  However, and this just my .02 here, neither should ever ever take the other for granted.

Going back to the Campagne d'Indochine, the irony of it all, of course, is that the French left Indochina and then the U.S. a few years later ended up intervening later to a far greater extent than the air support the French requested in 1954.

Toward the end of his life, my father-in-law made a remark to me that I will always remember.  Back in the 1960's as he watched the American move in and sally forth, he worried because he saw hubris.  "They really thought they would do better than we did," he said softly.  Because Americans believed their motives to be pure, noble and free from the taint of colonialism, and because of the great power, wealth and technological advantage of the U.S.,  they walked in assuming that victory was theirs.

It is, I reluctantly admit, a national character defect, one which probably stems from one of our more positive traits:  The sense that all things are possible if one simply tries hard enough and believes.

Embers of War will be available to patrons of the American Library in Paris just as soon as I can get into town (probably next week) to return it.

In the meantime, here is a video from Youtube (about 10 minutes) that talks about Dien Bien Phu, the French request to the Americans for assistance, and what happened after the base fell.

Bac 2013: A Fine Fourth of July

Yesterday afternoon I took the 171 bus from Versailles to Sèvres to pick up the younger Frenchlings French baccalaureate results.  The French bac is the exam French students take at the end of high school to graduate and to move on to higher education.  It serves the same purpose as the SAT in the U.S. but it's a very different experience.  It's not one exam, it's many over the course of a week with some written (essay questions) and others oral.  Students have to work very hard just to pass, much less do well enough to get into a good school.

The younger Frenchling had double the fun.  Four years ago she decided that she wanted an education that was more international - something similar to her school in Tokyo - and she was motivated enough to do the research herself. What she found was the Lycée de Sèvres.

Sèvres - Sections Internationales is a state-supported (public) French school on the outskirts of Paris that offers not just one but two bi-lingual programs (German and English) from elementary school through high school. The students follow the regular French curriculum in French (indispensable for passing the French Bac) but then have other classes in the second language in order to prepare for a wide range of other certifications recognized by the German, UK, US, and other university systems.  What an elegant solution for bi-lingual education and since this is a public school, it's affordable for a middle-class family here.

But just as she spent four years with extra classes and a very long school day (8 AM to 5 PM), this meant that she had extra exams too.  There were 16 of them over two weeks in French and English.  At one point she was so tired and stressed out that she told me that she was having second thought about having done this program.  

She survived just fine and when it was over her father whisked her off to Japan (her graduation present) for a week sightseeing in Tokyo, Kyoto and Osaka.  I stayed behind (I'm still not 100%)  and had the task of picking up her scores yesterday.

The atmosphere at the school when I arrived was almost exactly what it was two years ago at the elder Frenchling's high school.  A lot of very tense kids.   As each student received his or her results, there was great joy on the part of some and deep despair for others.  There was one young man who kept looking at his scores and saying, "Mais qu'est qui se passe?" (What's going on here?) Other kids were leaping into the air screaming "Oui!" and hugging their fellow students with joy.

I was as stressed as the kids but I'm a nearly 50 year old "Madame", very conscious of her dignity, and so I took the folder and went to another room to turn in her books and have a look.  Under the eye of one of the administrators I opened the file and started reading.  

There were two conditions for the younger Frenchling to get her admission to the University of Montreal Physics program confirmed:  pass the Bac (total score over 10) and get at least 11 in Mathematics and Physics.  As I read the scores I started smiling.  She ACED math and physics - she got 16/20 in both subjects and her overall Bac results earned her a "Mention Bien."  I threw up my hands and yelled at the top of my lungs in English, "My daughter is going to be a Physicist!"  

So the younger Frenchling will be joining her sister in Montreal (the elder Frenchling is at McGill doing Honours Psychology) this fall.  I am so proud of both my daughters.  My dreams as a parent have been realized -  I have children who are much much smarter than I am. 

The U.S. Congress and FATCA Reciprocity

Breaking story from James Jatras.

An unexpected development on the FATCA front.  Congressman Bill Posey, a representative from the state of Florida and member of the House of Representatives Financial Services Committee, has sent a letter to the U.S. Treasury about the promises of reciprocity that Treasury is making to foreign governments as they try to negotiate agreements to implement FATCA worldwide.

For those just joining the conversation, FATCA (Foreign Account Tax Compliance Act) is a law that was voted in 2010 by the U.S. Congress as part of the HIRE Act. It requires foreign banks to report the account information of all U.S. persons (U.S. citizens and Green Card holders) all over the world to the American IRS and imposes draconian fines on foreign entities for non-compliance. The legislation is "extra-territorial" which means that the U.S. is expecting foreign governments to impose American law on their own people and banks.

The unintended consequences of this law are many.  It is already turning U.S. citizens and Green Card holders into pariahs, literally "toxic assets" outside the U.S.  It is getting harder and harder for Americans living abroad to get banks accounts in the countries where they live and work.  It is even having an impact on the ability of Americans to do business or find work outside the U.S.  But those things are not obvious to Americans living in the homeland since they don't impact most of them directly.  However, there is one consequence to this law that does concern them and that is the issue of reciprocity.

FATCA as written is a one-way street.  It calls for information about the financial doings of U.S. Persons abroad to flow into the U.S., but does not provide for information to flow in the other direction - from the banks in the U.S. to foreign governments.   This is a serious problem.  Why, in heaven's name, would foreign governments agree to change their own laws, force their own banks to make major and expensive changes to their IT systems and procedures, and oblige their own citizens to bear the costs without getting something in return?  

And that is precisely what countries around the world want.  If the U.S. is asking us, they say, to report on U.S. customers in our countries then we want U.S. banks to report to us about account holders from our country. Sounds fair to me.  

So what happened is this:  As the U.S. Treasury toured the world negotiating FATCA implementation worldwide and signing IGA's (Intergovernmental Agreements), they made promises to these countries that the U.S. would indeed provide some sort of reciprocity at some point in the future.  I was personally present at two meetings here in Europe where I heard them say this. They were vague and used ambiguous language (a "je vous ai compris" style of discourse) but they gave assurances that reciprocity would happen and the Europeans listening left the meetings with that message.

Did Treasury have the authority to make these kinds of promises?  Remember that FATCA doesn't call for U.S. financial institutions to participate in this kind of automatic information exchange and the U.S. Congress has never ever explicitly approved reciprocity.  Instead of a public debate about this, what we've seen is under the radar attempts by Treasury to get reciprocity authorized without having to go through the very public democratic political process.  A good example is a short paragraph slipped into the Obama 2014 budget where it's likely that Congress won't even notice it's there or ask too many questions about it.  Sneaky.   

But some members of the U.S. Congress have noticed.  The domestic backlash over FATCA reciprocity started months ago and that brings us to Congressman Posey's July 1st letter to the Secretary of the U.S. Treasury, Jack Lew.  It's pretty direct and governments around the world should sit up and take notice.  He not only expresses his deep concern over proposed reciprocity because of the costs to U.S. banks, but he calls into question Treasury's authority to negotiate with and make promises to foreign governments without oversight and authorization from the U.S. Congress:

"My concerns are compounded by Treasury's actions to implement the Foreign Account Tax Compliance Act (FATCA) by negotiating "Intergovernmental Agreements" (IGAs) with foreign nations that would require these countries to enforce FATCA requirements on their own financial institutions." 

"I further note that the IGAs that are being entered into are not authorized, or even mentioned in FATCA.  Despite the absence of any specific legislative authorization, these IGAs are not being submitted to the Senate as treaties or treaty amendments for its advice and consent..." 

"I expect these broader questions to be more fully aired by the Financial Services Committee in its anticipated review of the administration's request for enhanced legislative authority.  In the meantime, I believe a moratorium on FATCA enforcement and negotiation of additional IGAs is in order."

Talk about cutting Treasury off at the knees.  They have already had a great deal of trouble getting foreign governments to sign IGA's.  There are 190+ countries in the world and right now only only a few nations like the UK, Germany, and Mexico have signed on.  Time is getting short - FATCA goes live in a few short months (January 1, 2014.)  How many more IGAs will Treasury be able to sign if there is uncertainty about reciprocity?  As for the ones already signed, how will these nations react to the possibility that those promises were empty?  And finally if FATCA goes live as planned in 2014 is the U.S. really going to start enforcing it and imposing penalties on foreign banks?  That would be a catastrophe.

Does this mean that FATCA is dead?  Not necessarily.  There is support, for example, from the EU and other regions for some kind of automatic information exchange and that isn't going to go away.  What I would hope for is that this will stop the heedless rush to implement a one-sided, very poorly written, American law with many unintended consequences.  Then everyone (all governments interested in automatic exchange) can sit down at a table and hash out together a system that is protective of people's rights, appropriately targets the few who are intentionally breaking the laws against tax evasion (and not those who are just collateral damage), and is agreed to by each country and its representatives through a legitimate political process.

"But that would be hard!"

Well, yes, it would be but if they think it is worth doing, then how about doing it right?  If I were one of the people who is adamant about implementing this kind of system, I would suck it up, press "rewind" and begin again. 

For more information, interpretations and comments, see the following sites:  The Maple Sandbox, The Isaac Brock Society and, of course, Repeal FATCA.

More on Exile from the 'Land of the Free'

In a previous post, Exile from the 'Land of the Free', we talked about the Reed-Schumer Amendment that proposes permanent exile for any former U.S. citizen deemed to have renounced to avoid taxes.  The way the amendment is written those who give up U.S. citizenship are "guilty until proven innocent" which means that the onus would be on the renunciant to prove that he or she gave up U.S. citizen for "good" (i.e. politically correct) reasons.

There were some excellent comments on this post and I encourage you to read them.  One of the latest is a story that is more common than many know:  a former American married to a foreign national who is a stay-at-home mother.  Her choice came down to her marriage/family or her citizenship.  Honestly I would make the same choice:  there is nothing more precious and irreplaceable than one's family, one's health and one's peace of mind.

To those who react rather bitterly to U.S. citizens who have renounced and those who are thinking about it, I have to ask them what they would do in the same situation?  Given a choice between U.S. nationality (and that pretty blue passport) or your spouse and children, which one would you give up?

Homeland Americans, I and many other Americans abroad are waiting to hear your answer.

In her comment, this former American asked a very good question:

Would the Schumer amendment apply to people who have renounced in the past, or only those going forward. What if the person becomes "covered" at one point in their life ( or if they lower the limit, if the dollar crashed, etc...)
Can the Schumer amendment be applied retroactively to those who "got out before"? And can they re-evaluate your covered status later in your life?

This is something that has us all scared.  We've seen three attempts already to exile the expatriates:  the Reed Amendment, the Ex-Patriot Act and now the Reed-Schumer Amendment.  Remember, folks, that the first, the Reed Amendment, actually passed and is U.S. law.  However the way it was written made it unenforceable so the law exists but there are no regulations to implement it.  I believe that they will keep trying until they can make it stick.  I speculate that if the number of renunciants skyrockets, they will succeed.  

Could they make it retroactive?  They could try.  However, (and take this with a grain of salt because I am not a lawyer) for those who renounced or relinquished under the prevailing laws at the time, any attempt by the U.S. government to go back and punish them further would certainly go straight to the courts.  And could you imagine the headlines if these people were denied entry into the U.S. to care for aging or sick family members?  What if some of those homeland Americans with exiled sons and daughters end up as burdens on the American social welfare system?  Something tells me that this would get everyone's attention.  I honestly don't think they would go there.  If anyone disagrees, please give me your take on it in the comments section. 

In my original post I quoted Phil Hodgen.  His blog is really extraordinary and well worth the read.  This post, in particular, is very pertinent to our discussion:  Why people expatriate?  It's a sober, dispassionate look at how expatriation from the U.S. works and why people are doing it.  He also offers his unvarnished opinion about where he thinks all this is going.  Clearly, the messages that are coming from Washington are leading many of us to think it might be best to, "Get out while the going is semi-good".  Hodgen concurs:

I expect the future to be more of the same. Expect the same exit tax rules, but more of them, and worse. Expect more expatriations. The floggings will continue until morale improves.

Can anything stop the trend?  I don't know.  Yes, it's discouraging to see American emigration framed entirely as a story about "evil rich tax evaders."  On the other hand my impression is that the media in the U.S. is starting to pick up these stories and some are being reframed to introduce homeland Americans to the idea that people do give up U.S. citizenship for reasons that are related to the citizenship-based taxation/FATCA dilemma but not in the way most homelanders think it is.

Is that going to be enough?  I don't think so.  Fundamentally, I see the problem as one of recognition/legitimacy.  Very few homeland Americans are aware that there 6-7 million of their compatriots living outside the U.S.   Myths about us abound:  we are only "temporarily" abroad, we always come "home" after a few years of fun, we are all rich, and so on.  Those of us who are long-term residents of other countries are viewed with suspicion by homelanders by just about every group along the U.S. political spectrum,  from the Right-wingers to the Progressives.  What we need, in my humble opinion, is recognition that we are simply the U.S. "Domestic Abroad" - America's very own Diaspora.  Look, living outside the U.S. doesn't make us any better or any worse than Americans in the homeland.  We aren't necessarily smarter, skinnier, prettier, richer or happier than our counterparts in Wisconsin or Nevada.  We're just people doing all the things that other Americans do - we're just not doing them on U.S. soil.  

Americans on the East Coast of the U.S. are not punished if they move to California.  So why punish Americans who want to move to Canada or Mexico or Europe or Asia?  The former doesn't cause anyone to blink twice - the latter is subject to all kinds of judgements and misconceptions.  

We have a serious PR problems, folks, and I'm open to any ideas about how to fix it.

Off to the garden to clear my head.