The Brass Tax of Politics

U.S. Jacks Up Exit Fee Against Persons Renouncing Citizenship

airplane-money-600
Just like the recent rise of business inversions — moving business HQ abroad — the United States has seen an uptick (up 221%) in Americans renouncing their citizenship. The elephant in the room in both these cases is taxes: both high taxes and burdensome tax compliance in foreign jurisdictions.

Instead of facing the problems directly, the Obama Administration has resorted to punitive measures. The shame and blame tactic of calling out businesses who wish to relocate as “unpatriotic” was undignified. Perhaps realizing that using the same strategy with individuals would be even less well received, they went the more quiet, direct route: yesterday, the State Department announced their interim final rule that raises the fee for renouncing citizenship from $450 to $2,350.

Their justification for raising the fee is the time and labor involved in the process; that is, the bureaucratic red tape that they created, and then decide to charge exhorbitant fees for:

“The CoSM demonstrated that documenting a U.S. citizen’s renunciation of citizenship is extremely costly, requiring American consular officers overseas to spend substantial amounts of time to accept, process, and adjudicate cases. For example, consular officers must confirm that the potential renunciant fully understands the consequences of renunciation, including losing the right to reside in the United States without documentation as an alien. Other steps include verifying that the renunciant is a U.S. citizen, conducting a minimum of two intensive interviews with the potential renunciant, and reviewing at least three consular systems before administering the oath of renunciation. The final approval of the loss of nationality must be done by law within the Directorate of Overseas Citizens Services in Washington, DC, after which the case is returned to the consular officer overseas for final delivery of the Certificate of Loss of Nationality to the renunciant. These steps further add to the time and labor that must be involved in the process. Accordingly, the Department is increasing the fee for processing such requests from $450 to $2,350. As noted in the interim final rule dated June 28, 2010 (77 FR 36522), the fee of $450 was set substantially below the cost to the U.S. government of providing this service (less than one quarter of the cost). Since that time, demand for the service has increased dramatically, consuming far more consular officer time and resources, as reflected in the 2012 Overseas Time Survey and increased workload data. Because the Department believes there is no public benefit or other reason for setting this fee below cost, the Department is increasing this fee to reflect the full cost of providing the service. Therefore the increased fee reflects both the increased cost of the provision of service as well as the determination to now charge the full cost.

Interestingly enough, if you compare the cost of renunciation in the United States to the cost of renunciation in other countries, the new fee puts the United States way above others. You can check out this handy chart here. The next two highest are Jamaica ($1,010 in US dollars), and Sierre Leone ($663 in US dollars).

So those who wish to renounce their citizenship get to buy their freedom by paying a 422% fee increase for the express privilege of dealing with United States bureaucracy one final time.

This is considered an administrative fee, issued by the State Department, but it is essentially an unofficial “exit tax” for regular citizens. But there is a real one too. As Forbes notes, “To leave America, you generally must prove 5 years of U.S. tax compliance. If you have a net worth greater than $2 million or average annual net income tax for the 5 previous years of $157,000 or more for 2014 (that’s tax, not income), you pay an exit tax”.

So for those who have done well in the United States, besides the higher administrative fee/exit tax, you get to pay that real “exit tax” knows as the 877A.

Alas, this isn’t the first time those wishing to leave have been targeted. A bigger, punitive measure was attempted in 2012 by Senators Chuck Schumer and Bob Casey. When the co-founder of Facebook, Eduardo Saverin, renounced his U.S. citizenship as a means to save millions in taxes before Facebook went public, the Senators reacted by proposing the “Ex-PATRIOT Act” of 2012 that essentially doubled the exit tax for high worth individuals. “People who could not prove another reason for renouncing citizenship would face a 30% tax on future capital gains on U.S. investments – twice the current 15% rate – and be barred from receiving a visa to enter the country.” Thankfully the bill died in committee the first year, and did not advance out of the Senate in 2013.

Though this new fee hike is different than the standard exit tax, and on a much smaller scale (dollars-wise), it speaks the same language: punish. All this fee hike does is prove that that current administration would rather squeeze U.S. citizens for more revenue, thus likely reiterating to those renouncing their citizenship that being a U.S. citizen lacks much of the value that it once did. And that is a very sad thing.

Liberal SuperPAC Uses Animal Farm Logic to Attack Koch Bros, Defend Soros

animalfarm

This would be really funny if it wasn't so sad. Brad Woodhouse is President of American Bridge 21st Century, a SuperPAC that "monitors what Republican politicians say and fights back when their rhetoric doesn't match their records." This is a PAC … [Continue reading]

Losing Out on A Pulitzer Prize: Ignoring the Ongoing IRS Scandal

pulitzer-prizes-newseum

The latest revelations in the never-ending IRS Scandal are pretty headline-worthy, but hardly a pip is being heard from the MSM, again. First, Judicial Watch has revealed, and the Department of Justice has confirmed, that the missing emails of Lois … [Continue reading]

New TIGTA Report Shows Obamacare Revenue Lagging, IRS Snagging

According to the Treasury Inspector General for Tax Admininstration (TIGTA), the 2.3% medical device excise tax enacted to help pay for Obamacare is not meeting targets. The tax went into affect January 1, 2013. The TIGTA report analyzed the … [Continue reading]

Obamacare Users Will Need Extra Form From the Government Before They Can File Their Taxes

Obamacare-website-before

If you are an Obamacare enrollee, you will not be able to file your taxes next year until you receive a new Obamacare form, the 1095A. That means if the government is not on time getting the forms out, taxpayers who need the form could face a delay … [Continue reading]

Tax on Sugar? This is not 1764

sugar-act-large

On April 5, 1764, Parliament passed something called "The Sugar Act", which, interestingly, had another name: "The American Revenue Act". It was a modification of the 1733 Molasses Act, and it also affected other goods, such as wine and … [Continue reading]

Savings, Working, and Retirement

hammock

A study was released today that showed more than a third of Americans, (36%)a have saved nothing for retirement. That got me thinking about the idea of retirement and the state of retiring in this country. Everyone thinks they can retire at age … [Continue reading]

The Latest Business Attack on MLPs is Just as Flimsy as the Inversion Crusade

Cyber-attacks

Earlier this week, the business world was chattering about the news that Kinder Morgan, pioneer of the Master Limited Partnership (MLP) business model, was surrendering the MLP structure in favor of a more traditional corporation. This happened last … [Continue reading]

Chuck Todd to Take Over Helm at Meet the Press?

HELM

At the end of June, I penned a piece about Chuck Todd with the opening salvo, "You can’t have anyone that stupid be in charge at NBC." Now I hear that Chuck Todd is planning on taking over David Gregory's spot on Meet the Press. That is an utter … [Continue reading]

Congressional Standing to Sue the President

scalechecksandbalances

Lately there have been recent discussion about whether or not Congress can sue the President. We have had several occurrences, in fact, where the President has violated the Constitution by overreaching his authority with regard to Congress. In these … [Continue reading]

More Inspector General Transparency: Feds Filter Final Report

filter_fedIG

As if the recent letter from the Inspectors General to Congress wasn't enough, there's a new story about apparent interference from the Feds into an Inspector General report. The Washington Post reports today about an incident in which an … [Continue reading]