A client has a pending application to cancel his U.S. citizenship at the Vancouver Consulate. Today he received the following email from the Consulate:
From: “Vancouver, ACS Department” <firstname.lastname@example.org>
Date: November 8, 2011 7:47:00 AM PST
To: FirstName LastName
Subject: RE: CLN forms – FirstName LastName
There is currently a back-log in respect of Loss of Nationality cases. Cases are responded to by turn. We request your patience.
U.S. Consulate General
American Citizen Services
Vancouver, BC, CANADA
This email is UNCLASSIFIED.
Do not expatriate by mail
If you want to terminate your U.S. citizenship before the end of the year:
Make an in-person appointment at an Embassy or Consulate.
Do not mail in your application to terminate citizenship. Do it in person.
If I could put twinkle stars surrounded by rainbows to draw your attention to those two sentences, I would. I’m just not that good at HTML.
You can go to any Consulate or Embassy in the world. It is worth buying a cheap ticket to fly somewhere to do this. Make it a vacation — go to Singapore or Bangkok or Frankfurt or somewhere else.
There is no guarantee that you will have your application processed before year-end. When you mail the documents to the Embassy or Consulate you do not know whether they arrived in good shape. By setting an in-person appointment, you will know for a fact that you terminated your citizenship on a particular day.
Even if your documents arrive by mail, and the Consulate acknowledges receipt, you face a second risk. If your documents were mailed and were incomplete, they will be rejected and you will have to start over. If you made a mistake on your paperwork, you can fix it on the spot if you are sitting in front of the Consular official.
Commentary — keep an open mind
I get the feeling that the number of people terminating U.S. citizenship has jumped dramatically. I wonder whether the U.S. government publishes statistics on this. Yes, I know that there are quarterly statistics for people expatriating under Section 877A, but I question whether those are complete and accurate.
Regular people who do not live in my world (international taxation) are flabbergasted when I tell them that U.S. citizens are turning in their passports right and left. It is simply inconceivable that someone would do such a thing. Sometimes the reaction turns to an implicit character assassination of the person relinquishing citizenship: they must be a bad person in some way. Tax dodger. Non-patriot. Someone unwilling to support his country.
It is more interesting to me to watch the outbound flow of intellectual (and financial) capital in a semi-scientific way and formulate a hypothesis. Why are these people choosing to terminate citizenship of the most powerful country in the world? Keep an open mind. Formulate a testable hypothesis. Adjust it when the data indicate the hypothesis fails.
Me? I know what they tell me. Multiple anecdotes don’t create a data set. But I hear them again and again report:
- The current jack-boot tax enforcement attitude of the IRS scares them. Many of the people we help expatriate settle in countries with higher tax rates than the U.S. It is not the rate of tax that matters. It is something else. Can you guess, Mr. Shulman?
- The estate tax. The funny (as in “it is a monument to towering stupidity”) thing about expatriation is that people who do so cannot allow their capital to return to the United States after death because of the exit tax rules — Section 2801. So the U.S. government drives capital out of the United States and then creates economic disincentives for that capital to return. Makes sense. We don’t need investment capital in the United States. We have too much real estate already. We don’t need investors. Or jobs. We have plenty of jobs already in the United States. Go away with your silly investment capital. Our banks are fine.
- The hassle of pointless paperwork. Unlike other countries, the United States imposes income tax on its citizens no matter where they live. Even if there is no tax imposed (because, for instance, the host country has a higher tax rate than the USA) there is a paperwork burden and the opportunity for screwing things up accidentally. And then, please cross-reference my first point re: jack-boots. Oh. And look at the constant threat that Congress will do away with the foreign earned income exclusion. Yet more Towers of Stupidity from our friends in Congress.
- They’ve put down roots (or have roots) in another country. Non-tax reasons exist. After living abroad for decades, people finally decide that the United States is no longer home. Or they came to the United States from another country and find the United States no longer hospitable, and prefer the home country to the USA. My parents are immigrants, and they decided that their home countries are no longer home–the United States is home. The reverse happens, too. Especially with Canada, in my experience.
Canary, meet coal mine
At the moment the number of people leaving might be small, and their actions dismissed in a hand-wavy fashion. But they should not be dismissed. Their actions are an indicator of something gone awry.
The United States has been built on immigration. Out-migration tells us something isn’t working. (Hah. Tell that to the State of California. “Oh, no. Everything is fine!” Same thought.) When people vote with their feet — and are willing to pay a staggering tax to do so — they are sending a message.
I don’t think anyone is listening. And this, unfortunately, is to the greater harm of the United States.