Every year we have a session at FreedomFest on “Tax Free Living and Investing Abroad.” The attendees want to know all about the benefits of renouncing their U.S. citizenship and living a “tax free” lifestyle abroad.
Last year, nearly 3,500 Americans said good-bye to the states to live in the Caribbean, Latin America, Asia and Europe.
Certainly, the U.S. government has imposed draconian rules and confiscatory taxes on Americans living abroad. It’s almost impossible now to open up a bank account in a foreign country because the foreign banks don’t want the hassle of dealing with U.S. tax authorities (it’s a misnomer to call it the “Internal Revenue Service.” It’s not “internal” – the IRS arm reaches out beyond our borders. Revenue is just a nice word for “taxation,” or even “theft.” And certainly the IRS is no “service” to anyone except bureaucrats and what Ayn Rand called “looters”).
In order to renounce your citizenship, you have to go to a foreign embassy and you have to pay an exit tax on all your net worth, which can be expensive if you are rich. You have to have another citizenship or passport to live abroad. You will have to pay taxes where you reside. (Even tax havens like the Bahamas have import duties you will have to pay.)
And then you have to get in another line for foreigners when you come back to visit the United States and immigration may give you a hard time. You will need a visa to return to the States, and even then, you can’t stay very long (no more than three months is recommended) or you will be charged taxes again on your worldwide income.
I know one friend who renounced his citizenship, then later regretted it and had to reverse the process – what a pain.
So think twice, my friends, about living the “care-free” lifestyle of an expatriate.
In case you missed it, I encourage you to read my e-letter column from last week about Apple’s success, the great man theory and Say’s law.