Renouncing US citizenship NOT too expensive for the wealthy

19 June 2009 by Mike Gogulski
Posted in mind control | 8 Comments »

Canada’s Investment Executive makes a blitheringly stupid set of assumptions in “New rules make renouncing citizenship too expensive for U.S. expats“:

New U.S. expatriation rules, introduced one year ago, governing U.S. citizens or long-time green card holders who wish to renounce their American citizenship are serving as a disincentive for many to make the decision to give up their citizenship.


Under the rules introduced June 17, 2008, there is a deemed disposition of worldwide assets based on their fair market value on the day before expatriation. A 45% tax is levied on any capital gains above a 2009 capital gains exemption of US$626,000.


U.S. citizens and green card holders often choose to renounce U.S. citizenship in order to remove themselves from the U.S. tax regime, which, for one thing, obligates them to file a U.S. tax return every year even if they don’t live or earn income in the U.S. They may also make the decision to renounce in order to avoid U.S. estate tax.

Only “covered” expatriates fall under the expatriation rules. Covered expatriates either have a net worth equal to or greater than US$2 million, or have an average tax liability of greater than US$145,000 for the previous five years. Those who have failed to certify compliance with U.S. tax obligations for the last five years — including filing a U.S. tax return — would also be considered a covered expatriate.

Well, I’m a covered expatriate, since the last time I filed a US tax return was 2005. I also happen to be rather broke.

What is so glaringly wrong here are the assumptions made about prospective renunciants of US citizenship which seem to underlie the article:

  • That someone with US$2m in net worth couldn’t be bothered to move their assets into structured offshore vehicles in advance of expatriation, and
  • That renunciants wouldn’t just say “screw the IRS anyway!” and ignore the law — which is their right under any moral framework which does not permit theft, which is what taxation is.

Of course, the ruling class tools at the OECD and its hated Financial Action Task Force have made the first option increasingly difficult by putting the screws to those few remaining countries which continue to legally permit banking, corporate stock ownership, trust and other asset-holding relationships that allow for privacy, anonymity and tax avoidance. That said, there remain plenty of holes in the global taxation control grid which can be exploited — some legally, and some illegally.

PT combinatorics interlude:

  • There are 203 states today. n=203
  • For safety and security, you might like to hold an asset in situated in country A with its nominal (corporate, trust) ownership domiciled in country B, all while legally residing in country C. r=3
  • Take P(n,r) = n!/(nr)!, where n=203, r=3
  • P(203,3) ~= 8,200,000
  • That’s a whole bunch of chances to slide ’round the control grid!

Mind you, n doesn’t really equal 203, since there are some states where you’d definitely not want to hold assets or an ownership vehicle or reside, or combinations thereof. We’re still talking about big numbers here, though.

One last thing, from the article:

Every quarter, the U.S. government publishes the names of those who’ve renounced U.S. citizenship in a federal register.

Well, that’s the Federal Register, actually, but whatever. I’m still looking forward to seeing my name turn up, but it wasn’t there as of a month ago when I did a bit of searching online. Oh well. I don’t really care about the American state’s paper tiger actions with respect to me anyway.

  1. 8 Responses to “Renouncing US citizenship NOT too expensive for the wealthy”

  2. By i18t on 21 June 2009

    Melancholy Sunday. Longing to tell my story. Renouncing career for personal discovery; only to realise my career is part of my journey.

  3. By Mike Gogulski on 21 June 2009

    Do go on…

  4. By Joe on 22 June 2009

    What I find puzzling is the reference to “green card holders … [who] choose to renounce U.S. citizenship.” Isn’t a green card holder, by definition, a resident *alien*, i.e., a non-U.S. citizen?

  5. By Mike Gogulski on 22 June 2009

    @Joe: I’m guessing this is just more bad work from the article’s author(s). No, a green card holder isn’t a citizen. There may be some follow-you-forever legal tax liability that attaches to you upon getting a green card, though. Frankly, I have no idea, having never been in that position.

  6. By James Lance on 14 April 2010

    Green card holders, although not having US citizenship, are regarded as “US Persons” by the IRS and the Treasury Dept (read FBAR form) and have to file and pay taxes on their world-wide income regardless of whether they are residing in the US or anywhere else in the world.

  7. By William Alexander on 8 May 2010

    I had a Green Card about 25 years ago ( Canadian Citizen) but lost it at the border which was lucky as I had never heard of US Estate Taxes. Had I died and still had a valid Green Card I would have lost a lot of money in US estate taxes. Once the Green Card was turned in at the border I no longer paid Federal Taxes from which I deducted my Canadian taxes on form 1116 which meant I had no taxes to pay.
    After 2yrs and 9 months the IRS sent me a note to say I and my wife had a few $s in our tax accounts and did I want them returned or not as I would lose them at the 3 year mark.
    So I phoned up the IRS rep, told her I had a pension from the states and would also have US partial social security (ss) shortly. She notified me how to have tax withheld on my pension, there would be no tax on my SS
    So I file a 1040NR and on the last page but one I list my US sourced income including tax withheld which brings my net tax to zero. I also list any bank interest since it is not taxed but they want to know.
    This whole operation takes about 5 minutes, and you take advantage of the Canadian/US tax treaty claiming all articles in the treaty.
    More recently, since we stay down south in the winter I have also filed the form 8840, closer connection to another country just in case regulations change and I don’t realise there has been a change. All very simple and the US IRS staff were most helpful.

  8. By Ronin on 12 November 2010

    Ah! I found the info regarding the 5-year tax-filing issue. I just hadn’t read EVERY post on your site. This is extremely helpful. I can’t say I’ll be taking the same path as you, but I salute your utter defiance to Uncle Sam, a.k.a. Big Brother. I’ll take a slightly less visible path to obscurity…

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  2. 9 February 2010: Are more and more Americans renouncing their US citizenship? | Be Vigilant

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