The U.S. is the world’s only industrialized nation that taxes citizens who live overseas, even if their income is generated in a foreign country and they never return to America
“Why is Tina Turner switching from American to Swiss citizenship? The legendary singer, a longtime Zurich resident, told the Blick newspaper that she has been very happy in Switzerland and “can’t imagine a better place to live.” But some observers believe she may be one of thousands of American expatriates who have taken the drastic and irrevocable step of giving up their citizenship because of what they consider to be the unjust and discriminatory taxation practices of their government.While Turner has indicated nothing other than a practical decision behind the switch, it comes at a time when American expats all over the world are turning in their passports in record numbers to avoid double taxation and other financial burdens imposed on them by Uncle Sam. According to government figures, nearly 1,800 Americans relinquished their passports in 2011, a process that requires a special application and a $450 exit fee. True, that number is just a drop in the bucket, considering that an estimated 6 million U.S. citizens live abroad. But the numbers are growing dramatically — a sevenfold increase since 2008, and that is not counting thousands of applications waiting to be processed in U.S. consulates and embassies around the world.
The U.S. is the world’s only industrialized nation that taxes citizens who live overseas, even if their income is generated in a foreign country and they never return to America. And while high-profile cases like that of Turner or that of Facebook co-founder Eduardo Saverin (who renounced his American citizenship last year to become a resident of Singapore) catch public attention, the vast majority of expatriates affected by double taxation and increasingly draconian filing rules are middle-class or retired, or those who have never lived or worked in the U.S. at all but were born to American parents overseas.Even though expatriates can claim a $97,000 exclusion on their U.S. taxes, most Americans who work in high-cost nations earn salaries far exceeding this amount, for which they already pay hefty income taxes in their countries of residence.