At the recent Overseas Vote Foundation Summit Conference in Munich, ACA Director Roland Crim explained why the seemingly unrelated strands of expatriate taxation, voting and lackluster US export performance actually form a tightly woven fabric. His comments are reproduced below.
Remarks before the Overseas Vote Foundation
Fourth Annual UOCAVA Summit Conference
Munich, March 18, 2010
While many of us have been fighting and winning the MOVE (Military and Overseas Voter Empowerment Act) battle, a series of dark clouds have been gathering outside US airspace.
For 30 years, ACA has been fielding queries about how to achieve or maintain or transfer US citizenship. Looking at the telephone logs, I can confirm that it has gone from 80% citizenship acquisition to 80% avoidance. The callers now ask, “how can I be sure I am not a citizen?” “How do I make sure my kids do not become US citizens?”
They don’t fear US citizenship in the abstract. They fear incurring a tax and reporting liability.
Voting requires citizenship, which for Americans requires compliance that is often expensive and perilous, and for which the omission of a single document, no matter the innocence of the taxpayer and absence of intent to evade, can have life-changing consequences.
In many cases, people are violating the law unknowingly, because US law imposes obligations which no one would have reason to suspect existed.
For years, everyone knew vaguely that Americans were a special species in the taxpayer menagerie, but our situation took a sharp turn for the worse in 2009.
What happened in 2009?
We saw horrific budget deficits. The federal government is going to have a 1.7 trillion dollar deficit this year. Extrapolating to 2045, there is a 53 trillion dollar deficit owing to unfunded liabilities in Social Security, Medicare and Medicaid. All are legally mandated. US taxpayers are in for some tough times.
Secondly, we saw the UBS case, which gave the IRS an opportunity to mount a frontal attack on Swiss banking secrecy which has seen a surprising degree of success.
Thirdly, we saw the beginning of vigorous, muscular enforcement of the Foreign Bank Account Report (FBAR) filing requirement. Last month I spoke with an attorney acting on behalf of FBAR clients facing the loss of 50% of their personal net wealth. Mind you, the FBAR has been around for 4 decades, it’s only last year that it has been given teeth.
Looking to the future, in the Treasury department’s recently proposed regulations we find a number of unpleasant surprises, all under the banner of anti-avoidance. Overall the trend line is pointing downwards for overseas Americans in respect of tax reporting and liability.
Overseas Americans dealing with this situation segment into three groups:
Group one, the “troopers”, will tough it out. They will keep filing and maintain compliance at all costs. They will hope for the best.
Group two, the “parachutists”, have concluded that compliance is simply too great a burden. Many of our most active, engaged, productive and patriotic citizens are effectively being forced to renounce their citizenship. The size of this group is increasing with each passing quarter.
Group three, the “enigmatics”, are probably the fastest growing and the most difficult to detect, because they are defined as seeking invisibility.
This group has concluded that it urgent that they do nothing, and to the extent possible, appear nowhere. They will reduce their profile and go off the radar, leaving as few digital footprints as possible.
This third group will avoid passport renewal. Get the second foreign passport into the pipeline if necessary. Reduce or eliminate visits to the USA. Avoid being listed in government databases.
ACA canvassed members in 1998 regarding the desirability of lobbying for an overseas census. The overwhelming majority of respondents were adamant that no personal details would be given on any census form, because of the possible adverse tax consequences.
The reaction of this third group is replete with its own hazards and sacrifices. Many in this group have decided never to set foot in the USA again. But for the moment they consider it their best option, because the alternative may be a more immediate confrontation with legal jeopardy, unsustainable compliance costs, and/or financial ruin.
What does this have to do with voting? Voting is the canary in the mineshaft. One of the tactics certain to be adopted is to simply stop voting. I predict that many voters will simply disappear, starting in this next midterm election. MOVE will offset their absence to some extent, to what extent is difficult to say.
What should be done about it? I believe that part of the solution lies in the fact that current law no only engenders avoidable tragedies for expats, it also causes great harm back home. And this angle may offer the best hope, possibly the only hope, for securing changes in the law.
One week ago President Obama introduced the National Export Initiative, with the goal of doubling exports in 5 years. This is a laudable objective, but export markets are won or lost in foreign countries, where the buyers are. A key competitive advantage Chinese expatriates enjoy vis-à-vis their American counterparts is the fact that their government leaves them alone and lets them get on with the business of moving Chinese goods.
And meanwhile back in Washington everyone wants to decipher the mysteries of Chinese success. Congressmen organize fact-finding missions. They should recognize that a vibrant and motivated overseas American community is the most effective vehicle for promoting exports and thus creation of jobs at home.
For years, we have heard US officials complaining about the Chinese currency being undervalued. But the trade balance will not improve by calls for re-evaluation of the yuan. It will improve when we see a re-evaluation of American Citizens Abroad.
My hope is that we can leverage the “expat factor” to tip close elections in favour of candidates who understand the dynamics of export job creation, and the benefits of having Americans abroad compete on a level playing field - irrespective of party affiliation.
If Americans worldwide awaken to the potential this represents for solving problems here and back home, we will ask different questions of Congressional and Presidential campaigns, and unite behind candidates with a vision for the future and for productive collaboration. But we must be pragmatic in selecting the arguments we advance, focusing not on our grievances, but on how changing the law can create jobs. This is a marathon undertaking by any definition, but it is doable and it is urgent.
Should Congress fail to change, many overseas Americans, like McArthur’s old soldiers, will never die; they will just fade away, and fading away means not voting.
It is incumbent upon all of us who want to see the promise of MOVE fulfilled to do all that is in our power to prevent that from happening.
For videos on voting from abroad, click here .