Category: Freedom

How is the IRS levying taxes to renounce US citizenship different from the Berlin Wall?

cross posted from Quora

by John Richardson
Lawyer (1982-present)

President Kennedy at the “Berlin Wall”

On June 26, 1963 President Kennedy gave his historic “Ich bin ein Berliner” speech. After World War II, the administration of the City of Berlin was divided among the allied powers (Soviet Union, USA, Britain and France). In 1961, the Soviets created a wall in order to prevent their people from leaving the Soviet Sector. (The City of Berlin was actually inside East Germany). Among other things, President Kennedy’s speech included the line: “We have never had to put a wall up to keep our people in – to prevent them from leaving us.”

Congressman Ron Paul speaks about “walls”

As Ron Paul once said: “The wall could be used to keep people in!”

Does the United States have any prohibitions on leaving the United States?

As a matter of fact yes.

In order for a U.S. citizen to legally leave the United States, the citizen must have been issued a U.S. passport. This is a legal requirement. U.S. citizens are NOT permitted to leave the United States on a non-U.S. passport. There is an interesting history to the United States using refusals to issue passports, as way to keep people inside the United States. See for example this discussion from “Today In Civil Liberties History”:

“Some of the more famous passport denial cases involved the famed African-American singer and left-wing political activist Paul Robeson, whose passport was cancelled on August 4, 1950; the noted artist Rockwell Kent, who was denied a passport extension on August 7, 1950; and the distinguished scientist Linus Pauling, who was denied a passport on May 11, 1952.”

The United States does have a history of attempting to prevent U.S. citizens from leaving the United States. But, the United States (unlike those who tried to climb the Berlin Wall) has not (to the best of my knowledge) shot for attempting to leave.

See also:

U.S. Passport as Instrument of Control

An excellent “scholarly” review of the Passport requirement is here:

The history of the requirement that U.S. citizens only use U.S. passports to enter the U.S.

Is there an analogy between the building of the Berlin Wall and the “Exit Taxes” imposed under Sec. 877A of the Internal Revenue Code today?

First, what are these “Exit Taxes” anyway?

“Exit Taxes” are taxes that are imposed on people who sever “tax residency” with a country. For a comparison of Canada’s Exit/Departure tax and the U.S. Exit Taxes see:

Canada’s “residence-based” departure tax vs. the US “citizenship-based” Expatriation Tax – Focus on Canada’s Tax

The U.S. “Exit Tax” is particularly draconian. It has no equivalent anywhere in the world. In part this is because the U.S. imposes “Exit Taxes” on renouncing citizenship (in addition to the $2350 administrative fee). Other countries impose Exit/Departure taxes when one physically moves from the country. (This illuminates one of the differences between U.S. “citizenship-based taxation” and “residence-based taxation” as applied by other countries. On this point see:

http://www.citizenshipsolutions….

U.S. citizens who live in the United States are fed a steady diet of “The United States is the “Land of the Free”. Although absolute freedom is NOT possible (JFK said “Freedom has many difficulties”), even in a comparative sense, Americans have fewer freedoms than the citizens of many other countries. I have provided a Quora answer to this question before.

John Richardson’s answer to Which country’s citizens enjoy more freedoms than Americans?

How do the Internal Revenue Code S. 877A Exit Taxes Work?

Renouncing US citizenship? How the S. 877A “Exit Tax” may apply to your Canadian assets – 25 Parts

U.S. “Exit Taxes” are imposed by Internal Revenue Code Sec. 877A. They are imposed by the Internal Revenue Code on certain people “covered expatriates” who relinquish U.S. citizenship. A “covered expatriate” is a person who relinquishes U.S. citizenship and triggers one or more of these three events: (1) has certain levels of income (determined by the U.S. tax payable), (2) a net worth of 2 million USD or more or (3) who cannot certify U.S. tax compliance for the five years prior to his/her relinquishment.

Part 4 – “You are a “covered expatriate” – How the “Exit Tax” is actually calculated”

For examples that demonstrate how incredibly punitive the U.S. “Exit Taxes” are (and specifically how they operate to confiscate non-U.S. pension plans) see:

Part 5 – “The “Exit Tax” in action – Five actual scenarios with 5 actual completed U.S. tax returns.”

The Section 877A Exit Tax impacts primarily Americans who already live outside the United States and are “tax residents” of other countries

The U.S. “Exit Tax” is triggered by relinquishing U.S. citizenship.

Renunciation is one form of relinquishment – It’s not the form of relinquishment, but the time of relinquishment

Most people relinquish U.S. citizenship when they already live outside the United States.

Therefore, I would say that:

The Berlin Wall was to prevent people for leaving Easy Germany!

The U.S. Exit Taxes are designed to punish those who have ALREADY left.

Furthermore, the Berlin Wall was to prevent EVERYBODY from leaving. The U.S. “Exit Taxes” are to punish only SOME (“covered expatriates”) who leave the United States.

Therefore, although both the Wall and the Exit Taxes are/were bad things, the are not the same.

A more relevant comparison “might” be between the German “reichsfluchtssteur” and the U.S. Exit Taxes. Both of these taxes are (at their core) ways to prevent capital from leaving the country. It is described in the above Wikipedia link as:

“The Reich Flight Tax ( German: Reichsfluchtsteuer) was a capital control law implemented in order to stem capital flight from the Weimar Republic. The law was created through decree on 8 December 1931 by Reich President Paul von Hindenburg. The Reich Flight Tax was assessed upon departure from the individual’s German domicile, provided that the individual had assets exceeding 200,000 RM or had a yearly income over 20,000 RM. The tax rate was set at 25 percent. In 1931, the Reichsmark was fixed at an exchange rate of 4.2 RM per USD; 200,000 RM was equivalent to $47,600 USD (equivalent to $766,000 in 2017).”

Although not triggered by tax non-compliance, note that (like the U.S. Exit Tax) it was triggered by both income and asset levels. The “Reichsfluchsteuer” was apparently a 25% tax. The “U.S. Exit Tax” (when applied to pensions) could very easily exceed 25%. Furthermore, the “U.S. Exit Tax” is largely a tax on non-U.S. pensions and other U.S. assets (making it the only known Exit Tax that effectively imposes confiscatory “taxation” on foreign pensions” and other foreign assets).

That said, (in fairness) it is possible to physically move from (or otherwise leave – provided you have a U.S. passport) the United States and NOT be subjected to the U.S. “Exit Tax” (it applies on relinquishment of citizenship). Therefore, the U.S. Exit Tax although harsher when applied, applies to fewer people AND is NOT a physical barrier to leaving the United States (although it is a clear barrier to creating a life in another country).

Possible conclusion:

How is the IRS levying taxes to renounce US citizenship different from the Berlin Wall?

U.S. Exit Taxes are more like the German Reichsfluchtsteuer than like the Berlin Wall (but financially more punitive than the Reichsfluchtsteur).

The Berlin Wall was designed to punish people who tried to leave East Berlin.

The U.S. “Exit Taxes” are used to punish those who have already left the United States.

Both, are designed to punish those who attempt to sever relationships (physical or political) with their respective “Homelands”.

But, considering the future …

It is interesting that the United States is now considering building it’s own wall. Those who don’t learn the lessons of history are doomed to repeat history.

I was born in Canada by an American mother, so am I an American citizen?

 

Cross-posted from Quora

I was born in Canada by an American mother, so am I an American citizen?

 
Answer by John Richardson , Lawyer (1982-present)

Anybody concerned with the answer to this question should (1) do the appropriate research and (2) get the appropriate advice.

Unless you live in the United States or want to live PERMANENTLY in the United States, you would NOT want U.S. citizenship. U.S. citizens are subject to U.S. taxation on ALL OF THEIR WORLDWIDE INCOME, even if they do NOT live in the United States. In fact U.S. citizens living outside the United States who are “tax residents” of other countries are always “subject(s)” (pun intended) to two tax systems.

The question is: “I was BORN IN CANADA to an AMERICAN mother, so am I an American citizen?” Note that if you were born in Canada you are born in another country where U.S. laws (as much as they would like them to) do NOT presumptively apply. The U.S. Immigration and Nationality Act is the statute that defines who is an American citizen and who is NOT an American citizen.

Here is my answer which is written in a way to encourage caution and to NOT just listen to the first “accountant” (what would an accountant know about this anyway?) or lawyer or immigration consultant.

The answer is “maybe”. It depends. Your approach to this question depends on whether you want to be a U.S. citizen or do not want to be a U.S. citizen.

For those born in Canada and who WANT to be U.S. citizens:

The U.S. Immigration and Nationality Act has specific rules that say under what circumstances a person born to an American mother outside the USA “shall” be a U.S. citizen. The answer is dependent on the mother having a certain number of years of actual physical presence in the United States. (The one year “continuous presence” test was struck down by the U.S. Supreme Court in the 2017 decision of Morales-Santanya).

Therefore, if you want to be an American citizen you would have to establish the existence of specific facts and present those facts to the U.S. State Department and ask them to issue you a U.S. passport. Note that you are NOT entitled to a U.S. passport until those specific facts are proven to the satisfaction of the State Department.

For those born in Canada who do NOT want to be U.S. citizens:

There are some in the tax compliance industry (what do they know about citizenship law anyway?) who have marketed the idea that U.S. citizenship can be imposed on people born in Canada (and other countries) even if they have never considered themselves to be U.S. citizens.

Can the USA forcibly impose U.S. citizenship on people who were NOT “Born In The USA”? What if one was born to an American mother in China (a country that does NOT allow “dual citizenship”). Can the USA forcibly impose U.S. citizenship on that citizen of China?

If you have accepted that you are a U.S. citizen and have traveled on a U.S. passport (and that kind of stuff) then you would NOT be able to defend the accusation of U.S. citizenship. But, if you have done NONE of those things and just happened to have been born outside the United States to an American mother, then your situation is probably different. You are arguably in a position where you would have the “right” to U.S. citizenship (under U.S. law if you want) but NOT the obligation to accept U.S. citizenship (because you were born in a country where the USA does not have jurisdiction).

I am not aware of a single instance where a U.S. court has ruled that people born outside the United States are required to be U.S. citizens.

In any case, if you were NOT born in the USA, you do not have the objective characteristics that would raise the question of “U.S. citizenship” anyway.

This issue has been discussed at the Isaac Brock Society and other sites. The following post provides some of the “analytical tools” to consider the question.

Help: Can the United States IMPOSE US citizenship on those born outside the US?

If you have read this far you might find the following video of interest:

U.S. citizenship and the Government of Australia

The question of “dual citizenship” and whether somebody IS a “dual citizen” was of practical relevance in Australia in 2017. Basically, seven (at least) Australian politicians were accused of being “dual citizens” (making them ineligible to serve in Australia’s legislative body). This “farce” provides a real world example of why it would matter if somebody born outside the USA to an American other would be an American citizen. See the following:

Australian Greens Senator @LarissaWaters resigns because of her CANADIAN place of birth. Too bad she was born in Canada (with images, tweets) · expatriationlaw

Which country’s citizens enjoy more freedoms than American citizens?

From Quora

John Richardson, Lawyer (1982-present)
Answered Dec 5, 2017

Which country’s citizens enjoy more freedoms than Americans?

The short answer is: The citizens of many countries enjoy more freedoms than Americans.

The answer to this difficult and interesting question should be considered from at least 3 perspectives:

Perspective 1: Do American citizens have the right to leave the United States and to make a new life outside the United States?
 
Perspective 2: How do the freedoms of American citizens living in the United States compare to the freedoms of (for example) a Russian citizen living in Russia?
 
Perspective 3: How do the freedoms of American citizens compare to the freedom of the citizens of other countries from the perspective of international human rights instruments?
 


 
Perspective 1: Do American citizens have the right to leave the United States and to make a new life outside the United States?

There are presumably some countries that make it impossible to physically leave the country. Certainly the United States does not (except that U.S. law requires U.S. citizens to have a U.S. passport to leave the United States) prevent its citizens from leaving the United States. What the United States does do, is make it difficult for U.S. citizens to survive outside the United States.

As long as they remain U.S. citizens, Americans do NOT really have the freedom to leave the United States, settle in other countries and fully participate as residents of other countries.

The primary reason is because U.S. citizens who leave the United States are still (as long as they remain U.S. citizens) subject to U.S. tax and reporting requirements. These requirements are so onerous (FATCA, FBAR, PFIC, CBT, etc.) that more and more U.S. citizens are renouncing U.S. citizenship so that they have the freedom to live outside the United States. There is no other country in the world that attempts to impose domestic laws on its citizens after they leave the country.

For a particularly graphic description of how America treats its citizens who attempt to live abroad, read about the Nightmare of Mexican residents who have U.S. citizenship”.

Conclusion: From perspective 1, Americans are the LEAST free people in the world.
 
Perspective 2: How do the freedoms of American citizens living in the United States compare to the freedoms of (for example) a Russian citizen living in Russia?

I suspect that Americans living in the United States have more freedom than citizens of some countries and less freedom than the citizens of other countries. But again, it depends how freedom is defined. Is freedom objective or is it subjective? What are the areas of human activity that are relevant?

The United States has a Federal Government and 50 states AND is a “mature country”. The country necessarily has a large number of laws and regulations (many of which cannot be easily understood).

Americans in the United States are clearly much more free than North Koreans living in North Korea. But, for the reasons given in the answer by Sindhu Mahadevan (below), I suspect that Americans living in the United States are not more free (and possibly less free) than the citizens of other first world democracies.

Americans live in a constant state of fear. Fear of illness, fear of violence, fear of terrorism, etc., fear of not being able to pay for post-secondary education … This is a big problem.

Two possible additional considerations:

The United States has the highest incarceration rate in the world.
The United States does have a “death penalty”
 
Can a country that has the highest incarceration rate in the world really be considered to be a country with maximum freedoms?
 
Perspective 3: How do the freedoms of American citizens compare to the freedom of the citizens of other countries from the perspective of international human rights instruments?

Interestingly Americans have CONSTITUTIONAL rights that are enshrined in the U.S. constitution. They do NOT have many “human rights” as guaranteed by international human rights documents. In many cases, the rights guaranteed by the U.S. constitution do NOT provide the protections afforded by international human rights documents. This may be surprising to Americans reading this. But, you might find the following to be of interest:

Human Rights and the United States

On the other hand, American systems do have access to a legal system and courts that can be used to enforce the CONSTITUTIONAL rights that they do have.