Comment by kbenson | Hacker News Reader

Comment by kbenson | Hacker News Reader

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> Emigrate from the US and you'll still be expected to pay US taxes on foreign income.

That's because you still have U.S. citizenship. You can give that up and not be taxed, as I understand it.

Also, it looks like there are provisions to give you exclusions on your foreign income,if you have any.[1] That seems sane to me, if you live their the whole year and that location is your tax base, then you can exclude all the income from their in your U.S. taxes. But living elsewhere won't protect you from U.S. taxes if you still have the benefit of U.S. citizenship and make a lot of money from the U.S.

California considering a wealth exit tax seems a bit different on first glance, but I could see it making sense if it's somewhat similar in use. If you make your money from California and continue to after moving from there to elsewhere, that money being eligible to be taxed by California because otherwise it's extracting the benefit of California's laws and markets without paying into the system that provides them.

1: https://www.irs.gov/individuals/international-taxpayers/fore...

As a Brit, I can work wherever I can find work (and legally work) around the world, earn a fortune and not pay any tax in the UK, /and/ keep my citizenship. I only would pay tax to the UK on income I earn here (which in itself leads to all kinds of strange and dodgy scenarios in terms of people avoiding paying taxes here)

This is ultimately political and comes down to perspective and opinion. As a citizen, you benefit from many things of your home country regardless of whether or not you reside there. Such as, for example, your home country's ability to exert pressure on the government of where you reside when you're unjustly arrested/detained. There's also access to the consulate of your home country and all services you have access to from the resident country. All of that stuff is funded somehow and it can seem unfair that only those who live within the home country's borders fund those things while those who reside elsewhere get to take advantage of it all without paying anything into it.

For Americans, for better or worse, its very large stick (the military) affords its citizens all sorts of benefits while traveling/living abroad.

There’s also the behaviour it incentivises - if you’ve moved abroad and intend to stay there long term, secure citizenship there and renounce your American citizenship to avoid double taxation.

The USA isn’t exactly hurting for new citizens and it’s probably desirable to have expats incentivised to deliberately relinquish their passports.

Mind you I’m looking at this from the perspective of here in New Zealand, where there’s regular media stories about Australia deporting NZ citizens who moved over there as kids and ended up criminals. There’s no incentives to relinquish an NZ passport so Australia can revoke their citizenship, deport, and they become NZs problem.

if you’ve moved abroad and intend to stay there long term, secure citizenship there and renounce your American citizenship to avoid double taxation

That should be "intend to stay there forever", since renouncing your USA citizenship is typically permanent, once you renounce citizenship, it's difficult or impossible to regain it.

> For Americans, for better or worse, its very large stick (the military) affords its citizens all sorts of benefits while traveling/living abroad

This is mostly a myth.

There are lots of examples of cases where people from less RAWR MILITARY countries (like... Sweden) got pulled out of risky situations before the Americans did. In some cases Americans simply have not gotten rescued at all and left to fend for themselves! And the US doesn't perform that service for free... if you get rescued they charge you tens of thousands.

Being able to be negotiated out of detainment has more to do with politics and trade, and the US has a lot of political enemies. The countries where the US military is a factor are countries you're not likely to want to move to and make a living in anyway.

Being able to travel to countries is also weaker as a US citizen, since many countries apply reciprocity, and the US often has stricter immigration controls.

Being American living abroad is mostly a demerit. You can't open bank accounts due to FATCA, you have to pay expensive specialized accountants due to foreign taxation, and in many cases people just don't like you due to your government. I can't think of any situations where being American is a pro over being an EU citizen.

> very large stick (the military) affords its citizens all sorts of benefits

That large stick to me seems to rather hit Americans traveling abroad, in that the US military unfortunately a bit has given ( people from the US ) a bad rep at some places?

when instead I, from western/northern Europe, is welcomed wherever I go (it seems this far)

Expat here, that's not how it works. You have two options when you live/work in another country:

Exclude up to about $100k of your foreign income from US taxes -- after that you still pay US taxes, and at the rate you would have paid if you were paying from the first dollar, meaning if you make $130K, you don't pay US taxes as if you made $30K, you pay the difference between the taxes on $130K and the taxes on $100K.

Deduct whatever you pay in foreign taxes from your US taxes, dollar for dollar.

The US is almost the only country that does this. All of my co-workers from Israel, Ukraine, India, and many other places pay generally no taxes in their home countries.

> it looks like there are provisions to give you exclusions on your foreign income,if you have any

The foreign income exclusion is not that high, especially if you are a mid career tech worker ($107,600 for 2020), and you will be double taxed on amounts above the exclusion. But at least you can skip California state taxes if you count as a nonresident.

I guess that's the decision to make. Do you pay extra to keep your U.S. citizenship active, or do you renounce citizenship to pay less?

I'm sure different people will have different ideas of what that's worth, but it's available as a choice. People that opt not to renounce citizenship have obviously decided it's worth it to not do so, whether that be keeping future options open, or because they know they plan to return. $100k is a lot of money, even if in many locations its less than a mid-career tech worker salary, so I'm not sure I have any objections to this.

There is a sense of dissatisfaction when one has to pay the extra tax, while one's coworkers, who are from countries other than the US, do not.

California taxes worldwide income, and you are still considered a CA resident if you were living there before you left the country.

I'm not a tax professional, but below is the relevant section from the California Franchise Tax Board's Guideline for Determining Resident Status, which can grant nonresident status depending on the particulars of one's employment:

Safe Harbor

Safe harbor is available for certain individuals leaving California under employment-related contracts. The safe harbor provides that an individual domiciled in California who is outside California under an employment-related contract for an uninterrupted period of at least 546 consecutive days will be considered a nonresident unless any of the following is met:

• The individual has intangible income exceeding $200,000 in any taxable year during which the employment-related contract is in effect.

• The principal purpose of the absence from California is to avoid personal income tax.

The spouse/RDP of the individual covered by this safe harbor rule will also be considered a nonresident while accompanying the individual outside California for at least 546 consecutive days. Return visits to California that do not exceed a total of 45 days during any taxable year covered by the employment contract are considered temporary.

Is that the salary for a mid-career tech worker in the US, or in Europe/Asia? Because tech salaries are a lot lower outside of the US.

Also many countries have double-taxation treaties to avoid the double taxation when you exceed $100k

I know a bunch of Americans abroad, none of them have to pay any tax to the US, but several of them have to pay specialist accountants to deal with the differences in taxation between the countries. It ends up being a tax on Americans that is not paid to the US but to accountants.

> Is that the salary for a mid-career tech worker in the US, or in Europe/Asia? Because tech salaries are a lot lower outside of the US.

Definitely it depends on the country, the industry, the specific company, and by the definition of mid-career (10 years? 20 years?).

> Also many countries have double-taxation treaties to avoid the double taxation when you exceed $100k

But then again, other countries do not double-tax from the start, so none of the international coworkers of the Americans abroad have to pay any taxes to their home countries, or for specialist accountants to deal with the differences in taxation.

I totally agree it's a ridiculous burden.

Americans have a big burden of FATCA, specialist accountants and just a lot of stress in general.

And to what end, when most of them end up paying no taxes to the US whatsoever? (this was the point I was trying to make - that after all this BS they are put through, the US is still not getting any extra tax revenue from these people)

It seems like it's mostly so that US politicians can say they've done something about high-profile rich people who have moved to tax havens, rather than actually increase tax income measurably.

You don’t have to use the exclusion, and in a lot of cases it’s not really beneficial.

The other option is to pay the difference in taxes, so if you were taxed at 50% in the country of residence, and the tax bill in the US would have been 45%, you’ll get the 5% back as tax credits towards future US tax obligations.

If you’re working in most European nations you’ll probably be paying more in tax than you would in the US.

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