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I think the U.S. is one of a few countries in the world that tax you on your global income even if you are no longer living in the country. This seems really unfair as expatriates have to pay taxes to their resident countries as well. Yes, they have income exclusion, etc. but those with high incomes will still have to pay. Even if you don't have a high income, you still have to file with the IRS even if you don't owe any taxes as long as you are a U.S. citizen.
I suspect most of these folks were first citizens of another country and simply moved back there and plan to remain there. I honestly would ask this- which country can the rich live in any pay LESS than they pay here? There is no first world country I know of that lets the rich pay less than here. Not Canada, not Europe, not Israel and not Scandinavia.
this would only help for the income made outside of the country.
So if you have investment and businesses outside of the country then it might be a good idea.
But if most of all of your money is made in the US, then it really doesnt matter, you still pay taxes.
I don't think it's possible to renounce your citizenship without giving up 15% of your net worth and having spent x amount of time living outside of the country.
As mentioned, the problem is not so much US personal tax rates (effective rates are actually quite low, but people are greedy and love to complain), it is the burden of complicated calculations and especially reporting requirements.
Plus, again as mentioned, the US government taxes US persons on worldwide income and requires reporting on worldwide assets, while many countries do not. True, then, for those with investments in several countries it may make sense to renounce US citizenship.
There is an "exit tax", but there is also a large exemption (I believe in the neighborhood of $2M for married filing jointly) and the tax is calculated on the unrealized capital gain of the remaining non-exempt asset value. So again, the burden would not be so much paying the final tax bill, but figuring out how to calculate it; the 15% figure mentioned is probably exaggerated if considered as the effective rate.
I am not sure about a requirement for living x number of years outside the country, but already having a second citizenship is a requirement.
Finally, in any case, then, I agree that in many cases taxation, and especially tax rates, are less a motivation for renouncing citizenship than cultural reasons.
However, freedom from onerous reporting requirements, especially for those with investments in several countries, and the threat of significant tax rate increases going forward, perhaps even wealth taxes, may be the factors that tip the scale, so to speak.
In this context, it may be worth noting all of the restrictions that a US person faces when attempting to invest outside the US, restrictions that have become increasingly more onerous and stigmatizing in the last decade or so, and viceversa. For example, many foreign banks refuse to do business with US persons because they then face scrutiny and burdensome reporting requirements; on the other side, many global businesses from emerging countries do not list on US exchanges, for example, due to onerous reporting requirements, choosing London instead; another example, some banks in the US have lost foreign-client private banking business to European and other rivals, again due to onerous reporting requirements.
In short, in the throes of globalization, for some people the US has become like any other country, subject to cost/benefit analysis in comparison to other just-as-valid options.
Its nearly impossible to renounce citizenship especially if you are wealthy. You really have to go out of your way to do it or you have to become a terrorist and commit treason or something like that.
Some people say, "well, if you don't like the USA so much then just leave and give up your citizenship."
My response, "I would if the feds would let me."
The fact of the matter is that the feds don't want people giving up citizenship because the USA taxes worldwide income even if you don't live in the states.
I spoke recently with a roadie for a major singing star and was told that virtually all Hollywood and rock stars have companies in other countries that most their income is routed through and they pay no taxes on it. To be sure, they pay some taxes as they also have residences here, but the 4 or 5 I do know of pay taxes on about 15% of their income.
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