A lot can happen in just two months.
In the two month period of March-April 2023, overseas Americans have been:
- Vilified: by the Senate Finance Committee
- Marginalized: by the IRS and others, and
- Abandoned: by the U.S. Departments of State and Defense
A previous post on this website discusses a March, 2023 report issued by the Senate Finance Committee which paints dual citizenship as both a tool and an indicator of tax evasion. For the Senate Finance Committee, dual citizenship is not a fact of the modern world – a world in which citizenship is a human right. On the contrary, it is something nefarious and those who are dual citizens are likely concealing “offshore” bank accounts for the purpose of avoiding U.S. taxation.
Dual citizenship is highly common among overseas Americans: of the approximately 1,500 persons who participated in SEAT’s 2020-21 survey, 61% reported having dual citizenship, and 5% reported being a citizen of three or more countries. Of the approximately 6,900 persons who particpated in Democrats Abroad’s 2022 survey, 57% reported having dual citizenship. The idea that overseas Americans – over half of whom are dual citizens – might need bank accounts in the countries where they live simply in order to live normal lives seems to not have occurred to the Senate Finance Committee (or, the Committee doesn’t care).
SEAT as well as other organizations representing overseas Americans have on many occassions appealed to the Senate Finance Committee to understand and alleviate the problems overseas Americans face as a result of the extraterritorial application of U.S. taxation and banking policies. Rather than responding to their appeals, instead the Committee vilifies overseas Americans as likely tax cheats for no reason other than also being a citizen of another country.
In March 2023 the IRS posted on its website a working paper entitled “The Offshore World According to FATCA: New Evidence on the Foreign Wealth of U.S. Households.”
The Paper is authored by a team of six economists: Niels Johannesen of the University of Copenhagen, Daniel Reck of the University of Maryland, Max Risch of Carnegie Mellon University, Joel Slemrod of the University of Michigan, and John Guyton and Patrick Langetieg of the IRS.
The Paper seeks to use account-level information reported to the IRS by foreign financial institutions pursuant to the Foreign Account Tax Compliance Act (FATCA) to “produce new evidence on the foreign financial wealth of U.S. households.”
Based upon the IRS and other data they reviewed, the Paper’s authors draw a crucial distinction among persons who hold “offshore wealth.” On the one hand, there are “sophisticated global investors,” and on the other hand, there are “Americans with close ties to specific foreign countries.” The latter, the authors explain, are either Americans living overseas or recent immigrants to the United States.
For the authors, the two groups of persons bear little relation to each other. The first group – sophisticated global investors – hold a particularly high share of their assets indirectly through partnerships and in countries reputed to be tax havens (such as the Cayman Islands). The accounts have relatively high balances. In contrast, the second group – overseas Americans and recent immigrants to the United States – hold their accounts directly, as individuals. They hold the accounts not in tax havens but in the countries where they live, where they used to live, or with which they otherwise have close contacts. The accounts have relatively low balances.
The authors make this observation:
[Our research] suggests that while the tax revenue effects of FATCA may target the very top of the income distribution, any compliance costs attributable to FATCA will fall on a wider set of taxpayers located throughout the income distribution.
But as far as overseas Americans go, the Paper’s authors stop there. They prepared a dense, 56-page paper to confirm with considerable detail what has already been known and undisputed for decades: that some highly wealthy persons who live in the United States hide some of their wealth in tax havens. In focusing on the already known and undisputed, the authors marginalized the real story: their data also confirms what overseas Americans have been claiming ever since FATCA was adopted, but to deaf ears – that they are ordinary people with ordinary wealth and ordinary bank accounts. Most especially, the Paper demonstrates that there is no evidence that the accounts overseas Americans hold in their countries of residence are used for tax evasion. As the Senate Finance Committee Report described above demonstrates, this evidence is of vital importance to stop the damaging vilification of overseas Americans. And this evidence is of vital importance to the fight for changes to U.S. extraterritorial taxation and banking policies. In marginalizing this evidence to focus instead on wealthy U.S. residents, the authors (who, again, include IRS employees) are marginalizing overseas Americans themselves.
On Saturday 22 April 2023, 100 special operations forces were deployed to evacuate by air U.S. embassy and other government personnel from embattled Sudan. At the same time that the United States announced this evacuation, it also announced that it would not evacuate U.S. civilians remaining in the country. The most that it would do was potential, and limited to overland routes. More specifically, Christopher Maier, the assistant secretary of defense for special operations and low-intensity warfare, stated “[the United States will] potentially make the overland routes out of Sudan potentially more viable.”
The first reason the U.S. Department of State offered for the refusal to evacuate the remaining U.S. citizens was that it would not be safe. However, this reason was quickly belied by the fact that other countries were in the process of evacuating not only their own citizens, but also the citizens of other countries, including Americans. The next reason the U.S. Department of State offered was that most of the remaining Americans were dual citizens and, as such, the State Department “anticipated” that many would not want to leave. This reason was also rejected. As the family member of U.S. citizens trapped in Sudan explained: “At the end of the day, a dual citizen is a citizen. They have the same constitutional rights as other citizens, and we shouldn’t be creating a tiered system for citizenship.” Ultimately, U.S. citizens seeking to leave Sudan and their family members described the U.S. State Department as “utterly useless.”
Finally yesterday, one full week after U.S. government personnel had already been evacuated, and seemingly only in response to media pressure, did the U.S. Department of State finally announce “evacuation efforts.” What were those efforts? One overland convoy, arriving at Port Sudan.
Considered in a vacuum, opinions may differ on whether the United States has a duty to do more to try to evacuate U.S. citizens from Sudan, (or, indeed, to evacuate them from any unsafe environment). But this situation does not exist in a vacuum. When overseas Americans object to the highly damaging U.S. extraterritorial tax system, a response they often hear is that they should be glad to pay U.S. taxes because they can count on the United States to evacuate them from unsafe environments. Setting aside the fact that Americans are obliged by law to reimburse the United States for expenses linked to their evacuation, it is the norm that the United States refuses to evacuate non-governmental citizens from any given situation. This has been demonstrated time and again. If the United States does, after first refusing, finally evacuate U.S. citizens, it is only in response to public pressure. The United States has made clear time and again that it cannot be depended upon to evacuate from any given situation anyone who is not U.S. governement personnel. That is, the United States government has made clear that it can and will abandon overseas Americans.
It’s A Lot For Just Two Months
Just two short months. These months have been rich with evidence that for the United States federal government, overseas Americans are to be vilified, marginalized, and abandoned. Dual citizens – over half of Americans living overseas – are held in special contempt: by mere virtue of being dual citizens, they are simultanouly considered to be tax cheats and unworthy of evacuation.