Monday, October 24, 2016

The cost of relinquishing U.S. citizenship

If a U.S. national becomes a citizen of a country that does not permit dual citizenship, then they must pay the State Department $2350 to relinquish their U.S. citizenship:
This is by far the most expensive relinquishment fee in the world, more than double that of Jamaica, which is in 2nd place. In some countries, the process is even free.

It appears part of the reason for this is a belief among many Americans that no one in their right mind would want to give up their U.S. citizenship for another citizenship in another country, unless they were wealthy fat cats trying to avoid taxes. However, there are many reasons why someone would want to relinquish their citizenship, as well as the tax obligations it presents (as, other than Eritrea, no other country in the world requires its citizens to pay taxes if they live and work abroad). They include:

- People who have no connection to the United States other than they were born there, their place of birth making them citizens. (But why should they have to pay taxes to the U.S. if they have no interest in the country?)

- People who have moved overseas and are seeking to become a citizen of another country, because that's their home now, where their life is, and they plan to live out the rest of their lives there, but the country requires them to give up all other citizenship.

There are plenty of middle-class and otherwise less wealthy people who fall into the above categories, making the $2350 fee a real burden for them, on top of otherwise having to report their income every year and pay the IRS the difference.

I can understand the desire to go after wealthy fat cats who go offshore to avoid taxes, but a $2350 fee isn't likely to be much of a burden to them,--it's pocket change for them--but I think this is a circumstance where there are unintended consequences and policy-makers should take that into account, and let go of the hubris that no one but a wealthy fat cat could reasonably want to become a citizen of a country other than the U.S.

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