This is another example of one of the truths of taxation.
Hasta la vista, Uncle Sam! A record 1,337 Americans gave up their passports in the first three months of the year, according to new data released by the U.S. government.
That’s nearly 40% of the 3,415 Americans that renounced citizenship last year, suggesting that U.S. renunciations will again hit a new high this year. In 2014, the number of Americans who gave up their passport was 15 times higher than in 2008.
The surge in renunciations is part of a backlash from expats who are tired of handling complicated tax paperwork, a burden that has increased in recent years as a new tax law kicked in.
Unlike most countries, the U.S. taxes citizens on all income, no matter where it is earned or where they live. The piles of paperwork can be so complex that expats often must seek professional help, forking over high fees to accountants and lawyers. It’s common for Americans living abroad to spend thousands to prepare even a relatively simple tax return.
Some folks treat tax policy as if it dealt with a static environment. People react to tax policies and the result is often that the government does not get the results it had planned on. In this case, the onerous tax policies for expats is causing many of them to react by just renouncing their citizenship altogether. So instead of getting something from these 1,337 former Americans, the government will get nothing. In this case, it’s a tiny drop in the bucket, but this is a microcosm of how many policies end up when they meet reality.