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As taxes bite, they surrender citizenship

Americans living abroad end up being taxed twice. For some, that is too much.

By New York Times
Published December 18, 2006

PARIS - She is a former Marine, a native Californian and now an ex-American who prefers to remain discreet about abandoning her citizenship. After 10 years of warily considering options, she turned in her U.S. passport last month without ceremony, becoming an alien in the view of her homeland.

"It's a really hard thing to do," said the woman, a 16-year resident of Geneva, Switzerland, who had tired of the cost and time of filing yearly U.S. tax returns on top of her Swiss taxes. "I just kept putting this off. But it's my kids and the estate tax. I don't care if I die with only one Swiss franc to my name, but the U.S. shouldn't get money I earned here when I die."

Historically, small numbers of Americans have turned in their passports every year for political and economic reasons, with the numbers reaching a high of about 2,000 during the Vietnam War in the early 1970s.

But after Congress sharply raised taxes this year for many Americans living abroad, some international tax lawyers say they detect rising demand from citizens to renounce ties with the United States, the only developed country that taxes its citizens while they live overseas. Americans abroad are also taxed in the countries where they live.

"The administrative costs of being an American and living outside the U.S. have gone up dramatically," said Marnin Michaels, a tax lawyer with Baker & McKenzie in Zurich, Switzerland.

So far this year, the Internal Revenue Service has tallied 509 Americans who have given up their citizenship, said Anthony Burke, an IRS spokesman in Washington. He said complete figures were still being calculated.

Concern about taxes among expatriates has surged since President Bush signed into law a bill that sharply raises tax rates for Americans abroad with incomes of more than $82,400 a year. The legislation also increases taxes on employer-provided benefits like housing allowances.

The changes, enacted in May and tweaked by the Treasury Department under guidelines issued in October, apply retroactively to Jan. 1, 2006.

[Last modified December 19, 2006, 00:11:48]