Expatriate Americans Break Up With Uncle Sam to Escape Tax Rules
Record Numbers Living Abroad Renounce U.S. Citizenship over IRS Reporting Requirements
Unlike other developed nations, the U.S. government taxes citizens on income they earn anywhere in the world. ...U.S. tax liabilities also cover children born to Americans abroad, extending the reach of the IRS across generations, as well as oceans.
…Helping boost the exodus, experts say, is a five-year-old U.S. campaign to hunt for undeclared accounts held by Americans abroad…..The tax dragnet has also swept up many middle-income Americans living abroad, prompting some to give up their U.S. citizenship. While people who renounce aren't freed of taxes due for past years, they don't want to risk sizable taxes and penalties for them and their children in the years ahead, experts say.
What kind of country does this to itself? With Medtronic's planned acquisition of Covidien and the announcement that the combined company will be domiciled in Ireland, U.S. tax policy has encouraged one more business to spend its money overseas. Medtronic, famous for its high-tech cardiac and spinal devices, will pay $42.9 billion for Dublin-based Covidien, which makes surgical tools and other medical supplies.
Shareholders of all companies—including employees who care about where economic growth will occur in the future—should know that America's federal corporate tax rate is 35%, which when combined with state and local levies rises to an average of nearly 40%. Ireland, where politicians evidently care about economic growth and as far as we know don't seek to stifle free speech on the topic, has a corporate tax rate of 12.5%.
Almost alone among civilized nations, Washington also demands to be paid on a company's world-wide earnings, rather than on money earned in the U.S. This tax is due whenever a company's overseas earnings are returned to America. Medtronic has about $14 billion overseas and rather than bringing it home and triggering the tax, the company will use the money to fund most of the cash portion of its $42.9 billion purchase.
The near-40% U.S. average rate is almost double the 21% average in the European Union, or the 22% in Asia, according to KPMG. As we noted recently, about the only place outside of captive Marxist countries with a higher corporate tax rate than the U.S. is the United Arab Emirates. But its top rate of 55% is generally applied only to foreign oil companies.
A big reason why the U.S. economy isn't growing as fast as it used to is that politicians not only don't want economic growth at the top of the agenda. They don't even want anyone to talk about it.
American families need a tax cut too and three charts show why
1.) Incomes have been going nowhere: “The April 2014 median income was 7.0 percent lower than the median of $56,941 in January 2000.”…Posted by Jill Fallon at June 18, 2014 2:20 PM | Permalink
2.) Higher education, the path to upward mobility, is an increasingly heavy burden:...
Middle-income families now paying 25 to 40 percent of their annual incomes to attend college. Remember, this is after accounting for any grants and scholarships that students receive.
3.) And then there's the rising cost of health care.