7 Reasons Why I’ll Never Renounce My US Citizenship

Sneak Peek:

Kristin:    00:00:00    In a perfect world, do I wish that the US would just let citizens stop paying taxes when they move abroad? Yes. Is that ever going to happen? No. 

Introduction: Welcome to Badass Digital Nomads, where we're pushing the boundaries of remote work and travel, all while staying grounded with a little bit of old school philosophy, self-development, and business advice from our guests.

Kristin Wilson, Host:    00:00:34    Hi everyone. Kristin from Traveling with Kristin here and welcome to episode 116 of Badass Digital Nomads and the third week of talking about the topic of renouncing one's US citizenship. I just wanna say thank you to everybody for being involved in this conversation. I feel like it's this unprecedented thing. I don't know if if a community has ever spent so much time talking about this topic from so many different angles. So I just wanted to thank you for your participation. Thank you for all of your comments on my YouTube community post on the video interview with Erika on YouTube on the Facebook post. And I'm just going through some of the comments now. But the topic of today's podcast on the other side of renouncing on why Not to renounce your citizenship was directly inspired by this entire conversation that we've been having. I did not have this podcast planned for this week.  

Kristin:    00:01:43    I just recorded it a couple days ago. And it's about why I am not renouncing my citizenship and why I probably won't ever do it. So you've now heard at least one person's story on why she did it. It's possible that you've seen other people's stories on YouTube and on other podcasts about why they did it, but what about why not to do it? And so you might assume a lot of people did assume, actually because I covered this topic on my channel, that it was something on my mind. But I've already been through this process of thinking about and weighing the pros and cons of renouncing my citizenship a long time ago. I came to the conclusion that I'm not doing it. And so I thought it would be helpful to share my thought process with you so that you have both sides. You can make this decision for yourself and hopefully some of the themes that we brought up, both in Erika's interview and also in today's podcast will give you some ideas and food for thought on issues that you might not have considered when thinking about this topic before.  

Kristin:    00:02:56    So before we get into that, and this podcast will also be a YouTube video coming out this week. I just wanna read some of your comments on the video about renouncing citizenship. And as it turns out, the most recent comment that I got just a few seconds ago was from Jeremiah Bradshaw who actually interviewed me on Badass Digital Nomads for the anniversary episode. He says, I just finished the podcast where Kristin parses out her thoughts on the myriad of blow back. She got on this topic and it could not have been done with more grace and class. Amazing everyone you came to the right place. Thank you so much Jeremiah. I'm gonna go out on a limb and say Jeremiah's a little bit biased 'cause he did interview me, but he was the listener of the podcast who I had never met. So we weren't friends before we were total strangers.  

Kristin:    00:03:50    So thank you, Jeremiah, for your support. And there are at least 300 comments on this video. I would love to read all of them to you because I do read all of the comments and there's just so much food for thought here. So I encourage you to check out the video if you haven't seen it, and at least browse the comments thread because there's lots of interesting stuff going on as there is in most of the videos. Half the video is the video, but the other half is the discussion that happens in the comments. So we have people on both sides and all perspectives. Of course. One viewer named Tara Christina says, it's a personal choice folks, this is another topic that either side will never see eye to eye on. You cannot understand another person unless you walk in their shoes. Just be respectful of anyone's decision and their reasons.  

Kristin:    00:04:41    Thank you, Kristin, for presenting this interesting topic. You are so welcome Tara, and I love your perspective. That's one of the most upvoted comments. I think a lot of people agree that it's an individual decision. And so that's again why I wanted to do today's podcast is to share another individual perspective so that you can form your own. A lot of people also commented about how Erika probably wouldn't have renounced her US citizenship if she didn't already have dual citizenship in Canada. And so that is pretty notable as well. And we have a big discussion going on about social security. So maybe that's a topic I need to look more into because I don't have all the details on that. But it does look like you can collect your social security even if you renounce, depending on how long you you worked in the US system.  

Kristin:    00:05:36    And um, let's see what else here? WriterSteve says, thank you for this amazing content and conversation. I'm so happy to have found your channel and the high quality content you produce. Keep up the great work we are watching and appreciative. Thank you WriterSteve. Lots of people chimed in and said thank you for posting it. So that was encouraging 'cause we had this whole debate and poll over whether or not I should post this video, but I'm glad that I did. And we just have a lot of people thinking out loud and debating what they would do, which has been really intriguing to read. People who have been planning to move to Portugal, people who are already living abroad. Emo says, bless you both for doing this. I've been looking into renouncing and it's maddening to try to get clear info. Got it here.  

Kristin:    00:06:21    Feeling good. Glad you got the info you needed. Emo. And more to come. Rhapsody says, Kristin, Kristin, Kristin, A most outstanding interview, your choice of person to interview was so very on point. Brava, my Lady Brava. Thank you Rhapsody. LParker says, much appreciation to both of you ladies, sharing your wisdom and experiences as well as advice he's watching from Seattle. And we had people that are pretty annoyed that some of these tax laws were seemingly to prevent billionaires and big businesses from leaving the country or from capital flight, uh, out of the country. And it seems to have just affected normal people, regular everyday people more than the people it's designed to impact. So that's a bit frustrating. But yeah, lots of interesting stuff going on over there in the channel comments. So let's get into some of my reasons for not renouncing right now.  

Kristin:    00:07:22    And if you've been enjoying this content and you would like to support head on over to badassdigitalnomads.com where you can donate PayPal, crypto Bitcoin, buy me a coffee, join my Patreon team, and we're getting almost halfway there to my goal of 100 patrons by the end of 2021. I think we're at 40 people right now and we do a live Zoom hangout once a month after my monthly live stream on YouTube, which is the last Sunday of every month. That is super fun. So come and join us over at patreon.com/travelingwithKristin, but you can also show your love and show your support by simply leaving a review wherever you listen. That means so much to me, really appreciate it. And coincidentally, we have two episodes coming up in the next two weeks with Greenback Tax Services, which is along these lines of expat issues, living abroad, expat taxes, and also the founders talk a lot in the first half of the interview about living abroad as a family.  

Kristin:    00:08:36    And I learned so much from them on that. So that's gonna be a two part interview coming up in episode 117 and 118 of Badass Digital Nomads. And then I have a very, very, very exciting announcement coming for you in the next week or so. So keep an ear and an eye out about that. I'll have all the details for you here in the podcast. So lots of exciting stuff going on. Oh, and my birthday's next week too. So I was asking people on YouTube as a birthday gift to share my channel, share my podcast that would be the best present you could give me. And on with the show.  

Kristin:    00:09:20    There are plenty of reasons why you might wanna consider renouncing your US citizenship, but there are also a lot of valid reasons not to. I recently published a video and two podcasts on why and how to renounce your US citizenship, but there are always two sides to every story, right? At least two. So let's talk about why you might not want to renounce your US citizenship and why I ultimately decided not to. So you have a more balanced perspective in choosing what you might wanna do in your own life. I'm Kristin, and I've been living abroad pretty much full-time since 2002, and I've been helping other people move overseas since 2005. So I've thought about this topic of renouncing my citizenship for, oh, at least two decades now. By far, the number one reason that Americans choose to renounce their US citizenship is because of the high cost burden and headache of filing and paying US taxes abroad.  

Kristin:    00:10:26    You've got extra paperwork to fill out, you might need to hire a special accountant to help you with your tax return. You could be liable for state taxes, self-employment taxes, social security taxes, income taxes, capital gains taxes. So you might be thinking, why would you be paying taxes in a country you don't live in? Well, the US is one of only two countries in the world that taxes its citizens based on where they're from, not where they live. So if you live in pretty much any other country, there are ways to change your tax domicile, to change your tax base from one country to another. That's a topic for another video. But despite all this paperwork and headache and the extra money that I'm paying every year just to be a US citizen, it's still not enough for me to give up my US citizenship.  

Kristin:    00:11:17    Now, maybe I haven't hit the right net worth to where I feel like I'm losing out on so much money that it would be worth renouncing. But Eduardo Severn, the former co-founder of Facebook, for example, he renounced, but he's a billionaire, so he has slightly different considerations. Now, I'm not saying that you have to be a millionaire or a billionaire to consider renouncing your citizenship, but the higher your net worth, the more complex your financial situation is, and the more money that's at stake naturally, the more seriously you might want to consider renouncing. And the other thing when it comes to the tax filing obligations is that, as I mentioned, I've been living abroad for such a long time now that I'm just used to the process. I know which forms I have to file. I have a good accountant, I know all of the deadlines, and I am probably just a bit desensitized to the whole process.  

Kristin:    00:12:14    So it's not as big of an obligation and a burden to me as it was back in 2005 when I had no idea what I was doing and I had to research everything from scratch. Another benefit that I have is that I'm from Florida, so my home address, my permanent address has always been in Florida. And so we don't have any state taxes here. And that might be much different for you if you're from New York or California and you're living abroad without being able to change your state tax domicile. There are also some benefits for us expats who are living abroad. We get a few tax breaks here and there. We have the foreign earned income exclusion. There are tax treaties with quite a few countries and there are a few extra write-offs and perks that you can talk about with your CPA, but it's not all bad.  

Kristin:    00:13:04    I don't pay as many taxes when I'm living abroad as I do when I'm living in the us but also in the US I use more services. Another reason that a lot of people renounce is because it's really hard to open an offshore bank account as a US citizen. Now, it's always been hard for me even since I was first living abroad in 2005, but it got a lot harder in 2010 when FATCA was passed, which is the Foreign Account Tax Compliance Act. And that's another long story topic for another video. But it basically increased the administrative cost for banks to open accounts for US citizens. But that's not enough of a reason either because it's still possible to open a foreign bank account as an American. Sure, you might get turned away at certain banks, you might have to fill out more paperwork.  

Kristin:    00:13:58    It might be a lot harder, more frustrating, take more time, but it's still possible. But these days you might not even need a traditional bank account in the country that you're living in with companies like Wise, Revolut, N26, Oxygen Bank, and so many more. There are countless completely online global bank accounts or money transfer and Forex accounts that make it so that you can access, manage and send money almost anywhere in the world for very little cost. I'll link to the bank that I use in the description below if you're interested. But this is something that used to be a huge headache, but in recent years that problem has been solved. Another reason that people say they wanna renounce their US citizenship is because they've married someone else abroad. But that doesn't apply to me either. So the problem with being a US citizen and then marrying a foreigner is that then that person's income can also become taxable income, especially if you file jointly.  

Kristin:    00:15:00    But I see it from the opposite side. What if I've renounce my US citizenship and then I meet my life partner who happens to be a US citizen and I can't even live in his home country? That presents a problem as well. This is one of those situations that doesn't really have a good solution because there's going to be problems if you are an American marrying a foreigner and living abroad. And also if you're American who gave up their citizenship and then marries an American, you're back where you started <laugh>. So in that scenario, it kind of becomes a moot point. And one thing that's weird about me is that a lot of people say that the reason they don't want to renounce their US citizenship is because the cost is so high. So it was raised from $400 to $2,350 in recent years. But to me, that's not even a consideration.  

Kristin:    00:15:53    I think that the uh, peace of mind and the money that you would save on accountants and tax filings and paperwork and time would greatly outweigh the cost of renouncing and any exit taxes that you may have to pay on the way out. Even though I don't mind spending a few grand on renouncing my citizenship, I'm still not going to do it. And the main reason why comes down to freedom choices and family. What I love about my location independent lifestyle, and I've been a digital nomad for a really long time, is that I can decide where I want to live and where I want to work. But if I decide to renounce my US citizenship today, I'm limiting my choices tomorrow. And then I have to explain to future Kristin a few decades from now why we can't go back to the US or have the risk of not being able to re-enter the US.  

Kristin:    00:16:50    Now, there are ways to of course, travel to the US and visit the US for a certain number of days per year, depending on what your passport is, if you acquire a second passport, second citizenship. But it's never going to be as easy as just walking into the line for US citizens or coming in with your global entry pass. I never wanna be restricted from seeing my family members in the US and I never wanna run the risk of being turned away at the US border. For whatever reason, the last year of the pandemic has really highlighted that potential risk. I don't know what's going to happen in the future, but it's very possible that I might need to take care of a sick relative or an aging parent someday. And I just wouldn't be able to forgive myself if I wasn't able to be there for a family member or a friend for that matter who needed me because of my desire to reduce my US tax obligation.  

Kristin:    00:17:55    So maybe over the course of my life, I end up paying thousands or hundreds of thousands of dollars more in US taxes. I only have this one life, and so I want to be able to spend it with my family members in the US whenever I want, for as long as I want. Now, maybe if I were a billionaire and I could fly my family out to me at any moment in time, that could change things as well. But I wanna be able to go to them, not have to make them come to me. I don't know, it's just impossible for me to put a price tag on the value of the time spent with my family. And time is a non-renewable resource. It's something that you can never get back. So it's a really important decision. Family is actually a reason that so many expats move back to their home countries after living abroad, because later in life that time becomes more valuable.  

Kristin:    00:18:53    People might wanna spend more time with their children, their grandchildren, their great-grandchildren. And that's not something that you can necessarily do from a beach in Costa Rica or Thailand or the Philippines or wherever. And you know, related to that, chances are I wanna retire in a vineyard in Spain or France or Italy or something like that. So I might look back on this and be like, man, I should have renounced my citizenship. I never went back. I lived happily ever after somewhere else. It all worked out. I don't know what I wanna do next year, let alone decades from now. And then another big reason that people renounce their citizenship is kind of accumulation of a lot of little reasons, mostly related to people's, uh, political ideology, their values, and really not resonating or agreeing with the principles of the United States and just not wanting to be a part of that system altogether.  

Kristin:    00:19:53    And while there are a lot of policies that I disagree with in the us, I don't feel so strongly about it that I feel like I need to renounce my citizenship. If anything, I am motivated to help try to change those things and become more politically active rather than just leaving and saying it's not my problem. But on the other hand, after traveling the world for so many years, I don't feel that kind of national tie to any country. I relate more with humanity and with the planet than I do with any sort of flag or national anthem. Sure, you know, I'm gonna root for the US and the Olympics and things like that. But other than that, I don't have my personal identity. So wrapped up in the passport that I have, if anything, I wish I had like five extra passports. And getting additional passports is something that I plan to do in the future anyway.  

Kristin:    00:20:57    But you can do that without giving up your current citizenship depending on which country you're from. According to an expat tax survey, 11% of respondents said that they were concerned about the political climate in the US. 10% were disappointed in the direction of the US government, and 8% felt like they just don't have strong ties to the US. So I wholly respect anyone that wants to renounce their US citizenship for whatever reason, those included. And in my interview with one of my YouTube subscribers named Erika, she explained her reasons for renouncing and a lot of them had to do with her personal convictions and lifestyle. And I completely respect that, but that's still not a strong enough reason for me personally to want to renounce when I compare that to the trade-off of possibly being restricted from entering the US and restricted from seeing my friends and family.  

Kristin:    00:21:55    There's another thing too, when you really start to think about the long-term implications and kind of the day-to-day changes of giving up your US citizenship, that also means you're giving up your social security number. So if you're not yet vested in the social security system, that means you won't get Social security. Although you can always make other investments and earn money in a lot of different ways. I don't think that the social security safety net and potentially losing out on that is a big reason not to renounce. But there are a lot of things that you might not think about, whether it's applying for a credit card in the US or applying for a job that you can't necessarily do without a social security number. And even though I have never had a regular nine to five salary job and I've always worked for myself, it still makes me a little nervous to throw away my social security number in case I might need it in the future.  

Kristin:    00:22:55    In a perfect world, do I wish that the US would just overturn their territorial tax system and let citizens stop paying taxes when they move abroad? Yes. Is that ever going to happen? No. So I'm not going to waste a lot of time and energy wishing that things were different. I'm just going to take things as they are right now and make my decision based on that. And if you're wondering why I don't think that things will ever change, well, first and foremost, it's because US expats living abroad don't vote. We have the lowest voter turnout in the United States. So even though there aren't millions of Americans living abroad, we don't really use our voice. We're not politically active. We don't vote. We make the least amount of political contributions. And as we know, money talks when it comes to US policy and we don't have much representation.  

Kristin:    00:23:49    If you are a Republican, you can join Republicans overseas, but Republicans overseas is not recognized by the RNC. If you are a Democrat, you can join Democrats abroad, which actually is recognized by the DNC, and you can vote in primary elections, but you still don't have much representation. And there's no sort of expat lobby that's representing the needs of all US citizens abroad. So we have strengthened numbers, but our power is very diluted because we are of different political parties and we're spread out over countries all around the world. So we don't vote, we don't make our voices heard, we're not politically involved. We don't pay as many taxes as stateside citizens, and we don't have official political representation that makes it really hard to influence US policy. It's like out of sight, out of mind. In addition, only a few thousand people a year renounce their citizenship.  

Kristin:    00:24:46    So you might have heard these stats that like three times more people renounce their citizenship in 2020, and that is true, but the actual number, it only went up from 2,500 people to 6,000 people. And when you look at the population of the US, it's really a drop in the bucket. You might also think that with the rise in remote work, there's going to be more people living abroad and maybe we'll have more power and more sway over US tax policy, but I think the opposite is going to happen. I think that the more US citizens there are working remotely, the more oversight there's going to be on this to ensure that US citizens abroad are filing and paying their taxes accordingly. If anything. And I think that this is going to be a deeply unpopular idea. I think that the rise in remote work could lead to some sort of a centralized global tax system to catch people that aren't paying taxes in any country and to ensure that everyone is paying something somewhere.  

Kristin:    00:25:54    I'm not saying that's gonna happen tomorrow, but with all of the digital nomad and remote work visas and the critical mass of people who will start to fall into this category as stateless tax residents, I think that is something that is quite realistic in the future. I've been able to live and work abroad in 60 plus countries in my career so far while maintaining my US citizenship. So while my life might be easier, might be less stressful, might be more carefree if I did renounce my citizenship, I still don't want to risk not being able to return to the US in the future or being limited in the amount of time I can spend with my friends and family. But what about you? After listening to my interview with Erika on why she renounced her citizenship and the reasons why I'm not going to, would you renounce? Why or why not? And is there one particular overarching reason in that decision, or is it a combination of a lot of little things.