How U.S. Expats Feel About Paying Taxes Abroad and Renouncing Citizenship

SafetyWing

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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:    00:01:23    Hi everyone. Kristin from Traveling with Kristin here and welcome to episode 106 of Badass Digital Nomads about what expats really think about the US. This episode was inspired by an annual survey that I have seen going around the last few years by a company called Greenback Tax Services. And while this podcast is not sponsored by them, I found the content and the results of their poll very compelling. And side note, I found out about Greenback Tax Services because of the many negative experiences I had had trying to file my taxes from abroad. And I was looking for a competent US accountant. And so if you haven't found one yet, even though I work with, uh, one of my friends now who I met at Nomad Summit and she's not taking any new clients right now, uh, Greenback Tax Services is a good company to look into if you are looking for help filing your taxes from abroad.  

Kristin:    00:02:34    So check them out, shout out to them for doing this research because there's not much data on Americans abroad or digital nomads for that matter. And so anyone who is out there proactively creating their own research props to them. And so this poll had about 4,000 participants from 125 different countries. And if you're listening to this episode before May 21st, 2021, then you can participate in this year's survey. So I will link to that survey in the show notes for you, make your voice heard. So anyway, this is what Americans abroad think about voting, absentee paying taxes offshore and also their perspective on how the US handled the Coronavirus pandemic and why they decided to stay abroad rather than come back at the beginning of the pandemic. And it's also about how they feel about renouncing their citizenship. So this is, this audio is part of a YouTube video that you can check out in the show notes, but there's one thing that got cut out of that video that I wanted to mention here about taxes.  

Kristin:    00:03:56    So the reason that so many Americans report not wanting to file US taxes isn't necessarily because they don't wanna pay taxes at all according to the survey, it's more about the complexity and the burden of the US tax system. So things like FACA compliance and FBAR forms. And so I got a lot of comments on YouTube about, yeah, people just wanna evade taxes or people don't wanna pay taxes. But I think overall people just want a more simplified, streamlined process for when they're living abroad versus when they're living in the US and they also want some less extreme options rather than renouncing their citizenship. So that's my opinion, but that's also what the data indicates. Um, so when you're listening to that, uh, don't think that everybody answering this just doesn't wanna pay taxes at all. It's just that they think that that process is overly burdensome and they want better options.  

Kristin:    00:05:02    And um, there are some, I guess, groups lobbying to try to change this tax system. We'll have more info on that coming up in the future. And then if you're interested in the voting aspect of this episode, I have another podcast on that that I'll link to in the show notes as well. I hope you find this episode interesting and thought provoking. These are some of the big questions for our time in this remote global connected economy and world that we're living in. Any questions or comments, feel free to comment below on badassdigitalnomads.com or below the video over at youtube.com/travelingwithKristin. And shout out goes to Melanie J this week for her review on Apple podcasts. Melanie says, inspiring and kind. I thoroughly enjoy listening to Kristin's interviews and her personal story. Kristin is so clearly intentional and kind in her life and work. So whether or not you're interested in the digital nomad life, this is a feel good podcast. Thank you, Melanie. It makes me feel good to read your kind words and thank you to all of you for making me a part of your day today. It's so good to be here. Enjoy.  

Kristin:    00:06:37    What do Americans living abroad really think about the us my friends that work at an international accounting firm, specifically for US citizens abroad, hold more than 4,000 people last year living in 125 countries about what their opinion was on four key topics, US taxes, voting, the coronavirus pandemic, and giving up their US citizenship. What were the results? Let's discuss before we get started, I should probably give a quick disclaimer that this was not a scientific survey and no one actually knows how many US citizens are living abroad. I know that sounds crazy. The reason for this is that contrary to popular belief, the US government does not track how many citizens are living or traveling in different countries. There's no sort of exit visa when you leave the United States, and it's voluntary if you want to register with your embassy in a different country. Also, there is no generally accepted definition for what an expat is and expats aren't included in the US census.  

Kristin:    00:07:47    So for the purposes of this video, an expat is just someone who is temporarily living or working outside of his or her home country. And there are an estimated one to 9 million US expats living abroad. So the first thing that expats reported back about is that they don't like filing taxes abroad. And why would they? The US is one of only two countries in the world that taxes its citizens based on their citizenship, not where they're living. So that means that no matter how long you live outside of the United States, as long as you maintain your citizenship, you are required to file an annual tax return. So expats really don't like this. And this is understandable because if you lived outside of your home country for 10 years or 20 years, you probably wouldn't wanna pay taxes there. So according to this survey, 70% of us expats don't feel that they should be required to file US taxes while living abroad.  

Kristin:    00:08:50    Who are these other 30% and more than 50% said they would like to repeal citizenship based taxation. So what would it look like if we didn't have that? Depending on the country you're from, you could actually change your tax domicile to another country with lower or even zero taxes. So if you moved from Norway to Costa Rica or Panama for example, and you work online, you might not be liable to pay income taxes at all. Unfortunately, I don't think that we will ever see the end of citizenship based taxation in the US for reasons that relate to the next three points that we're gonna talk about. The second question was related to the US government's handling of the coronavirus. And here 81% of expats said that they disapproved of how the US handled the pandemic, 91% opted to stay abroad and they actually felt safer in their adopted country and they felt that that country had a better healthcare system.  

Kristin:    00:09:53    Now this is a pretty controversial topic and we're still technically in the pandemic, so I think we're gonna need a bit more distance before history can judge which countries handled the coronavirus bad or well. But suffice to say the US did not do the best job as of the time of recording this video. The US still has the highest coronavirus case count in the world, the highest number of deaths in the world, and we are fourth in the world for the death rate per 100,000 people. Also, 63% said that the US government's handling of the coronavirus actually inspired them to stay abroad longer. And then about a third had civil unrest and safety concerns, which also proved to be validated. I mean, we had a lot of protests this year, a lot of uncertainty, riots and insurrection. I mean that's pretty much the definition of civil unrest.  

Kristin:    00:10:51    And so I found that really interesting that such an overwhelming amount of Americans abroad would choose to stay abroad at the beginning of a pandemic that saw many, many people crowded into airports trying to get home. And then the third finding was that one in four expats are considering renouncing their US citizenship. I often get questions about that if you leave the us if you have to give up your citizenship, and that's not the case. You can live on a tourist visa or you can acquire a permanent residency or even a second citizenship, another passport in another country. While keeping your US citizenship, there isn't really a big incentive to give up your US citizenship. But more people in recent years have decided to give it up specifically because of taxes. So it jumped from about 2000 people in 2019 to 6,000 in 2020. But that is still just a small drop in the bucket when you think about the total population.  

Kristin:    00:11:56    A few thousand people giving up their citizenship isn't really gonna have much of a tangible impact on US policy. But then also 89% of the respondents said that it was because they felt like their needs weren't being addressed by us politicians. And so this is related to the last point on voting, but when US citizens move abroad, they have a lot less political influence. And it's true local domestic policy makers don't care as much about Americans living abroad as they do about their local constituents. So unless a lot of high net worth individuals start doing it, it's gonna take a massive critical mass of people giving up their citizenship, which is quite an extreme measure to take for any US politicians to pay any attention. So if you are interested in potentially renouncing your US citizenship and you're curious about the pros and cons of doing that, let me know in the comments below and maybe we can make another video about that.  

Kristin:    00:12:58    And then the fourth finding was that record numbers of Americans abroad were planning to vote in the 2020 election and did vote. And this is really significant because Americans abroad are notorious for not voting. They actually have one of the lowest voter turnouts of any other US state. This is a really important topic that the mainstream media never covers. And most people don't know that Democrats abroad are known as being the bluest state in the US. They are so liberal, in fact that expats voted for Bernie Sanders in the Democratic primary in both 2016 and 2020. And um, it's actually quite different for Republicans because Republicans abroad don't have any official representation. So Democrats abroad are recognized by the DNC, but Republicans overseas are not. Now this is a really loaded topic that I can do an entire video on if you're interested, but I did do a podcast about why expats don't vote and actually why so many of them vote democratic.  

Kristin:    00:14:09    Um, I think that the influence of expats has been drastically underrated in the past. And when you consider how many more millions of people are working remotely now and how many people might be living outside of the US in the years to come, or changing states for that matter, the number of expats living abroad could have a very significant impact on the outcome of the US election. And this is really weird because US politicians don't care about expats abroad. So we could end up having this really big group of people that have very little political influence, but end up deciding the outcome of the presidential election. So if we bring this back to the question of repealing citizenship based taxation, it's very unlikely that that is going to happen when the people who want that repealed are living abroad. They're not voting and they're not making political donations. And we pretty much live in a pay for place system these days in the United States. If you like this type of video though, then you'll probably like one that I did recently about why expats leave Costa Rica, which you can watch here and this other video about my thoughts on returning to the US after 15 years abroad, like this video, share it, subscribe, all that good stuff, and see you in the next video.  

Kristin:    00:15:40    Kristin here, thanks so much for listening with millions of podcasts out there. I'm so glad you're here. We aren't doing any traditional advertising on Badass Digital Nomads right now. So if you'd like to help support the show, here are four ways. First, you can leave a review wherever you listen. This helps more people find the show and I get to read what you think. You can also use my affiliate links in the show notes for products that I use, love and recommend, or you can join my Patreon team for $5 per month at patreon.com/travelingwithKristin. Or you can buy me a coffee at badassdigitalnomad.com/donate. Thank you again for being here and for being a part of the global Badass Digital Nomads community. Nearly 100,000 people strong. I hope you enjoyed this episode and see you here again next week. Kristin here, thanks so much for listening.