Today, the 15 of June, is the day by when all American expatriates are expected to have their US tax returns in – and for this reason, the Democrats Abroad this year has declared it is also the day they are urging their members to call their members of Congress in the US, and urge them to support a change to a residence-based tax system.
“On Thursday June 15th – the tax deadline for international filers – we strongly encourage you to join Democrats around the world [in picking up your phone to ask your representatives and senators for their support for Residency Based Taxation,” the organisation says, in a statement on its website.
“CallStorms only work if a massive number of calls are generated, literally disrupting the day. We need your help to storm Capitol Hill on June 15th.
“The time is now to generate awareness, and build support for RBT.”
Official expat arm of Democrats
The Democrats Abroad is the official representative agency for members of the US Democratic Party who live permanently or temporarily abroad, as well as for independent expatriates who are interested in maintaining a foothold in the US political system. The organisation enjoys state-level recognition by the Democratic National Committee, and has local committees in 42 countries, including the UK, Hong Kong, Thailand, Italy and Singapore, with members living in more than 190 countries around the world.
Its campaign for residence-based taxation has its origins in the fact that the US is the only major country – indeed, one of just two countries in the world, the other being Eritrea, American tax experts frequently point out – which taxes its citizens on their world-wide income on the basis of their being US citizens, no matter how long they might live abroad.
Even if they pay tax in their current country of residence, American expats are expected to file a tax return, and although double-tax treaties may ensure they aren’t taxed for the same thing twice, they may owe tax to the US authorities if some portion of their income isn’t taxed locally.
This system has been in place since the Revenue Act of 1913 was enacted, the Democrats Abroad notes in an explanation on its website.
The way American expats are taxed has become an issue recently, though, because the Foreign Account Tax Compliance Act, which was signed into law in 2010, has enabled the US to crack down on Americans who hold money and other assets overseas, which hadn’t been the case previously. FATCA has made life so difficult for American expats that, as reported, the numbers who have sought to renounce their citizenships have soared, even though the cost of renouncing has also gone up .
The Democrats Abroad isn’t alone in its campaign to get the US to move to a residence-based tax system; the American Citizens Abroad has also been lobbying for a change, as have other groups, ahead of the Trump Administration’s avowed plans to reform the US tax system.
In May, the ACA was one of several organisations that co-signed a letter to the Congress and the White House urging a move to RBT; the other co-signees included the Asia Pacific Council of American Chambers of Commerce, the Swiss-American Chamber of Commerce, AmCham Abu Dhabi, Americans for Tax Reform and US Wheat Associates.
Below is a sample script expat Democrats are invited to use when they call their congressional representatives.
In its materials, the Democrats Abroad reminds its members to “make sure your calls are courteous and that you thank staffers for their time”.
In a reference to a shooting which took place yesterday in a Washington, DC suburb, involving a gunman who opened fire on a group of Republican congressmen who had been practising for an annual charity baseball game, wounding four, the organisation suggests that “a few words of sympathy and well wishes” might also be the right thing to do.
The sample script:
Hello, my name is [name] and I am [Representative/Senator]’s constituent in [County, State]. [If calling a Representative: My ZIP code is [ZIP].]
I currently live in [city, country] and I am calling to ask [Representative/Senator] to support Residency Based Taxation. As you may know, the US is the only developed country that taxes its citizens on their worldwide income, even when those citizens live abroad and no matter how long they’ve lived abroad. That means I pay taxes in [country] where I live, and I file a tax return with the IRS every year. IRS tax forms for declaring foreign income are a lot more complicated, so besides being a nuisance, filing abroad is complex, costly, and very stressful.
I’m an ordinary US citizen. I moved to [country] to [be with my partner / be with my family / to take an exciting job / other]. I / my family cannot afford to be double-taxed. I’m / we’re not wealthy, with lots of disposable income to spend on tax preparation.
I value my US citizenship. I vote in every election. I pay attention to US politics. But I don’t think it’s fair that I am taxed in [country of residence] as well as in the US on income I earn abroad. The current law is costly, punitive, and unfair, causing many Americans overseas to consider renouncing US citizenship. I hope that shocks you because it shocks me.
That is why I’m asking [Representative/Senator] to change the US tax laws from Citizenship Based Taxation to Residency Based Taxation.