Beyond Boris Johnson: Number of 'expatriates' dropping US citizenship soars

The British foreign minister is one of thousands of dual citizens who renounced US citizenship in 2016. What's driving the surge in expatriation?

First Look

After years of promises, British foreign minister and former mayor of London Boris Johnson has finally renounced his US citizenship. He’s far from alone, it turns out.

On Thursday, the US Treasury published its quarterly list of Americans who gave up their citizenship. In 2016, 5,411 people decided to “expatriate.” That’s a 26 percent increase over 2015 and a 58 percent jump from 2014. And the trend looks set to grow.

Why? While concerns about President Trump and the future of US democracy had many Americans – including celebrities like Barbra Streisand and Lena Dunham – saying they would leave the country if he won, Americans abroad are likely to have more pragmatic reasons: namely, taxes.

“We have not been contacted by anyone saying that they wanted to give up their citizenship because Trump won the election,” Ryan Dunn, a lawyer with Andrew Mitchel LLC, told The Washington Post.

The United States is one of just two countries that requires non-resident citizens to pay taxes (Eritrea is the other). The policy is a legacy of the Civil War, The Washington Post reported: The Revenue Act of 1862 meant that men who fled the US to avoid joining the Union army were still contributing to the war effort financially.

But for decades, no one was really checking to make sure Americans abroad were actually filing tax returns in the US. That all changed in 2010, following allegations that UBS, a Swiss bank, helped Americans hide financial information from the Internal Revenue Service (IRS). Congress introduced a new piece of legislation, the Foreign Account Tax Compliance Act (FATCA), that demanded that foreign financial institutions check whether an account holder is a US citizen or permanent resident.

"Foreign banks are basically acting as the police to flush these U.S. citizens out of the bushes so the IRS can see them," Andrew Mitchel, a Connecticut tax attorney who has been tracking the number of expatriations since FATCA was enacted, told the Daily Record. "That's when people start to realize, 'Oh, I'm not filing and I should be filing.' "

The law is projected to raise $8.7 billion in tax revenue over 10 years, the Daily Record reported – and some Americans may be renouncing their citizenship to get away from these burdens, according to Dean Zerbe, a former senior counsel to the Senate Finance Committee who is now national managing director for Alliantgroup.

"We're fairly expensive in the tax code in terms of what we tax," he told the Daily Record. "I think for a lot of folks, it's gotten them to revisit where they are in terms of citizenship status."

Mr. Johnson, for instance, objected to the large tax bill he found himself saddled with when he sold his London house. He settled the bill in 2015, but the desire to avoid future payments may have played a role in his eventual decision to expatriate.

But some say it’s the administrative complications created by FATCA that really have Americans reconsidering their citizenship.

“Think lots of extra forms that have to be filed even by citizens who aren't wealthy by any standard,” explained Peter Spiro, a Temple University law professor and author of “At Home in Two Countries: The Past and Future of Dual Citizenship,” to The Washington Post. “Americans abroad used to be able to do their taxes just like Americans at home. Now they have to hire expensive accountants.”

Even everyday banking tasks become more complicated, said Marylouise Serrato, executive director of American Citizens Abroad, an advocacy group. Foreign financial institutions can be less than eager to allow US citizens to open accounts since they can be held responsible if US citizens fail to file their taxes.

"Many are [expatriating] because, simply, their lives and livelihoods are overseas and they can't function any more. What do you do when you can no longer bank your paycheck?" Ms. Serrato told the Daily Record. "This narrative that Americans don't want to pay their taxes, that's not a fair representation of the situation."

Though the number of people renouncing their citizenship continues to increase – nearly doubling in the final quarter of 2016 from the same period in 2015, according to US News & World Report – it is far exceeded by the numbers of people who become naturalized US citizens each year. In the 2015 fiscal year alone, there were 729,995 naturalized citizens, according to US Citizenship and Immigration Services.

That all contributes to a sense that the global image of the US is, while complicated, still fairly positive, as The Christian Science Monitor reported on Thursday:

For all its perceived arrogance that has so often enraged the globe – moving unilaterally on the 2003 invasion of Iraq, engaging in drone warfare despite an international outcry, supporting dictatorships in the interests of stability or the economy, and asserting its commitment to human rights abroad despite failures in improving race relations and equality at home – the US has always stood as a beacon that many in the world want to see shine.

This report contains material from Reuters.