Financial (Dis)Incentives

There are many reasons why people live as expats.  Career.  Military.  Education.  Love.  Wanderlust.  Refuge.  But there's another one, too:  Finance.

For example, we've all heard about people who retire to countries with lower costs of living to stretch their retirement funds further.  In this regard, finance can be a strong incentive to pull up roots and resettle abroad.

But finance can have a different sort of impact on expats, too, and not one that's positive.  Especially for Americans living abroad.

The New York Times ran an article back in December of 2006 about changes to US tax law that resulted in higher taxes for US expats.  These changes subsequently led to an increase in the number of American expats renouncing their citizenship.  According to that article, the US is the only developed nation that taxes its citizens based on citizenship rather than residency - effectively requiring Americans abroad to pay taxes twice: once to their country of residence and once again to the US.

Even if your income falls below the threshold triggering an actual tax payment, Americans abroad still must file the paperwork year after year.

This spring, the New York Times once more ran an article on this topic.  The trend of Americans giving up their citizenship continues, with numbers growing each year.  And this time the complaints are not limited to tax requirements.  Apparently the Patriot Act, meant to keep terrorists and criminals from opening US bank accounts, is also costing Americans abroad without a permanent US address to lose their accounts, too.

I didn't personally experience this problem.  While abroad, I've always had a permanent US address available for situations just like this.  But what if we sold our US home and didn't have a family member willing to let us use their address?  I would not be happy to lose the right to maintain a US bank account.  And I certainly wouldn't be happy to be lumped in with terrorists and criminals!

What's your experience, financially, with being an expat - American or otherwise?  If the financial issues / loss of rights were sufficiently frustrating, would you be moved to relinquish your citizenship of birth?  How big a disincentive would it take for you to take such a drastic step?  Or would you?  For some of us, citizenship is merely a label, but for others of us it strikes right to the core of our identity.

Personally, I can't say which way I would go.  I guess I haven't reached the point of sufficient angst yet where I would be forced to make that choice.  I hope I never am.