Double Taxation Just Got Worse

The United States is the only developed country that taxes it citizens while they are overseas. Americans abroad are also taxed in foreign countries where they reside. And it's gotten worse recently. President Bush signed into law a bill that sharply increases tax rates for Americans abroad with income of more than $82,400 a year. The legislation also increases taxes on employer-provided benefits like housing allowances.

But with new tax pressures facing American expatriates due to the new legislation enacted this year, international tax lawyers say they detect rising demand from citizens to renounce ties with the United States — "renunciants."

"The administrative costs of being an American and living outside the U.S. have gone up dramatically," said Marnin Michaels, a tax lawyer with Baker & McKenzie in Zurich.

See the article "More Americans abroad giving up citizenship for lower taxes," in the Intl Herald Tribune.

Bottom Line: If you tax something, you get less of it. If you subsidize something, you get more of it.