Americans abroad need to save for retirement, too. It’s not easy.
“We’re treated like second-class citizens.”
— Karen from Wisconsin
Dear Congress,
My name is Karen and I am a Wisconsin voter. I am a U.S.-born citizen who has been living in Switzerland for the past 26 years. I am a dual citizen, have two dual-citizen children and have worked full-time since the time that I have arrived.
For the first 10 years I lived abroad the dollar was stronger than most European currencies, so I was always exempt from a U.S. tax burden. With time, my salary increased and for the last 15 years or so the dollar’s value relative to the Swiss Franc nose-dived. The foreign earned income exemption would cover almost everyone in low-cost countries. However, the tax burden becomes very expensive for people earning a middle-class salary in a high-cost country.
I am active in Democrats Abroad and we have had calls with representatives in the past explaining so many of the points that the other testimonials here have called out:
Difficulty opening certain kinds of savings accounts (mutual funds) due to the cumbersome reporting the banks have to do.
The expense of hiring an accountant to do the 1040 and calculate the tax burden.
The dinosaur method the IRS uses with letters, which with the low postage they apply, takes a month to get to Europe and then the amount due has already increased. If overpaid, you are sent a check, which most banks charge at least a 30 Swiss franc fee to deposit or cash. Electronic payments via IBAN are not possible and to pay a small balance with a credit card there is a charge.
The DA calls with representatives were interesting because there were members from Australia, Switzerland, Singapore, Japan and we mentioned clearly that a reasonable salary is consistently higher than the exemption. This amount is then taxed in the very high brackets—why?
When I arrived, I had no difficulty opening bank accounts and my husband and I had no difficulty getting a mortgage. Now, if I choose to sell the property the United States would tax the profit at a very high rate. Why? That is an investment made in a foreign country, where it is already taxed.
When speaking with other expats, I have now come to discover that my pension in Switzerland, when paid out to me upon retirement, will be taxed at an even higher rate than income [because the foreign earned income exclusion only applies to earned income]! With rising costs of healthcare everywhere, we need these funds. We have worked for it. Why should the U.S. tax my Swiss pension at all?
In many ways this burden is a typical example of how a few dishonest people have given all of us who live abroad for good reasons a bad reputation. Some rich Americans living in the U.S. opened secret accounts in Switzerland and other countries with strong bank secrecy regulations to avoid paying wealth taxes in the USA.
But people like me need bank accounts, we need to save for retirement, possibly save for our children’s education and we are denied a lot of access and treated like second-class citizens because of where we were born. Many people I have met feel that they will be forced to give up their citizenships. We are honest, hard-working citizens who happen to reside in other countries. We vote. Many of us do not want to give up our citizenship. We may want to return someday.
Please end this double taxation!
Sincerely,
Karen
