New campaign aims to end citizenship-based taxation for Americans abroad

American citizens living abroad have launched a new global campaign to end unjust discrimination against U.S. citizens. Tax Fairness for Americans Abroad, a non-partisan organization, aims to fight for residence-based taxation for the estimated 9 million Americans living outside the country. The campaign was inspired by Fabien Lehagre, president of the Association of Accidental Americans (AAA), and is supported by individual donations.

Lehagre told Expats.cz that "the term Accidental American refers to citizens who are American citizens by birthright, but have little or no contact with the U.S. These people have never lived, worked or studied there, and have no U.S. social security number."

“Our mission is to free Americans abroad from discrimination by fighting for residence-based taxation, which is the law of the land in nearly every other country in the world,” said Brandon Mitchener, executive director of Tax Fairness for Americans Abroad.

“American citizens should not have to renounce their U.S. citizenship in order to avoid discrimination, double-taxation, and everyday hassles just for being an American who chooses to live abroad,” Mitchener said.

"The U.S. and Eritrea are the only two countries in the world basing their tax systems on citizenship rather than residency," Lehagre told us.

Expats.cz also reached out to Mitchener to ask him whether he thought it was fair for American citizens to pay thousands of dollars to renounce their citizenship. 

“Of course not! The AAA recently forced the State Department to agree to reduce the fee back to its original level of USD 450 (CZK 10,400). The State Department has not done this yet but has said it will. This is a good example that change is possible if enough people make enough noise about a just cause. We certainly have that,” he told us.

Tax Fairness for Americans Abroad represents both ordinary Americans and “accidental” Americans who were born in the U.S. but only lived there as young children, or were born to American parents abroad. It intends to collect and share stories of expatriate Americans’ experience with citizenship-based taxation (CBT) and lobby for changes in U.S. law and regulations.

The tax and financial discrimination against Americans abroad is a result of the 19th-century policy of CBT, which taxes Americans on their worldwide income – even if they already declare income in the country where they live. This complex and burdensome system requires Americans living abroad to navigate both the U.S. tax code and the tax laws of their country of residence. This often leads to expensive professional tax advice and high compliance costs, with little or no U.S. tax liability at the end of the year.

“Being American should be a source of pride,” said Lehagre, who was born and lived in California as an infant. “Unfortunately, U.S. legislation and regulations have made being American a financial nightmare for millions of ‘accidental Americans’ living in other countries,” he added. 

Moreover, many non-U.S. financial institutions discriminate against Americans due to uniquely American compliance requirements, such as the Foreign Account Tax Compliance Act (FATCA) and Report of Foreign Bank and Financial Accounts (FBAR).

The FBAR requirements, arguably, discriminate against Americans who do not live abroad, Lehagre tells us. These regulations impose excessive reporting and punishments for non-compliance, which should not apply to accounts in American expatriates’ countries of residence, he continues.

For long-term American residents abroad, U.S. bank and savings accounts are considered “foreign” financial accounts. Tax Fairness for Americans Abroad plans to call on Congress and the U.S. Treasury to ensure that Americans living abroad are treated fairly and not as second-class citizens simply because of their choice to live outside the country.

The campaign has already received support from more than 1,300 individual Americans abroad, with small donations averaging USD 65 (CZK 1,500). The organization hopes to bring attention to the issue of tax and financial discrimination against Americans living abroad and work towards a more fair and equitable system for all citizens, regardless of where they choose to reside.