Two bills in the US Congress that may be of
great importance to Americans living here

Perhaps it’s good news or perhaps it’s bad news that arises amidst the bad news of a US Congress with a largely fanatic majority and a largely anachronistic minority, both of which appear to be mostly ineffective. Probably it’s a mixture of both and probably nothing will change, but US citizens ought to pay attention and perhaps contact the senators and representatives from the states and districts from whence they hail.

The United States is one of very few countries that taxes on the basis of citizenship rather than residency within the country. We could argue back and forth the reason for this and the justice of that scheme, but in any case politicians from both major parties have for years legislated to enforce it against those who would hide money from the Internal Revenue Service in foreign jurisdictions. Or is it about US banks claiming dibs on the accounts of Americans, compelling them to use money laundering centers in states like Nevada instead of in countries like Panama?

One of the enforcement laws is the Foreign Account Tax Compliance Act — FATCA — which in general compels Americans with $10,000 or more in an overseas bank or brokerage account, or invested in a corporation such as the ones in which many upscale Panamanian homes are held, to report this to Uncle Sam. The penalties for failure to comply can be draconian and there are non-disclosure penalties for banks and brokerages with US citizen clients as well. A lot of banks use the FATCA requirements as an excuse to reject all American depositors other than the ultra-rich ones. It’s now hard for a US citizen to get a bank account in many countries, including Panama. Moreover, foreign citizens married to Americans in effect have to reveal their financial affairs to US authorities due to the requirements of FATCA and other US tax laws. These requirements have led thousands of people to renounce US citizenship.

A lot of politicians in Washington have temporized, have been driven by stereotypes or have entirely ignored the issues due to the perception that those who live overseas but vote in their states or districts are too few to affect their own electoral prospects. In the Republican ranks there are those who like any and all tax dodges for the rich and would thus repeal FATCA altogether. On both the Democratic and Republican sides of the aisle there are those relatively few who would switch from citizenship to residency as the basis for income taxation. And then there is the “safe harbor” proposal for which Democrats Abroad has been working for several years. It would make FATCA inapplicable to those who live in the countries where they have accounts. Few of the Americans for whom Panama is a place to hide money actually live here. The US citizens who live here are rarely in Panama for tax reasons.

Thus there is Representative Carolyn Maloney’s exemption from FATCA’s application to accounts in Panama (or any other foreign jurisdiction) held by people who live in Panama (or another country in which they hold accounts). It doesn’t mean that the very rich don’t have to declare their interest and dividend income and doesn’t change the citizenship basis for taxation. It just spares most American citizens living abroad and the banks and brokerages in which they have accounts from a lot of paperwork and some potentially onerous penalties for minor infractions. Maloney is a Democrat from New York with a fair number of foreign-born residents in her district and more than the average number of absentee constituents who cast their ballots for or against her from abroad. She’s one of the few members of Congress who has paid a lot of attention to the six to eight million Americans living outside the USA. Her proposed Overseas Americans Financial Access Act, which follows the 2015 recommendation of the IRS Taxpayer Advocate Service, would make life easier for Americans living in Panama. It’s worth a few calls or emails to Congress to boost this proposal.

Then there is Alabama Representative Mike Rogers and his Border Wall Funding Act of 2017, enrolled as HR 1813. This is an act of financial aggression aimed at all Latin American and Caribbean countries, said to be for the purpose of discouraging “illegal aliens” and raising funds to build Donald Trump’s wall along the Mexican border.

The argument is that people come to the United States from Latin America and the Caribbean to work and send money back to families in their countries of origin. In a lot of countries such remittances are an important source of financial sustenance for many families. Thus Rogers, one of those Republicans who likes to raise taxes, would impose a two percent tax on all money transfers from the United States to anywhere in Latin America or the Caribbean.

There is no practical, legal and fair way to limit this tax to just foreign citizens in the USA, to just those foreigners who are in the United States without proper documents, or to just the services like Western Union and MoneyGram. There are laws against discrimination on the basis of national origin — which were never all that popular with Rogers’s white Alabama constituents to begin with. To shut down transfers through the most popular services would move them over to ATMs, PayPal, bitcoin operations or other alternatives. It’s also not practical to restrict the tax to only certain classes of people on the receiving end.

What it all means is a tax on all money transfers, including from Americans in the USA to Americans in Panama. It would be a tax on electronic commerce of all kinds, including the donations of readers in the USA to The Panama News.

The Border Wall Funding Act is both malicious and impractical. It would make life more expensive for US citizens — and the Panamanian relatives of US citizens — living in Panama. It would require a new layer of federal bureaucracy to enforce. It would impede small businesses in both Panama and the United States. It’s a bad idea, bad enough that US citizens living in Panama should make sure to be registered to vote back in the places of last residence in the States and contact the senators and representatives from these places to object to this.

~ ~ ~

These announcements are interactive. Click on them for more information.