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DFW

(56,367 posts)
Fri Mar 6, 2020, 07:47 PM Mar 2020

It is time to end double taxation, once and for all

There are three countries in the world that do NOT recognize residence-based taxation. Eritrea, some other obscure African country that I have forgotten, and....the USA. The USA makes you file a US tax return no matter where you live.

Some people (usually with no clue) jump in and whine about fiendishly clever billionaires dodging taxes and living on yachts harbored off of the Caymans or Monte Carlo. There might even be one or two. But there SIX MILLION other Americans living abroad, many with menial jobs, such as teaching English in Cameroun (or whatever), and we all have the added expense of extra accountants and time lost to pay for.

Most countries have treaties with the USA to avoid double taxation. I found out the hard way that most foreign bureaucrats don't understand how these treaties work, and don't care. Time doesn't stand still just because some document was signed in 1962. Many new local tax laws were enacted since these treaties were signed. In Germany, I found out that the tax authorities have neither the time, nor the inclination, nor the competence to learn the intricacies of the double taxation treaty. "Parts of your income were source-taxed at 40% in the USA? Not our problem. You owe us 50% on the gross, and if all that leaves you with is 10%, too bad. We can't figure out that crazy treaty anyway." No? Then why the f*** did your country sign it?

I found exactly two, count 'em, Democratic politicians willing to actively try to bring the USA in line with the rest of the world except Eritrea (and Zamunda, or wherever the other one is). One was Russ Feingold of Wisconsin, who was cheated out of regaining his Senate seat in 2016. The other is Wendy Davis of Texas, who is running for US Congress, and is willing to seek relief for us, even though she is quite aware that she will be accused of pampering the two "billionayahs" instead of trying to help out the six million of us who are not. Texas women are nothing if not gutsy. Ann Richards, you are not forgotten.

When I moved to Geramny, I knew full well, I was moving from a place with a maxtax of 39.6% (now 37%) to a place whose maximum tax rate was an effective 50% (including "solidarity supplement" ), and one that kicked in at under $100,000 gross income--not like the USA where you have to make over $400K to reach the maxtax barrier. I took that into account, even though I get zero benefits from paying the extra money--no pension, no health care insurance at all, none of that "free" stuff that we are (incorrectly) told that all European countries "give" you. But OK, money isn't everything and being with my wife full time IS. Dealing with nasty, uncaring, ignorant bureaucrats and expensive international accountants (who never convince the bureaucrats anyway) is not part of the "less traveling-more free time" I envisaged when I moved over here full time.

Russ is out. Colin Allred, my Rep. from TX-32, told me he'd look into it, but ever since he got elected, total radio silence except for requests for money. I told him that due to his inaction on his promise, I had none to spare. Crickets anyway.

Help us Obiwendy Davis. You're our only hope!

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It is time to end double taxation, once and for all (Original Post) DFW Mar 2020 OP
Doesn't US have provisions that help, income exclusion and foreign tax credit. Hoyt Mar 2020 #1
If you are a permanent resident of the USA, there are some remedies DFW Mar 2020 #2
 

Hoyt

(54,770 posts)
1. Doesn't US have provisions that help, income exclusion and foreign tax credit.
Fri Mar 6, 2020, 08:32 PM
Mar 2020

Obviously you know better than me, but I thought there is some help so that you aren’t paying full tax rate here.

DFW

(56,367 posts)
2. If you are a permanent resident of the USA, there are some remedies
Fri Mar 6, 2020, 08:54 PM
Mar 2020

If you are a permanent resident of another country, as I am, you are at their mercy--again, as I am. Furthermore, all of my income is in the USA, so the Germans may not understand all of the mandatory taxation that some income is subject to (or choose not to).

Every year, they ask me if I have taken any distribution from my Roth IRA (I have not). I made the Roth conversion before I moved my residence here. That meant I paid my taxes on it up front at the time of conversion. Under US law, my tax obligation was paid in full. The Germans are hinting that they now want 50% of that, too, even though the double taxation treaty clearly states they are entitled to none of it. The treaty says that a US citizen resident in the USA, who is taxed on funds in the USA, cannot be taxed again on those same funds by Germany. Except that the Germans are saying, well we want 50% of it anyway, never mind that you paid your US taxes on it already.

Maybe they want me busking on the streets of Düsseldorf or searching for deposit return bottles in the trash at train stations, like so many Germans are already doing. Not everyone shares in the relative prosperity here. My wife is a retired German social worker, and worked all her professional life with people here who fell through the cracks. Their number is greater than most people imagine (or prefer to admit).

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