Until recently, it wasn’t common for Americans to renounce their citizenship. With an estimated waiting list of 7-11 years, becoming an American citizen is tough because the demand is so high.
The ultra-wealthy don’t seem to feel that way, considering that they are leaving in droves.
How Many People Are Renouncing Their American Citizenship?
The number of Americans who choose to renounce their citizenship is at an all-time high. From 1998-2009, less than 1,000 citizens renounced, but from 2010 on (with the exception of 2012), over 1,000 citizens are leaving their homeland behind. In 2020, that number reached 6,707.
Search terms regarding how Americans can renounce their U.S. passports are up by 140%, even in the wake of another COVID strain. It’s unlikely the trend will slow down anytime soon.
The coronavirus has decreased the number of people renouncing slightly, but the ultra-wealthy aren’t amongst the citizens who chose to rethink their moving plans due to lack of funds. In fact, wealthy people are leaving specifically to reduce their current and potential tax burden.
The American Tax Burden: Not Just Affecting The Wealthy
The United States and Eritrea, a North-Eastern African country, are the only two countries on the planet that tax its citizens based on citizenship, not residency. In the United States, a remote worker could be taxed once in their country of residence and again for being a US citizen.
While it’s possible to eliminate double taxation, it doesn’t always work out that way. If a remote worker doesn’t have the funds to hire a personal accountant, they’re almost guaranteed to pay income tax (as an employee) or self-employed tax twice regardless of tax bracket.
On top of that, new tax and estate measures proposed by the Biden administration could accelerate the trend for renouncement, especially for the ultra-wealthy.
The Wealthy Leave Primarily To Avoid Taxation
The vast majority of people who renounce their American citizenship are tech billionaires who are seeking to avoid tax liability. Although some people qualify as “accidental Americans,” or people born in America but leave shortly after, they’re more of an anomaly.
