Tom Harkin: “Senator Stabenow and I are introducing legislation similar to the measure we proposed in the last Congress to…”

“Senator Stabenow and I are introducing legislation similar to the measure we proposed in the last Congress to effectively prevent very rich individuals from reducing their taxes by renouncing the U.S. citizenship. It is a companion to a measure introduced by Congressman Charles Rangel in 2002. The Joint Tax Committee estimated that it will raise $656 million over 10 years from a very few people who I call Benedict Arnolds. These people turn their back on their country which provided so well for then, in order to avoid paying their fair share of U.S. taxes. Under current law, there are special rules that apply to these former citizens that appear to recover funds lost to the Treasury. However, they are full of holes. Under the current regime, for 10 years after a U.S. citizen renounces his or her citizenship with a principal purpose of avoiding U.S. taxes, the person is taxed at the rates that would have applied had he or she remained a citizen. In reality, the tax is nominally on a broader base of income and on more types of transactions. In addition, if the expatriate dies within 10 years of the expatriation, more types of assets are included in his or her estate. Unfortunately, the reality is that taxes are very often not paid. The reality is that once a person has expatriated and removed U.S. assets from U.S. jurisdiction, it is extremely difficult to enforce the current rules, particularly for an entire decade after the citizenship is renounced.”