I began my tax preparation this year with my mind on President Obama looking to tax the wealthiest Americans a bit more to pay for a reduction in taxes on the rest of us. For expatriates, taxes are a sore subject. American expatriates, unlike citizens of just about any other country, are required to file tax returns no matter where we live in the world, an we have to claim back foreign taxes, as either a credit or a deduction. The notion behind all of this is that you can’t simply move off shore to avoid paying U.S. taxes. Fair enough, except that of course you don’t get to avail yourself of nearly any of the services you are paying for.
The way this works is that we get a deduction for housing and a credit for tax paid. In the end the idea is still that if you’re not working in the U.S., you shouldn’t have to really pay much. The deduction for housing was limited based on where you lived. This year, we in Europe are treated to an extra insult. Because the American dollar did so poorly overall in 2008, we all expected that the Department of Treasury would adjust the housing limit accordingly – but they didn’t. That amounts to about a 10% additional tax on us. And of course there are penalties for not prepaying based on the currency fluctuation.
I might not mind so much, except that as an American citizen I still cannot buy mutual funds, just because I live outside the U.S. There are many other services I don’t get, that perhaps I would enjoy. Like courtesy at the American consulate in Zurich.