Taxation and Representation

Many people have asked me what it’s like living in Switzerland, and how life differs from that of outside the United States. Some of the big differences are how one interacts with the U.S. government itself, and with the States. Let’s discuss two examples over the next few days and whether or not they are fair, the first one being everyone’s favorite subject, taxes.

Here’s one way things don’t change: no matter where you live in the world, if you are a U.S. citizen who receives any sort of income above a very minimal amount, you have to file a tax return. U.S. stands alone in this nearly unique way among other governments. In most other cases you only file taxes (if required at all) in the country in which you reside. However, just because one has to fill out paperwork doesn’t mean one ends up paying the same taxes one would pay as a resident.

The U.S. philosophy is basically this: if you’re paying taxes somewhere else, and you’re not actually working in America, then you can reduce your tax burden by the amount paid. That means that if you never travel to America and the tax rate is higher than what you would pay as a U.S. resident, you pay nothing. On the other hand, if you do visit and work during that visit, then that money is subject to tax. And if the American tax rate is higher than the country in which you reside, you end up paying the difference. It’s more complicated than that (there are housing credits, limits on those credits, an income exclusion, etc), but that’s the jist.

Is any of this easy? No. The amount of paperwork expatriates often have to complete for taxes can measure into the kilograms, just for simple returns. In addition, different tax systems may cause substantial amounts of confusion due to when obligations occur, and when tax bills are finalized, requiring substantial revision over time. And don’t even get me started if you have a more complex situation, like say stock options, whose value has to be accounted for between the time they were granted and the amount of time you’ve spent in the states.

Is this fair? It says that as a U.S. citizen you still have a societal obligation no matter where you live. If you are a citizen and have never lived in the U.S., it may seem unfair. But the government is supposed to be there to protect you if you get into trouble; and you also get to vote for your senator, congressman, and in the presidential race. Certainly to me this seems fair. Citizenship has its responsibilities. In Switzerland, for instance, male citizens must serve in the armed service. It would be unfair if expatriates had to pay a higher rate than other citizens. Depending on your point of view, that has in part taken place, but not to the point that it has impacted me personally.

The IRS has attempted to simplify things somewhat, and you can see their attempt here.

Happy Swiss Confederation Day

On this happy occasion, let us take a few minutes to discuss some of the benefits of living in Switzerland. To start with, people are polite to a fault. Our family has been treated with the utmost respect the entire time we have been here. In our town, people greet each other in passing with Greuzi, and they say good-bye when they part.

While the trains run with well known precision, what is not so known is that you can get virtually anywhere in Switzerland through the extensive network of not only trains but also buses. The trains are also kept clean not only by the SBB, but also by the passengers themselves. One need look only so far as the neighboring countries to understand that it is hard to keep the transit system clean, and easy to create a mess. The Swiss have worked hard. Most of what we need is close at hand. That includes two supermarkets, three bakeries, day care, two post offices, several banks, a pool.

Joanna enjoys swimming, and for a very reasonable amount she can do so nearly every day of the year. How reasonable? What we pay in a year here wouldn’t cover the cost of the service in California for a month. But don’t get the impression that Switzerland is a socialist state, for it is perhaps the least socialist state in Europe. We do not have a social healthcare system, but we do pay a very reasonable fee per month for insurance. When we want to see a doctor, we see one. Not a nurse, but a doctor.

While I have come to realize that there is no perfect place, Switzerland is even attempting to do away with some of the things I would think of as flaws. Smoking here has dropped dramatically, even in the time we’ve lived here.

So here’s to you, Switzerland! Maybe next year I’ll recite this auf Deutsch!

The Do Nothing Presidency

Smoke Stack

Yesterday, the Bush Administration released a long awaited report by the Environmental Protection Agency, that says that Carbon Dioxide can and should be regulated. One would think this a remarkable departure for an administration that has done everything within its power to destroy the environment, through drilling in fragile environmental areas, unmitigated logging, and the failure to protect endangered species. There’s a catch: the Supreme Court ordered the EPA to develop the report, and in releasing it, in the same breath, the administration argued that regulation by the EPA to protect our children will hurt business and industrial growth.

Let’s review our tally for this administration:

Housing — Failure to properly regulate the housing market has led to a massive series of bank failures.
The Energy Market — we are suffering from inflation due to a massive increase in oil prices, which itself is in part due to an inability of Americans to conserve. The administration has done absolutely nothing to reduce consumption, or for that matter offer fuel alternatives. Instead, they’ve argued that drilling in wilderness refuges will offer some form of relief, a claim that is disputed by every expert in the field, because it will offer no short term relief, while medium and long term relief are by no means at all assured.
Security— having gone to war twice and wasted billions of dollars on meaningless programs, the administration has managed to alienate America from the rest of the world, reducing people’s desires to visit, impacting tourism, and reducing our national credibility. At the same time the Taliban has rebuilt itself, and we’ve lost our allies in Pakistan and now, seemingly Iraq (not that Prime Minister Maliki was every clearly an ally).
Education— No Child Left Behind has meant that our children haven’t gone forward as a group. Our public education system remains in a shambles due to lack of incentives for good teachers, buildings that are falling apart, and a general willingness by this administration to divert funds to religious programs.
Public Transportation— our skies are more dangerous than they have been since the creation of the FAA. More runway incursions, more close calls in the air, disgruntled workforces, and disgruntled passengers have left our air transportation system in a mess, while we’ve invested nearly nothing in ground public transport.
Public Welfare— with a remarkably lame response to Hurricane Katrina, the administration demonstrated that they could not be trusted with emergency crisis management.

In short, they did nothing except collect pay checks. Perhaps Americans will pay more attention to our civic responsibilities the next time we hand someone the keys.

Voting Machines: Thank Heavens for Academia

vote button Often times it is said that the purpose of academic research is to seek the truth, no matter where it leads. The purpose of industry representatives is often to obscure the truths they do not like. Such apparently was the case at a recent hearing of the Texas House of Representatives’ Committee on Elections. These are the guys who are nominally supposed to ensure that each citizen of Texas gets an opportunity to vote, and that his or her vote is counted. The committee provides oversight and legislation for electronic voting.

How secure is your electronic vote, compared to a paper ballet? Can you have an electronic hanging chad? A group of researchers have spent a fair amount of time answering that very question. Drs Ed Felton & Dan Wallach, as well as others, have looked at numerous different voting systems, and found all sorts of little problems. For instance, some voting machines are susceptible to virii, and if they get it they can give it to their peers. That’s not a problem, according to the manufacturers’ spokesmen. But who are we to believe? An academician whose purpose is to advance the state of the art and find truths, or a spokesman, whose purpose is to obscure them?

There are mistakes made in many, if not all elections and surveys. Here are just a few questions:

What is an acceptable rate of error? As 2000 demonstrated, even a hand count of paper ballots can have problem.
Rather than prevaricate, why shouldn’t the vendors of these voting machines fix the problems that have been reported?
What sort of regulations are appropriate? The spokesmen all but demanded a common standard in as much as they complained that there was none.

Conveniently Dr. Wallach has an answer to that last question. His testimony recommends just that.

For what it’s worth, as an expatriate I do not expect to use a voting machine for quite some time, but rather a paper ballot.

How the U.S. Bureaucracy Breaks Down Abroad

There’s a lot you don’t think about when you live in America. Taxes are what they are. You can usually even do them yourself. If you want a passport, you go to the post office and apply. If you want to donate to a charity you go to their web page and donate. But if you’re not a U.S. resident, things get a little more tricky. For one thing, that donation you wanted to make has a form that only lists states without an option for countries. This happened to me when Bill Cosby called for everyone to donate $8 to the U.S. National Slavery Museum (although I notice that they’ve now fixed this little problem by moving to PayPal).

When a child is born normally you don’t need to do anything, except perhaps sign the Social Security application. For us it was another matter. We had to first get an international birth certificate, then get a foreign births registration, and then get a Social Security card and a passport. All of this was necessary for our taxes and for Joanna to be able to travel to the United States. As an American she has to enter the U.S. on a U.S. passport.

And of course anyone who has seen the Borne Identity thinks they know what the U.S. Consulate in Zürich looks like. Well surprise! It looks nothing like what you see in the movies. It’s a little hole in the wall with a very SMALL waiting room and no place to change the diaper of a four month old baby, which is how old she was when we did all of this.

But it got even sillier. We brought the required pictures for her, and the chargé d’affairres informed us that we couldn’t use pictures that were printed my handy dandy little Canon. Instead we had to go and get professional photos. And the hits just keep on coming. The picture of a new born child is not all that identifying.

And of course then there’s me. With the mad rush for passports thanks to inane policies of the Bush Administration, if I need to get a new passport, which I will soon, it means I will have to park it in Switzerland for whatever period of time it takes for that passport to make it all the way to the States, sit in some pile, and make it all the way back to Switzerland. Probably some weeks. This doesn’t seem like a lot, for most people, but Switzerland is a small country, and work sometimes requires me to travel.

You may like to invest your money in mutual funds. Hopefully that’s protected you from some of the downturn that has occurred lately. As expatriates, however, we are generally excluded from buying new mutual funds thanks to a lack of clarity as to how they are regulated outside of a state.

Want to use Quicken? Forget it. Quicken is not usable for foreign currencies, and so you end up doing kludges like treating foreign bank accounts as mutual funds with each unit priced in dollars. Did I mention that because we have foreign accounts we have to file yet more paperwork? Hopefully gnucash will be more usable in the future than it was in the past.

When we actually do come back to the States, we’ll have to deal with yet more paperwork to bring in our cars (if we can at all) and even some of that California wine we brought across.

The thing about paperwork is that perhaps in each instance there is a goal that someone could argue is legitimate. For instance, in my daughter’s case, the government is trying to protect against kidnapped children. But a picture really won’t help, and yet it’s required. And if they want one, they should make it easy for citizens to comply. The paperwork for bank accounts is meant to address tax evasion through offshore accounts. In the case where someone lives in the States, that makes sense. But does it really make sense for those of us who live abroad?

Well, as it turns out, many of us pay taxes to the United States even though we don’t live there. Yes, my daughter will be cursed with this when she is old enough, just because she is American. I don’t mind paying some taxes, actually. America is my home country. But I expect representation in return, and really all I want is civility out of our civil workers and some intelligence about when and how to apply rules that involve paperwork.