Wealthy Americans Are Renouncing Citizenship In Record Numbers

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Varun Hukeri General Assignment & Analysis Reporter
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The number of Americans who renounced their citizenship hit a record high in 2020 and has continued to increase in 2021.

Andrew Mitchel, an international tax attorney who tracks the numbers, found there were 6,707 individuals who renounced their U.S. citizenship in favor of a foreign country in 2020, Axios first reported Thursday. That number is a 237% increase compared to 2019 and considerably higher than any year dating back to 1998.

The latest figures this year, compiled by an Internal Revenue Service (IRS) quarterly registry, found there were 734 individuals who renounced their U.S. citizenship in the second quarter of 2021. That number is a roughly 200% increase compared to the first quarter.

WASHINGTON, DC - JULY 22: The Internal Revenue Service Building is shown July 22, 2013 in Washington, DC. Due to current shortfalls in the federal budget, all Internal Revenue Service operations are closed today, with another furlough day scheduled for next month. (Photo by Win McNamee/Getty Images)

The Internal Revenue Service Building is shown in Washington, DC (Win McNamee/Getty Images)

Individuals who renounce their U.S. citizenship tend to be wealthy and are often aiming to reduce their tax burden, according to Axios. Ashkan Yekrangi, an immigration attorney, told the outlet “the bulk of cases are individuals trying to avoid tax liability.”

The IRS list of people who have renounced their citizenship or permanent residency, for example, only includes people with global financial assets of more than $2 million. (RELATED: Biden Proposes Ballooning IRS With 87,000 More Employees To Deflate Tax Fraud)

Many of the wealthy Americans seeking to renounce their citizenship come from the tech industry. Former Google CEO Eric Schmidt reportedly applied in November 2020 to become a citizen of Cyprus, according to Recode.

President Joe Biden’s proposed changes to the tax code could further accelerate this trend. The administration’s economic agenda includes undoing former President Donald Trump’s 2017 tax reform and raising the top corporate tax rate from 21% to 28%. Biden has also proposed raising the top capital gains tax to 43.4% for Americans making more than $1 million a year.

The number of Americans renouncing their citizenship began increasing in 2010 after Congress passed the Foreign Tax Compliance Act (FATCA), according to Axios. The law made reporting requirements and penalties more stringent for people who choose to expatriate. The U.S. is one of two countries that taxes people based on their citizenship rather than their residency.

Washington, UNITED STATES: This 24 March, 2006 photo shows US Internal Revenue Service (IRS) tax forms. April 15 marks the date for US taxpayers to file their returns. AFP PHOTO/Karen BLEIER (Photo credit should read KAREN BLEIER/AFP via Getty Images)

Internal Revenue Service (IRS) tax forms (Karen Bleier/AFP via Getty Images)

FACTA “kind of flushed people out of the bushes,” Mitchel said, according to Axios. He added the law “effectively deputized all the banks around the world to tattletale on U.S. citizens.”

David Lesperance, an international tax attorney in Poland who helps people renounce their U.S. citizenship, said renunciation has become considerably more difficult as many U.S. embassies and consulates remain closed due to COVID-19.

“There are probably 20,000 or 30,000 people who want to do this, but they can’t get the appointment,” he told Axios. “There’s not a peak demand — the system’s capacity has peaked.”

But the State Department warns that renunciation of U.S. citizenship “may have no effect” on an individual’s tax obligations. The department also notes an individual could be barred from entering the U.S. if it’s determined their renunciation “is motivated by tax avoidance purposes.”