The virtuous expatriate looks for a home state

One of our neighbors is departing the Land of the Deplorables (TM) for Canada (folks protest Trump’s election and the country’s newfound hostility to non-whites by moving to our yet-whiter northern neighbor rather than to, e.g., Mexico?). She has been upset for more than a year by Donald Trump’s collusion with Russia, his lack of respect for women who were paid to have sex, and his stated passion for enforcing U.S. immigration laws. The tipping point for her was an attractive job offer from a Canadian employer.

She’ll still be a U.S. citizen, but she doesn’t want to be a Massachusetts citizen any longer. Write-in votes here won’t help advance her passion for higher taxes and an expanded government. “I want to choose a state where my vote matters,” she noted. I suggested Michigan or New Hampshire, the states that were closest in the 2016 Presidential Election. “No,” she replied. “It has to be a state that is tax-free.” (Michigan imposes a 4.25 percent income tax; New Hampshire is widely believed to be tax-free, but that’s only for W-2 income; dividends and interest are taxed at 5 percent)

15 thoughts on “The virtuous expatriate looks for a home state

  1. Wait! She wants to vote on where my money goes while she pays no money? She sounds like a liberal.

  2. Mark, expats pay federal income taxes. They may also have to pay FICA if they’re self-employed. However, there’s a Foreign Earned Income Exclusion which means that you only start paying taxes on income above c. $104,000. See for a decent summary.

    The US is one of only two countries in the world that requires expats to pay income taxes, along with Eritrea. However, to the best of my knowledge _many_ countries allow expats to vote in some or all elections. That’s part of what being a citizen of a country means for countries with elections.

  3. Is she single? If married, is the whole family moving with her or just the husband? If the husband is moving with her too, I feel sorry for him. But maybe not. Is the divorce system better in Canada than it is in USA for the husband to rip the divorce settlement benefit for himself?

    I’m always amazed how some people are tripped off like this so quickly. Trump will be not be around any more in 2 or 6 years. That’s a small fraction of a time for someone to use as an execute to make such a radical life change. But then again, I think her motivation is more about the “attractive job offer from a Canadian employer” and far less about Trump. She is playing both the victim and in-charge game to make a pointless point.

  4. What she wants to do is voter fraud and tax evasion.

    Here’s a question: is it more virtuous to keep your mouth shut or to turn her in?

  5. The comment above is wrong about only Eritrea along with the US being the only countries to tax worldwide income. Lots of countries do. I hate to say anything in favor of US tax laws but taxing worldwide income is probably the fairest system of taxation because it prevents sleazy dodges like not claiming income earned overseas through sham corporations or pretending to be an expat or whatever. Sometimes as with any legal rule it works in weird ways — ask Boris Johnson. As for this woman, my guess is she will not be missed & America will do ok without her. So adios. Or should i say au revoir?

  6. How exactly does she plan to establish residency in a low-tax state while living in Canada?

  7. You can’t >evade< taxes by moving to Canada. You'll pay Canadian taxes (usually higher than US ones, with exception of capital gain. There are tax treaties in place to prevent double taxation, unless you earn a very large amount of money.
    You'll have access to health care as long as you are entering legally and working.

    You have to file US taxes but probably won't have to pay anything unless your income is very high (over $200K or so in our devalued dollars). US taxes you as a non-resident as parp above suggests.

    For most of the last century, people moved back and forth between the US and Canada for work fairly frequently. It's not like your relocating to Moldavia.

  8. Your neighbor should look at the province of Alberta, the lowest taxes in Canada and no provincial sales tax, only GST at 5%. Alberta is the “Texas” of Canada, home of “old stock” Canadians.

  9. Haha. Good luck trying to break state residence for a high tax state. Being an expat won’t do it last I checked (I was an expat in London for 3 years). To break residence in a US state requires moving to another US state, and for NY, NJ, CT it requires proving you don’t own property there and establishing residence somewhere else – oh yeah, and they reserve the right to decide you are lying and can’t break residence.

  10. As a long time expat, my condolences. Ever since 9/11 it’s been a real hassle.

    She can’t just choose a state. It has to be her last domicile before leaving the country. She’d have to give up her Mass. digs, move to the new state, get a driver’s license there, register to vote, get a few month’s worth of utility bills, file a state tax form of some sort, etc. Mass. won’t let her go so easily, and the new state won’t accept her so easily.

    She’ll learn how much fun it is to deal with the Treasury Department each year. And the IRS. You have all kinds of extra crap to file, and normal accountants don’t know about it. Does she have an IRA? Canada may not recognize deferred gains. Does she plan on changing her address for any financial account? It used to be a big hassle, all the documents they needed to “know their customer” under the Patriot Act. Now they just summarily close you’re accounts and mail you a check because you’re too much of s burden.

  11. bingo to Marvin. My daughter in London can’t open an account because the U.S. requirements aren’t worth the fees. Yet she has to pay U.S. taxes.

    And now comes Brexit and the deal changed again because her market (labor and sales) has shrunk.

    I’m a Never Trumper, but if he could untangle the tax code I would reconsider.

    Good luck to your neighbor solving the Trump problem and the tax problem at the same time.

  12. Just to clear up some of the confusing tax stuff written above. The US and most countries tax on worldwide income. That’s not a unique hassle to the US. Canada will tax you on US income. What is a unique hassle is that you have to file US tax returns even if you have no US source income. In practice this ends up not being much of a difference because that is triggered by even a dime of interest on an account.

    There will be a binational convention for the avoidance of double taxation. In practice that means you file with the authorities abroad and pay your taxes. Then you file your IRS forms with some complicated extra stuff that if you’re lucky mean you owe the US nothing. If due to different tax rules you would have owed the IRS more than the foreign country, you pay the delta. Some years the IRS will send you a nastygram that you owe money and you cannot figure out why. This makes for an extended period of unpleasantness.

    Note that the IRS is extremely underfunded because of partisan politics, and they have two divisions that do not communicate with each other so well, the accountants and the collection bonebreakers. The latter have free access to all your bank accounts worldwide, thanks to one of those extra forms you file. Also, you file the same firm with FINCEN, and they fine you $100,000 per account if you’re late with the annual filling, or half the balance, whichever is highest.

    The expat market is not big enough to support a vigorous and competitive tax advice industry, do you either have to learn all this stuff yourself or pay outrageous fees for advice from people who probably know more than you, but probably also don’t know everything.

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