The tax hikes that will result from going over the fiscal cliff on January 1, 2013 are already producing side effects. Inquiries from wealthy US citizens about relinquishing their citizenship have risen 22%.
This Website Is For Financial Professionals Only
The wealthy also face the enactment of the Foreign Account Tax Compliance Act (FATCA) that will require US citizens all over the globe to report their global assets and earnings to the IRS, where they live, how long they have lived there, and whether any money is owed.
FATCA came to be as part of a 2010 economic stimulus package. It is designed to recapture billions of dollars in tax revenues that the US government claims are lost because the wealthy hide assets abroad.
Critics of the law think the US is on a draconian search to hunt them down. Foreign financial institutions are finding it too expensive to serve US citizens. Some European financial and banking institutions have already shut out American citizens.
FATCA also applies to businesses located abroad in which Americans have a financial interest. It further requires foreign financial institutions to collect a 30% tax on any pass-through transactions involving banks that are not in compliance with the new rules.
That would result in negative, unanticipated consequences of enacting the legislation both for citizens and the country as a whole.