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Originally Posted by Red Slinger
Very true.
My wife was born in Edmonton (she's recovered since) to American parents. She has never lived a day in the US nor has she ever worked a day in the US. Even so, the US government expects her to file US income taxes. Even worse is that I, as her husband, someone who has zero ties to the US, also have to file a US tax return every year. The IRS has pledged a general threat that anyone who is considered a US citizen and does not do this is subject to a heavy fine. Our initial reaction was basically, "so what? IS the IRS going to freeze our assets in our Canadian bank if we don't file?" Yes. That is exactly what they would do and the Canadian banks and the government have done basically nothing about it.
The other option is that she can renounce her US citizenship but in order to do so she has to back file something like 5 years worth of US tax returns, go through two interviews at the US embassy and pay a significant fee for processing the request. It's basically a government sponsored extortion.
This is all based on a law that has been on the books for decades but it was never enforced. The enforcement started about 3 years ago when the government and IRS were having issues generating enough revenue through the traditional tax structure. The rich pay, relatively speaking, almost no tax in the US after all of their legal deductions. Meanwhile, taxes have gone down for both the middle class and poor in the US. In other words, the US tax structure is so out of whack that the US needs to find new, exciting and morally ambiguous ways of squeezing blood from the stone. Historically speaking, this has some parallels to the Roman Empire and the circumstances that led to the fall of Rome.
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Yeah the tax code is amazingly out of whack there. I guess they haven't tried to update it as a whole in 25+ years or so, so all the deductions and other things they add to it every year just throw the whole thing out of kilter more and more.
The good news is they are actually finally starting to do something about it. Though, the congressmen and senators and whomever else is in charge of changing and updating it have had all their suggestions and recommendations locked in a 50 year vault so their constituents and more importantly the lobby groups won't know who did what and who took what benefits and loopholes away.
Very messed up, but possibly the best of a very crappy situation, and unfortunately how it will have to be till they get some of the big money out of politics, which is probably never.