The number of Americans who renounced their citizenship hit a record high in 2020 amid the coronavirus pandemic, Axios reports.
The number of people who gave up their passports rose by 237% to 6,707 in 2020.
People who renounce their US citizenship “tend to be ultra-wealthy and many of them are seekign to reduce their tax burden,” according to the report.
New tax increases proposed by the Biden administration and certain states and cities may cause the trend to continue.
The United States is one of just two countries, along with Eritrea, that taxes people based on their citizenship, meaning that people who live overseas must continue to pay taxes in the US as well as the country where they live.
Numbers rise since 2010:
The number of Americans renouncing their citizenship began to rise in 2010, when Congress passed the Foreign Account Tax Compliance Act, which increased reporting requirements and penalties for Americans living overseas.
FATCA "kind of flushed people out of the bushes," international tax lawyer Andrew Mitchel told Axios. It "effectively deputized all the banks around the world to tattletale on U.S. citizens."
But Mitchel cautioned that some of the people who were reported to renounce their citizenship last year may have actually done so years earlier because the lists kept by the IRS are not up-to-date.
“It’s not as if the latest quarter names that have come out are indicative of the current political environment or anything like that," he said.
More on the way:
International tax lawyer David Lesperance told Axios that the numbers are expected to grow once embassies are fully reopened.
"There are probably 20,000 or 30,000 people who want to do this, but they can’t get the appointment," he said. "There’s not a peak demand — the system’s capacity has peaked…It's a year-and-a-half to get an appointment at a Canadian embassy. Bern [Switzerland] alone has a backlog of over 300 cases."
Biden has proposed raising the top capital gains tax and the top marginal tax rate on the wealthiest Americans.
Though it’s unclear if it will pass, Lesperance told Axios that it prompted a lot of calls from people “wanting to find out which foreign countries might grant them citizenship.”
