Why Americans Are Giving Up Citizenship

Derek Lawson

Welcome back to The Immigration Conversation. I'm Derek Lawson, and as always, I'm joined by Ruby Sturt. Ruby, how are you doing today?

Ruby Sturt

G'day, Derek! I'm good, mate. Bit chilly here, but nothing a cuppa can't fix. And honestly, this topic—Americans giving up their citizenship—it's wild, isn't it?

Derek Lawson

It really is. I mean, if you'd told me back in, say, 2005, that thousands of Americans would be lining up to renounce their citizenship, I'd have thought you were confusing it with a plot from a Cold War spy novel. But here we are—over 6,700 people did just that in 2020. And the numbers have stayed high ever since.

Ruby Sturt

Yeah, and it's not just a blip. Like, this isn't a one-off thing. The numbers were tiny before 2009—just a couple hundred a year, right? Then, boom, it jumps. And it keeps jumping. So, what's actually driving this? It's not just people being cranky about politics, is it?

Derek Lawson

No, not really. The main drivers are actually legal and financial. The U.S. is one of the only countries that taxes its citizens on their worldwide income, no matter where they live. So, if you're an American living in, say, Switzerland, you still have to file U.S. tax returns every year. And then came FATCA—the Foreign Account Tax Compliance Act—in 2010. That law basically forced foreign banks to report any accounts held by U.S. citizens to the IRS. Suddenly, banks overseas started seeing Americans as, well, kind of a headache.

Ruby Sturt

Yeah, and some banks just said, "No thanks, mate," and shut down accounts for Americans. Imagine living in another country for years, and then your bank tells you, "Sorry, we can't serve you anymore because you're American." That's rough.

Derek Lawson

Exactly. I remember reporting from Detroit on expat communities—folks who'd moved to Canada or Europe decades ago. After FATCA, I heard from people who suddenly couldn't get mortgages, or even basic checking accounts, just because of their U.S. passport. It was like, overnight, being American abroad became a liability instead of an asset.

Ruby Sturt

And it's not just the banking, right? The paperwork is a nightmare. Even if you don't owe any U.S. taxes, you still have to file all these forms. Miss one, and you could get hit with a penalty. It's no wonder people start thinking, "Is this really worth it?"

Derek Lawson

Yeah, and the numbers back that up. The surge in renunciations isn't just a fluke—it's a structural shift. People are making tough, pragmatic decisions because the system's gotten so complicated.

Ruby Sturt

So, let's talk about who's actually giving up their citizenship. It's not just billionaires dodging taxes, right?

Derek Lawson

No, that's a common misconception. Most people renouncing are long-term expats—folks who've lived abroad for years, sometimes decades. They're often middle-income earners, not the ultra-wealthy. And a lot of them already have another citizenship, so they're not risking statelessness.

Ruby Sturt

And then there are the "accidental Americans." I love that term, but it's kind of tragic, isn't it? People who were born in the U.S. or have an American parent, but they've lived their whole lives somewhere else. They might not even realize they're American until their bank flags them. I actually got a message from a listener—she's Australian, but her mum was born in California. She got a call from her bank one day, asking for her U.S. tax ID. She had no idea she was even considered a U.S. citizen. Next thing you know, she's knee-deep in IRS forms.

Derek Lawson

That's happening a lot, especially in places like Canada and Switzerland. Everyday people—teachers, nurses, retirees—suddenly find out they're on the hook for U.S. tax paperwork. And it's not just the paperwork. Some countries, like Japan or South Korea, don't allow dual citizenship, so people have to choose. If you want to fully participate in society there, you might have to give up your U.S. passport.

Ruby Sturt

And it's not just about taxes, either. Some folks just want to simplify their lives. If every time you open a bank account or apply for a job, you have to explain your U.S. status, it gets old fast. I mean, I get stressed just filling out my Aussie tax return, let alone dealing with two countries' rules.

Derek Lawson

Yeah, and the data shows most renouncers aren't super rich. Sure, a third of them are millionaires, but that's still a minority. The majority are just regular people who got caught up in a system that wasn't really designed for global citizens.

Ruby Sturt

And geographically, it's mostly happening in countries with big American expat communities—Canada, Switzerland, the UK, Germany, Hong Kong. Makes sense, right? That's where the banking headaches and tax rules hit hardest.

Derek Lawson

Absolutely. And when you look at the big picture, it's not about disloyalty. It's about people trying to live their lives without unnecessary stress. The system just hasn't kept up with how global everything's become.

Ruby Sturt

Alright, so let's say you decide to renounce. It's not just a quick form and a handshake, is it?

Derek Lawson

Not even close. The process is, well, kind of a maze. First, you have to fill out a stack of paperwork, then schedule an in-person interview at a U.S. consulate. And here's the kicker—the fee is $2,350. That's one of the highest renunciation fees in the world. It used to be $450, but they raised it in 2014. So, it's not just emotionally tough—it's expensive.

Ruby Sturt

And you can't just do it online or by mail. You have to show up in person, sometimes flying to another country if there's no consulate nearby. Then you get a Certificate of Loss of Nationality—sounds dramatic, doesn't it?

Derek Lawson

It does. And even after all that, you still have to file a final U.S. tax return and possibly pay an exit tax, depending on your assets. It's a lot to navigate. Compared to other countries, the U.S. makes it pretty tough. Most places don't tax citizens on worldwide income, and their renunciation processes are simpler and cheaper.

Ruby Sturt

Yeah, like, Australia doesn't chase you for taxes if you move to London. But the U.S.—and, weirdly, Eritrea—are the outliers. That's why advocacy groups are pushing for something called residence-based taxation. Basically, if you don't live in the U.S., you shouldn't have to file U.S. taxes. Sounds fair, right?

Derek Lawson

It does. Groups like Tax Fairness for Americans Abroad are making noise about this. They argue that the current system is outdated and doesn't reflect how mobile people are now. There's a real debate about whether the U.S. should adapt or risk losing more citizens who just can't deal with the red tape anymore.

Ruby Sturt

And it's not just about paperwork—it's about identity, too. For some, giving up citizenship is a last resort. But if the system doesn't change, more people might feel like they have no choice.

Derek Lawson

Yeah, and with millions of Americans living abroad, even a small percentage renouncing is a big deal. It says something about how citizenship is changing in a global world.

Ruby Sturt

Alright, that's all we've got time for today. If you're an American abroad or just curious about this stuff, let us know your thoughts. And if you want us to dig into another immigration topic, send us a message.

Derek Lawson

Thanks for joining us on The Immigration Conversation. Ruby, always a pleasure. We'll be back soon with more stories and, hopefully, a little less paperwork. Take care, everyone.

Ruby Sturt

Catch ya next time, Derek. Bye, everyone!