American Voters Abroad: No Double Taxation Without Real Representation

12/04/2008 05:12 am ET | Updated May 25, 2011

A U.S. research chemist living in Switzerland says that Americans living abroad [expatriates or "expats"] face "double taxation without representation."

Six million eligible U.S. voters--a group equal to the population of Washington State--live overseas. Many are on a military or corporate rotation but some have been away for decades. The oldest are
Sister Cecilia Gaudette, a 106-year old nun in a convent in Rome, who supports Obama, and 105 year old
Miriam Polluck in Israel, who is for McCain. Expats' chances of voting depend partly on whether they are Democrats or Republicans, because Democrats treat overseas Americans as a state. Democrats Abroad [DA] is authorized to hold a primary, sending 22 delegates this year to the Denver convention. No such Republican set-up exists. There is granted a central federal online site to register to vote abroad but the actual absentee ballots are furnished by one of the 50 states, their efficiency varying wildly. Votes must moreover be tabulated. One million absentee ballots were requested in the 2006 midterm election but only a third of those votes were counted.

Then there is the tax situation. Expats are taxed by both the country in which they work and by the U.S.--on the same earned income. Consequently, the U.S. research chemist in Switzerland, whom I know, wrote me, giving me permission to quote his words but asking that I not use his name. I'll dub him Craig. Craig explained:

Absentee voting is possible. I was able to register four years ago from Switzerland to vote through my home state [Louisiana's]Orleans parish, voting for John Kerry for president. I used the system provided by the Democratic Party. The problem was that afterward, the parish office continued to send me ballots for all New Orleans local elections, for people I'd never heard of. So I wrote to the office asking that I be taken off the voter list. Which they did. When this watershed 2008 Presidential election neared, I sent the office a letter asking that they put me back on the list and send me an absentee ballot. That was months ago. I'm still waiting to receive it.

The expatriate organization, American Citizens Abroad [ACA], with headquarters in Geneva, has tried for years (decades?) to change the situation, to no avail.

We are meanwhile subjected to double taxation. Each year I file a Swiss income tax form on my earned income. I don't object to being taxed where I live and work; I get a lot of services in return. The Swiss Confederation was founded in 1291, five hundred years before our nation. A democracy, it already has social security, universal health insurance, public education through university level, automatic voter registration, voting via ballot mail, etc. However, as soon as I file a Swiss federal income tax form on earned income, which is 100% in Swiss francs, I must also file and pay in U.S. dollars the IRS taxes on the same income. The U.S. is almost the only country taxing its overseas citizens on money earned abroad.

Unlike the voting system, the IRS registers its expats quickly and efficiently, without any red tape. (One can easily test their extraordinary organizational talents by failing to file a 1040.) Tax consultants over here don't understand U.S. tax laws (who does?) You're on your own. I sometimes think that one of the main purposes of this system is to keep tabs, through taxes, on us "renegade" Americans living and working away from the U.S.. For actively earned income, a company salary for example, you file form 2555, where you're allowed to subtract $85,000. For passively received income, such as from a company pension fund, you file a 1116 and can subtract the foreign taxes paid.

The really funny feeling comes though when the U.S. dollar starts to climb or fall on the world money markets. Suddenly from the perspective of the IRS our incomes, paid in Swiss francs, seem to be increasing or decreasing, becausetheir dollar worth is going up and down and that can put me in another tax bracket. Make one slight error on filling out the forms, and you get a quick bill from the IRS.

It does not happen the other way around. The U.S. and Switzerland for example have a bilateral agreement on taxation. Under it, a Swiss citizen living in the U.S. earning a U.S. income in U.S. dollars must file only an IRS 1040. That's it; this person is not required also to file a Swiss income tax form on the income earned in the U.S., because Switzerland strictly adheres to its law against double taxation. Swiss absentee ballots meanwhile go out like clockwork in the mail to the Swiss people working in the United States, come back and are counted. If Switzerland can do it, the U.S. could certainly do it.

Expat organizations have repeatedly pointed out that this double taxation puts U.S. citizens at a disadvantage in international commerce, but again no one in Washington is listening. Almost everybody over here in Europe is pulling for Barack Obama, by the way. To many, McCain looks a bit senile and Palin appears immature and aggressive. If the Obama/Biden ticket does win, there is a good chance that there will be more trust in the international finance system, and more respect for the role that America has to play in the world. I hope though that there will be a drastic overhaul of "turbo capitalism" and the tax and voting systems. That old battle cry: "No taxation without representation!!!" voiced one of the main reasons that the Colonies broke away from Britain.

When did we forget that?