Daily Ramble
One of the more consistent questions I receive is about taxation from my US-based readers. If you’re not from the US, you probably don’t realize the insidious nature of the United States Internal Revenue Service or IRS. In fact, even if you’re from the US, you likely don’t know the reach of the IRS.
So, let’s get some basics out of the way. First off, if you’re an American citizen, it doesn’t matter where in the world you live and earn money — you owe taxes to the US IRS. For comparison, the only other country globally that bases taxation on citizenship rather than residency is Eritrea, a country on the African side of the Red Sea.
Second, the distinction between residency and citizenship can be confusing if you’ve not dealt with it, so let me break down those terms as well. Citizenship allows you to live, work, pay taxes, vote, and hold a passport in a country. Residency only allows you to live, work, and pay taxes to the country you live. So, for example, I’m a Portuguese resident and a US citizen.
Lastly, taxation as a US citizen living abroad is not straightforward. It’s confused by the fact that there are tax treaties in place with many countries. For example, although I owe the US government taxes for wages earned in Portugal, tax treaties reduce the taxable amount. Confused? Totally normal. Want to find professional help to navigate your taxation situation? Good luck finding someone knowledgeable in both the local tax code and the US tax code. The byzantine nightmare is so terrible that I’ve met more than my fair share of US ex-pats who get citizenship abroad and drop their US citizenship because of the IRS. However, dropping your US citizenship is not as easy as burning your passport. Instead, to renounce, you’ve got an exit fee as well as an exit tax based on your last five years of taxation—a parting gift from Uncle Sam.
I’ve thought long and hard about the expenses I cost the US government, and the only thing I can fairly see being taxed for is for the use of the US Embassy, which would be a trivial amount if all US citizens living in Portuguese were asked to cover the Embassy’s expenses. Morally, it’s a tough pill to swallow living abroad, being a US Citizen, and paying taxes to the US government. I can’t help but think it’s predatory for the US to extract tax revenue out of its ex-pat citizens since the group lacks political representation.
Clearly, I’m not the only one miffed by this relationship. As a result, new businesses are springing up with the sole focus of helping individuals arbitrage their tax situation by establishing multiple citizenships. I’m particularly fond of Plan B Passport, which helps individuals across the globe establish citizenship/residency in seven different nations, ranging from the Caribbean to the European Union. I’ve spoken with the founder, Katie, and can attest to her knowledge and professionalism. If you like the idea of having a Plan B passport for either legal tax reduction or emergency exit reasons, then I would recommend listening to this excellent podcast on the What Bitcoin Did show where the host, Peter McCormack, interviews Katie and becomes convinced to start his Plan B Passport process.
In a world being societally reorganized by the open communications network of the Internet and the open monetary network of Bitcoin, it is not far-fetched to see how borders will become increasingly less relevant in the decades to come. A second passport moves you into that future.
“I can’t believe I’m posting Ted Cruz” Things on the Interweb
I don’t know what to think of myself for agreeing with almost everything Ted Cruz said in this video.
Bitcoin Price Prediction
Yesterday: $42.2k - $49k
Today: $44.6k - $49k
Tomorrow: $42.2k - $49k
Despite the negative news on the US crypto industry, the price of Bitcoin remained resilient, maintaining price action well above $45k for the last day. At the moment, the price action is beginning to show signs of exhaustion, though it remains to be seen if it leads to a pullback or not. My money is still on a break up to $49k before we see the bulls lose steam. Ideally, we remaining over $45k on any daily closes from here on out, but holding above $42k is the most critical point. Below, and we re-enter the range Bitcoin fought to escape for almost 3 months. We should know in the next day if we see a price push for $49k or slide back to $42k to find more buyers before pushing. Again, my bias is firmly bullish at this point. My perspective will only begin to shift if we see the price start closing below $42k.
Bitcoin Q & A
Q: The damaging language to the crypto industry contained in the $1T infrastructure bill just passed the senate. What happens next?
A: It heads to the House of Representatives.
A bipartisan group of senators worked to clear the sweeping increase to the definition of “broker” contained in the US infrastructure bill winding through the legislative process. But, despite reaching full agreement across both sides of the aisle, a retiring 87-year-old senator from Alabama decided to be the party pooper by shooting down all amendments if his $50B for military spending wasn’t included. But, of course, he’s headed out of office, so he doesn’t seem to mind the heat he’s getting, especially since the majority of his election campaigns have been financed by the banking industry.
The next step is for the bill to make it to the House of Representatives, where the fight continues. Until the President signs the bill into law, there remains hope that the US doesn’t cut off its nose to spite its face.
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And here's me, also really shocked at finding that I agree with Ted Cruz. That was common sense. What's happening??!