Americans have been increasingly renouncing their citizenship and in the last couple of years renunciation numbers have been the largest ever recorded (United States Treasury). Tax policymakers are ignoring the citizenship renunciation numbers because they are small compared to the total American population. However, I believe people are underestimating these numbers. The main meaning of renunciation numbers is not on their nominal value but on their indirect significance.
Nationality is one of the most important forces in the world. Most citizens are born and raised learning to be proud of their country and to feel lucky or even blessed of being a citizen of where they have citizenship. The fact that around 5000 Americans per year have been renouncing the citizenship of the mightiest economic and military power in the world compared to less than 250 renunciations less than 15 years ago is disturbing. From the best of my knowledge, no other country in the world has a higher number of citizenship renunciations. The fact that Americans are renouncing their citizenship at higher rates than virtually any other country not only reinforces the empirical evidence that the American Dream is dead (Chetty et al., 2014), but it goes beyond that. It indicates that an increasing number of people think that the simple fact of being an American citizen is a burden rather than an honor. People who are proud or even neutral about being a US citizen do not renounce citizenship. One must really be annoyed about it to take this extreme measure. Renunciation is a permanent, lengthy process that involves a lot of paperwork, interviews, and monetary fees. Once you renounce your home citizenship you cannot stay in US soil for more than 3 months, you are unlikely to get a job in the US again, and you can even be blocked to ever visit your motherland for the rest of your life (due to visa issues). Given that the renunciation rates have been on their an all-time high, it suggests that the value of being a US citizen is in its all-time low.
What has led to this? Taxes.
The increase in US renunciations has been spiked by the US tax code and tax authorities. First, the US and Eritrea (an extremely poor and dictatorial African state) are the only countries in the world that tax their citizens who live and work abroad,* i.e. citizenship-based taxation. Consequently, if you are an American live and work in Russia, for example, you must pay taxes in Russia and in the US, i.e. you are double taxed.** Obviously, this is extremely unfair to US citizens living abroad since they are not using US roads, ports, redistribution programs, or even directly benefiting from the insanely expensively US national security. To make things worse, the US (read IRS) has implemented a policy called the Foreign Account Tax Compliance Act (FATCA). FATCA requires foreign banks and brokerages to report non-US financial holdings to the local tax service. The problem is that complying with the FATCA costs foreign financial institutions hundreds of thousands of dollars every year. Therefore, the best financial institutions abroad rarely accept US citizens. The only way to remove this huge tax burden is by renouncing your US citizenship. For example, Eduardo Saverin, the Facebook co-founder, who held double citizenship Brazilian-American, chose to renounce US citizenship and go live in Singapore. This change saved him more than US$ 700 million in taxes just in his first year without US citizenship (Sullivan, 2019). Taxing the rich is virtually impossible. By increasing top income taxes, the US will export a huge part of its capital and make thousands more renounce their citizenship. For more check "The Elusive Quest of Taxing the Rich".
* By live and work, I mean more specifically citizens who have fiscal residence and income sources in a foreign jurisdiction. In some rare cases, you can live and work in a place and have fiscal residence elsewhere. For more on fiscal residence check "Legal Tax Reduction" and "Buying Passports and Permanent Visas".
** Yes, there are bilateral taxation agreements, but only some countries have those, and even if they exist, they are far from perfect. That is, even if there is a bilateral tax agreement between the country you live and the US, you may be paying taxes on the tax difference (i.e. the US tax duty minus the Russian tax duty), or something on those lines.