back to article America was founded on a dislike of taxes, so how did it get the IRS?

Welcome again to the eXpat files, our now-occasional visit with readers who've moved to a new land in search of adventure, sunshine and, in the case of this week's chap, bewildering and labyrinthine tax and credit regulations. The chap in question is David Hough, currently resident in Newark, California (not New Jersey). David …

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  1. NormDP

    One of the great myths that America has claimed over Communism is that in the US you can own property. Nonsense. If you think you own it? Stop paying taxes on it. See how long you own it. You own your shirt -- nobody can make a claim on it -- but you don't own your house or anything other real property.

    1. Anonymous Coward
      Anonymous Coward

      +1

      The difference is in communism the government owns your ass, in capitalism corporations own your ass. In a mixed economy you're a pass around.

    2. Anonymous Coward
      Anonymous Coward

      "Stop paying taxes on it. "

      One of the sci-fi writers** based a novel on the inability of city house owners to pay their taxes. When they defaulted the city took their house - so they left the city.

      Consequently the number of tax payers kept diminishing and the taxes on them rose higher - until the city owned every property. As the houses were unsaleable and empty then the city had no tax income and was effectively bankrupt

      Seems like something similar happened to Detroit recently.

      **Probably Clifford Simak's "City" 1952.

      1. Joe Gurman

        Except.... wrong.

        People left Detroit because jobs in the city and in towns adjacent to the city vaporized as the automotive industry packed up and left for overseas and non-unionized or less unionized ares in the American South. They couldn't afford to pay property taxes, or keep their homes from falling apart, because they had no money. The city would have been bankrupt and empty regardless of its sources of income because no one could afford to live there who needed a job to make ends meet.

    3. chivo243 Silver badge

      Nail -> Head -> Spot on.

      Years ago my parents paid off their mortgage. And I remember my dad bitching about still having to pay to live in "HIS" house, yes in Amerika property taxes suck!

      1. Yet Another Anonymous coward Silver badge

        Another big difference, in the UK your home is your castle. Here you have condo-fees if you live in a flat or townhouse (block of houses/maisonette) which can be $3-500/month to pay for the general building stuff and you can be hit for massive $50-100K bills if they discover something major wrong with the building.

        Even if you have your own home in the suburbs there will be a Home Owners Association who can set rules on how your house looks and fine you if you don't comply. Surprisingly for such an ethnic melting pot it is often used to make sure that the wrong sort of people don't get to stay long in your neighbourhood.

        1. John Miles

          re: Here you have condo-fees if you live in a flat or townhouse

          UK has similar - it is called Leasehold - flat I was renting in was about £1,200 a year maintenance charges and you can get with big bills - Most flats in UK are Leasehold, though there may be more protection for leaseholders in UK

          1. Yet Another Anonymous coward Silver badge

            Re: re: Here you have condo-fees if you live in a flat or townhouse

            Leasehold always used to be pretty cheap though, I paid £100/year ground rent and a few quid for external lighting/etc in the UK.

            Here even ordinary flats come with hefty fees and I get the impression that the property developer regards these as the profit margin. If the place has a gym or outside pool then the fees can end up being 50% on top of the rent/mortgage. It's enough that the mortgage companies take it into account when working out how much they will lend you.

            1. Anonymous Coward
              Headmaster

              Re: re: Here you have condo-fees if you live in a flat or townhouse

              The good news is that you get to write your property taxes off your federal income tax. So if you are throwing down $15K on property taxes, and you are in the 28% federal bracket, you get over $4K off your federal taxes.

        2. RainbowTrout

          Not all developments have HOAs (such as mine). You do lose out though in not having a neighbourhood swimming pool or club house which the HOA fees pay for.

          1. MrXavia

            Re: Council Tax

            Yes, But if you can't pay, i.e. are unemployed, only students live there, generally you don't pay it, there are plenty of exceptions to the rule.. in theory that pays for all the council services, Fire/police/bins etc..

            in theory road tax pays to fix the roads (yeah when do they ever do that?)

        3. Tom 13

          Re: there will be a Home Owners Association

          Only if you live in one of the People's Republics. My parents house has no Home Owners Association. Problem is, the maggots that live in the People's Republics keep moving out because they don't like them, then vote to impose People's Republic rules in their new location. Kalifornia is one of the prime examples of this behavior.

      2. Number6

        The UK has council tax - vaguely related to the value of the house in the distant past. Cambridgeshire is charging about half a percent of current value, others may vary. However, I'm not sure they can confiscate your house for non-payment, so it's not quite as bad as the US.

        The US system has some things in its favour though - starting from the date of last sale, California property tax is assessed as 1% of that value, and it increases by a nominal amount each year. That way, you buy a house knowing what it's going to cost you in future years. It also means that if you bought a house dirt-cheap many years ago and it's now worth several million, you're not expected to pay property tax based on its current value, over which you have no real control. This is way better than a mansion tax which will hit people who may have very few assets other than a house with a hugely inflated value. As with council tax, it's distributed locally.

        1. Joe Gurman

          Each state differs in how it bases its property taxes

          Outside of the Bay Area join California and few other tho property markets, the annual property tax on anything short of a real mansion is much less than $14K.

          In most states, the rate is something on the order of 1% of assessed values, with assessments being arrive out every three years based not he sale prices of similar homes in the area. If house prices have dropped precipitously, as they did in the US after 2007, one can generally apply for a reassessment, which if granted, results in much lower tax bills.

          Many states also have "homesteader" rules, that prevent the absolute rise in property tax bills from exceeding some percentage (say 10%) if you've lived in the home for a few years.

      3. Joe Gurman

        Nail -> head - missed totally.

        I paid off my mortgage in the US 12 years ago, and still enjoy police and fire protection, the higher property values that come with a decent if not stellar educational system, a good public parks and recreation system, and a public library system. And they even occasionally patch the potholes on the roads. They can do all that because other homeowners and I pay our property taxes. Time for some people to grow up and realize their homes would be worth nothing if they lived someplace where no one could afford to pay the property taxes (q.v. Detroit).

        1. Anonymous Coward
          Anonymous Coward

          Re: Nail -> head - missed totally.

          My town is actually very good about potholes, plowing, parks, drinking water, and hopefully broadband soon. I don't have a problem with paying property tax. It's not the fairest but it's simple and non-intrusive.

          The IRS and the state income/sales taxes, on the other hand, require mountains of paperwork and as discussed below, are really starting to undermine basic human rights worldwide. These taxes were banned by the US constitution for good reason. Unfortunately those protections were trashed in WW1 and we're still suffering 100 years later. WTF.

    4. John Miles

      Or even just have someone have drugs in it

      Judging from use of Civil forfeiture I have heard

    5. Uncle Slacky Silver badge

      See also

      Eminent domain: https://en.wikipedia.org/wiki/Eminent_domain#United_States

    6. lambda_beta
      Linux

      Facts Please

      First off, property taxes are levied by the town ... not the state or the federal government. The amount you pay depends on two factors:

      1. The accessed value of you house.

      2. A percentage based on the assessed value (usually some % per $1000).

      The town can manipulate either one to get to the amount you have to pay in property taxes.

      The IRS has nothing to do with this.

      1. Tom 13

        Re:The IRS has nothing to do with this.

        Yes and no. No, the IRS doesn't directly have anything to do with. Yes, being able to deduct house taxes from your federal taxes encourages non-federal taxing entities to boost their take from property taxes.

  2. Anonymous Coward
    Anonymous Coward

    Buying houses

    If the whole house buying price has to be put in escrow in cash before the deal is complete - how does a chain of buyers work? It is my understanding that in the UK several lawyers close all the chain's transactions simultaneously.

    1. Yet Another Anonymous coward Silver badge

      Re: Buying houses

      The whole process here is much faster.

      Make an offer (in writing and binding with a big penalty) then typically complete in less than a week. It's a bit of a rush to get inspections booked and paper work faxed to the bank but it means you don't have months long process that falls apart because somebody in the chain drops out and no gazumping.

      Some places have a rule that all contracts exchange on the first of the month (as do all rental contracts) which makes getting a mover or even a uhaul van tricky.

  3. Anonymous Coward
    Anonymous Coward

    House prices

    If one compares the South East of the UK then the quoted house prices are not much different. There are many places in the UK where house prices are a lot cheaper - but no doubt if you compare like with like then there are similar spreads in the USA.

    The big difference may be that you can't commute easily between areas because of the distances in the USA?

    1. phil dude
      Boffin

      Re: House prices

      @AC: There is a vast amount of land in the US, and they build almost a million new houses EVERY month!!! That is the big difference with the UK. House building is not encouraged as land is in (artficial) short supply.

      Distances are greater, but the interstates are far more likely to connect places you want to be, than not. In fact a very cool thing they have been doing (well in the East) is every exit has a list of amenities (Food, Gas, Lodging, Attractions etc..) approaching the exit ramps.

      P.

      1. Anonymous Coward
        Anonymous Coward

        Re: House prices

        Not a million houses a month. Current new home construction rates in the U.S. are about 1 million ANNUALLY.

      2. Rainer

        Re: House prices

        There's a lot of land available here in Switzerland, too - but most people realize that commuting 4h a day is a waste of life!

        What point is there about owning a house when you only see it in the dark?

        A former co-worker moved (back) to the US and now works for TFB. His commute is something like 2h. One way.

        That's insane. I'm 25 minutes from work. By bike.

    2. Yet Another Anonymous coward Silver badge

      Re: House prices

      One of the problems with SF is that there is a desire to keep the place low rise and low density. So high demand and low supply = prices rise (the policy is set by voters = property owners)

      In Houston there is 300mi of empty land between Houston and San Antonio which is being filled with suburbs as fast as the concrete can set, prices are low but you have to sit in movie grade traffic jams.

      And distances are bigger, you can commute to London from Yorkshire. You can't commute to SF from Detroit. I'm guessing that >50% of the UK population live in comutting distances to London?

      1. Fibbles

        Re: House prices

        I'm guessing that >50% of the

        UK population live in comutting

        distances to London?

        I laughed. Sometimes it takes me an hour just to travel 10 miles. London is 100 miles away.

        1. Yet Another Anonymous coward Silver badge

          Re: House prices

          There are big versions of Thomas the Tank engine. I know people from York that commute into London and the government wants to spend a gazillion quid on making Birmingham a London suburb

          1. Fibbles

            Re: House prices

            Have you seen the cost of train fares lately? Sod that.

            1. AndrueC Silver badge
              Thumb Up

              Re: House prices

              Have you seen the cost of train fares lately? Sod that.

              Meh, it's not that bad from some places. I live in South Northants (rural area in the UK for those who don't know). I can get to a train station on the Chiltern line in 15 minutes. From there it's £452 a month for the journey to London and parking is £99. So that's about £26 to get to Marylebone and back. It'd be going on for £20 if you went by car and that's not allowing much for parking or congestion charges. I think it'd be worth £10 just to avoid having to deal with the M25 and London traffic. And Chiltern run a very reliable service which usually has enough room for most people to find a seat.

              Birmingham (second biggest city for those who don't know) is cheaper - about £15 per day. Journey times for me are about 90 minutes door to door in both cases. I did the trip to B'ham for 14 months until earlier this year. In fact I'll give a shout out to any of my ex- travelling companions. I got out just before the line was blocked - literally one day before, lol.

        2. Pedigree-Pete

          @ Fibbles Re: House prices

          I think you'll find that is pronounce "That made I larf" around these parts.

      2. Anonymous Coward
        Anonymous Coward

        Re: House prices

        "I'm guessing that >50% of the UK population live in comutting distances to London?"

        Broadly speaking yes. The train journey from the West Midlands to London is about an hour and ten, I'd say that's a practical limit of commuting when combined with the feeder/destination journeys. Taking the West Midlands and all closer regions (London, South East, East) and you have 46% of the mainland population. Those in the more outlying reaches of the West Midlands may complain that it can't be done, but that 46% doesn't include the nether reaches of the South West region (like Swindon) or or the East Midlands (like Leicester).

  4. Anonymous Coward
    Anonymous Coward

    Taxes etc

    There was an article a while back about people considered eligible for USA tax have to submit returns even when they have moved to another country. Preparing the paperwork answer can cost much more than any tax due.

    Apparently the slightest association with the country can result in you being considered a tax payer even when you have moved back to your country?

    Still it is better than the 1960/70s when British people with a Green Card were drafted to Vietnam or classed as deserters. One colleague worked there for a year and escaped while his call-up papers were in the post.

    1. chivo243 Silver badge

      Re: Taxes etc

      As an American living abroad, I can say the paperwork I must do for the IRS is crazy. I don't have to pay any taxes, but just the paperwork involved in "notifying" them is extreme. Speaking of which, what is the date? Crap, late again!?

    2. Yet Another Anonymous coward Silver badge

      Re: Taxes etc

      You generally end up doping a tax return for the year after you leave - but probably end up getting some money back! US citizens have to file every year even if they have never lived in the country.

      The problem is that US politicians reward their sort of people with specific rules/loopholes. So if you just fill in the boxes you pay a lot more tax. Even regular working people end up getting a big chunk off (mortgage interest is deductable, so is any money borrowed for investing). For people on software developer salaries you need accountants to start doing "MP expenses" level of tax-avoidance.

      ps. Remember we conscripted a bunch of people for WWII and then told them they weren't citizens - like Spike Miligan. Not to mention the millions of Indian soldiers forced to fight for their "mother country"

      1. Nifty Silver badge

        Re: Taxes etc

        Does that mean dipping the tax return in a special sauce so that it all comes out right?

      2. Anonymous Coward
        Anonymous Coward

        Re: Taxes etc (Spike Milligan)

        Err, Spike Milligan wasn't exactly the same situation. He was from a British army family, and was born in India "on the regimental strength", to a father who had been born in Ireland when it was part of the UK (I don't recall where his mother was born). They had returned to Britain when his father left the army, and were living in London when the war began. He expected to serve during the general conscription, and joined up willingly when conscripted.

        His treatment after the war, when he was denied a British passport, was a disgrace.

        1. gazthejourno (Written by Reg staff)

          Re: Re: Taxes etc (Spike Milligan)

          "Willingly?!"

          Alright, Milligan did exaggerate for comic effect in his memoirs but he certainly wasn't beating down the door of the recruiting office.

          1. Anonymous Coward
            Anonymous Coward

            Re: Taxes etc (Spike Milligan)

            Well, when you put it like that, willingly was probably the wrong word!

            I haven't read his memoirs in a while, but from memory he had injured himself when his callup papers came through, and reported late (with a doctor's note or somesuch permitting it). He wasn't beating the door down to the recruiting office, but nor was he hiding under the bed waiting for MPs to come round and drag him into the street.

            So he answered the draft, unlike the friend of my father, who was working in New York state in the 1960s when he received notice he was eligible to be drafted for Vietnam. He drove to Canada the same night, and his wife arranged for their belongings to be shipped back to the UK.

            And, to reiterate the other point, the way the British Government treated Milligan (and others in similar positions) following the war, by denying passports to people who had risked their lives to fight, was disgraceful.

      3. Anonymous Coward
        Anonymous Coward

        Re: Taxes etc

        "Not to mention the millions of Indian soldiers forced to fight for their "mother country""

        I think you'll find that the the Indian forces were volunteers, and that conscription was never used.

    3. Chris Fox

      IRS claims a global right to charge income tax on anyone

      "Apparently the slightest association with the country can result in you being considered a tax payer even when you have moved back to your country?"

      Indeed, no personal association at all is required: under rules that are supposed to stop global tax-avoidance schemes, IRS claims income tax on royalty payments made to you if routed through a US-registered part of an organisation, even if you are not registered with the IRS, have never visited the US, are not a US citizen, have had no dealings with the US-registered part of the organisation, have conducted all the relevant work outside the US, and pay all the income tax due in your own country.

      You can avoid the IRS claiming this income tax... but only by first registering with the IRS... and that involves sending them your passport to them in the post for some unspecified period, assuming you even have one*... meanwhile the big players still avoid paying tax... It makes the injustice of that import duty on colonial tea seem like small beer...

      * Anyone else noticed how No2ID won the battle against UK ID cards, yet lost the war, with biometric passports now being demanded for an ever increasing range of transactions with government, banks, and prospective employers, and with an ever decreasing choice of acceptable and viable alternatives? And now you need a biometric passport, with all the details logged in the US, just to avoid paying income tax to the IRS.

      1. Midnight

        Re: IRS claims a global right to charge income tax on anyone

        Indeed. The USA has always been a great proponent of "taxation without representation".

        It has also always been at war with Eastasia, and Eurasia has always been its ally.

  5. Heathroi

    one way to establish a credit history if you know you are coming to the US for a while before actually arriving is go to your current bank and use their contacts to transfer your foriegn cards into US cards, if you just turn up, you might have come from bongobongoland. amex probably works best for that.

    1. Rob 5

      Spot on.

      If you have an AmEx card in the UK, they'll give you a US card based solely on your history with them. What's even better is, they'll report it to the US CRAs as dating from when you first opened your UK account, so you can instantly get several years' worth of credit history.

      The program is called AmEx Global Transfer, iirc.

      1. eldel

        Re: Amex transfers

        Yup - did just that (quite fortuitously) 14 years ago when we first moved out here. That plus the credit union which still had my employers name in it made the credit score a comparative non-issue. It took me quite a while to realise just how lucky I'd been. Talking to other newish arrivals and hearing horror stories of not even being able to rent somewhere to live because there was no credit record.

        In fact the biggest issue I had was persuading one of the phone providers to give me a phone which was capable of international calls. Now *that* was hard.

    2. Yet Another Anonymous coward Silver badge

      Don't expect this to work for "the world's global bank" - fscking HSBC

      Also expect banking to be at least 20years behind europe. You will pay fees for being in credit, you will pay for cheques (which they can't spell) and you will use them a lot, debit cards are being heavily pushed as the "next big thing"....

      1. Anonymous Coward
        Anonymous Coward

        I don't pay for checks (proper spelling!) or debit cards--unless I use another bank's ATM networks. I don't take out credit cards if they have an annual maintenance fee.

        1. Rob 5

          You may be doing yourself a disservice, then. For example, I pay a small annual fee for one of my AmEx cards. The points that I earn with it pay for hotel rooms, flights etc that are worth much more than that fee.

          1. Anonymous Coward
            Anonymous Coward

            I have a no-fee points VISA on which I place most of my purchases, and that works well.. Had a gold amex, but dumped it due to the fees.

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