The Upper Class and American Green Cards: Not Economical

More and more of the upper class is considering emigrating overseas, especially to the United States. Often, because their business is still in China, along with other considerations, they are reluctant to give up Chinese citizenship and prefer obtaining U.S. green cards to establish permanent residency. This way, there are no problems with traveling between the countries.

However, many people find that the reality of the immigration process, especially with regard to taxes, is not exactly ideal.

For those households who have their center of gravity in the U.S. after emigrating, this may not be such a problem. But those who have companies in China and are not employed in the U.S. need to give thought to taxation issues when applying for a green card.

China currently mainly implements indirect taxes. Personal income taxes count as payroll taxes in the implementation process. The main income tax comes from the class with higher salaries. A variety of other services outside of wages and property income are not taxed. Business owners typically give lower wages so that they hardly pay income taxes. Although the tax burden is heavier for the company, it is in fact shared by the consumers, employees and business owners. The personal income tax that business owners pay is therefore not so high.

The U.S. tax system can be improved to be much more effective. Among its many federal taxes, the income tax remains dominant, accounting for around 50 percent of total federal tax revenue. This revenue also includes the federal estate tax, inheritance tax, local property taxes and other taxes, which all become the responsibility of the individual. According to 2000-2010 statistics, U.S. households pay an average of 29 percent of their household income to the government as annual taxes. Though personal income taxes are mainly on the basis of household income, demographic factors, tax exemptions and tax credits, only low-income families and families with children are able to profit from tax rebates. For higher-income classes, these taxes are not easy to avoid. Once tax evasion is discovered, one could have to pay fines, be discredited or go to jail.

Therefore, businesses within China face an awkward situation: In China, they have to bear a heavier company tax burden; in America, they have to pay a higher personal income tax.

According to the IRS in a Taxation of Green Card Holders guide published in October 2006, “A green card holder is considered to be a resident of the U.S. for U.S. income tax purposes and is therefore subject to U.S. taxes on worldwide income.” Worldwide income covers personal income, foreign bank accounts, stocks, equity, investments and more. Before, this bill was not strictly enforced, but the U.S. government has engaged in much more stringent enforcement as it becomes more and more nervous over its spending. This policy’s enforcement will likely become more and more strict as time goes on.

In the long term, getting a green card is no longer a win-win situation. Having it both ways and trying to take advantage of the system has become more and more difficult.