The Economist:  International Taxation: America’s Berlin Wall:

Congress increases the ransom expats must pay to escape the taxman.

Queues of frustrated foreigners crowd many an American consulate around the world hoping to get into the United States. Less noticed are the heavily taxed American expatriates wanting to get out—by renouncing their citizenship.

In Hong Kong just now, they cannot. “Please note that this office cannot accept renunciation applications at this time,” the consulate’s website states. Apart from sounding like East Germany before the fall of the Berlin Wall, the closure is unfortunately timed. Because of pending legislation on President Bush’s desk that is expected to become law by June 16th, any American who wants to surrender his passport has only a few days to do so before facing an enormous penalty.

That penalty is buried in an innocuous piece of legislation with the veto-proof name, Heroes Earnings Assistance and Relief Tax (HEART) act. The new law means active American soldiers will benefit from tax relief. To pay for that, Congress has turned on expats, especially those who, since new tax laws in 2006, have become increasingly eager to give up their citizenship to escape the taxman.

Under the proposed legislation, expatriates surrendering their citizenship with a net worth of $2m or more, or a high income, will have to act as if they have sold all their worldwide assets at a fair market price. If the unrealised gains on these assets exceed $600,000, capital-gains tax will apply. A study by the Congressional Budget Office guesses that the new law will progressively net the government up to $286m over five years. It is unclear, however, why people would suffer the consequences if they did not expect to save money in the long run by escaping American taxes.

(Hat Tip: Matthew Ledvina.)