B. They are mad at you. In this case you know for sure that it was not worth giving even a penny to a person who does not want to help others. you still learn great karma.

Most working and middle-class “minnows” abroad pay local, regional, and national taxes in the countries where they live, as well as VAT, excise and other taxes and fees. Whether these taxes are lower or higher that what they would pay as “homelanders” (USPs resident in the US) is immaterial. They all pay their fair share where they live according to the local system negotiated through whatever political means extant. They have to deal with the advantages and the drawbacks of their local countries’ system and do not need and often cannot survive with the additional variables imposed by the IRS.

US extraterritorial taxation policy does not take into account the disparities caused by the shift in exchange rates (thanks perhaps largely to US “quantitative easing”) that pushes people into higher US tax brackets despite no increased local purchasing power, the cost of living in each foreign country, as well as the tax structure in the foreign countries (for example, some countries have a much higher VAT than the US sales tax, but VAT paid outside the US is not eligible for a Foreign Tax Credit in the US).

US Double Taxation also takes money rightfully earned in a foreign country out of the local economy, where USPs should be free to spend or invest their money. Non-USP family members of USPs are also adversely affected, despite having no allegiance to the US.

Working and middle-class USPs have recently reached retirement age to discover that they have outstanding US tax liability, or while having no US tax liability due to the (limited) Foreign Earned Income Exclusion (FEIE) and Foreign Tax Credit (FTC), might owe confiscatory penalties on foreign tax-deferred or tax-exempt retirement plans that were not reported to the US (see FBAR). Many USPs abroad renounce because their pensions would not count as “Earned Income” and they could not survive if they paid US double taxes.