Since the USA has “double taxation” treaties with a lot of countries, that often isn’t the reason.
Being American means filling out an an American tax return.
Being American means not being accepted as an account holder by your bank or investment company.
Being a dual-citizen means being a second-class citizen.
And technically, if your reason for renouncing your citizenship is “to avoid tax”, then it doesn’t work: you are still subject to American tax as if you were a citizen for several (8?) years after.
American tax returns are horrible. I understand that if you are just a simple wage earner, it’s not that bad, but many people aren’t just simple wage earners, and those simple submission methods don’t work for people with foreign income anyway.
Americans are protected by a range of regulations on what banks and institutions can say and do, and registration and operation requirements. This is good. But it means that if my foreign bank wants to accept American customers, they have to learn about and comply with a whole set of foreign regulatory and operating requirements. BUT WAIT – a lot of American banks and institutions also don’t want you, because you are a foreign resident. So, your local bank won’t have you, and your American bank won’t have you.
Having a second nationality means that either country can strip you of your nationality. Australia could strip you of your Australian nationality. It doesn’t happen often, and it happens mostly to people who are criminal, or sick, or mentally ill, but it’s another thing to worry about when you see it happening to people who are sick or mentally ill. And it’s not just the USA that does this kind of thing. And people can be very nationalistic: if you don’t want to give up your foreign citizenship, why should America (or any other country) accept you? And then there are the technical restrictions: in Australia, you can’t run for parliament (congress/senate) – you aren’t Australian enough for that. And rules on inheritance and property ownership and eligibility for social security – any of which might have cut outs for foreign citizens that might affect you or your children.
And speaking of your kids: is retaining dual citizenship going to be an overall benefit? Sure, it’s a nice thing, but absent your personal natural connection with your land of origin, are they going to feel the same?
For myself, there came a day when my connection to Australia was more important than my connection to the USA. I miss the USA, but not enough that I want to endanger my relationship with my new partner, Australia, and both of my countries permit but have demonstrated hostility to dual-citizenship.