This is the eighth of a series of posts – starting with Cook v. Tait 1 – about citizenship-based taxation. A recent article by Allison Christians “Drawing the Boundaries of Tax Justice” is a must read. The article is notable because it considers tax policy without adopting any of the usual assumptions. In fact, the article invites you to reexamine your assumptions about the principles of taxation. The article asks a number of questions including the obvious: who should be taxed, why, and what is the basis for taxation. Although the article is NOT specifically about citizenship- based taxation, it raises the question about its appropriateness.
An excerpt from the article that is a useful contribution to the analysis of “citizenship-based taxation” is:
Citizenship or nationality might seem like an appropriate place to start in thinking about the state’s right to tax to the extent the category indicates the individual’s (and perhaps by proxy the entity’s) choice to identify with a state as a matter of political allegiance. The suggestion is that citizenship is a brand of identification that signifies a positive undertaking—lodged in legal terms—to mark a person as belonging to the state. However, this is a difficult, perhaps impossible, argument to sustain in a world in which globalization has redrawn the boundaries of human community so that people can easily be branded as a citizen by multiple states. This simultaneous branding dilutes the citizenship category so much that it cannot easily serve to distinguish among competing jurisdictional claims.
Citizenship’s brand dilution is reflected in conflicting state practices when it comes to identifying taxpayers. With few exceptions, states routinely reject citizenship as the best normative explanation for the state’s exercise of taxation over the person. The one state that imposes taxation on the basis of citizenship in all cases—the United States—is routinely criticized for this position, since the act is hostile to other jurisdictional claims that the United States otherwise acknowledges as valid.
DRAWING THE BOUNDARIES OF TAX JUSTICE – Allison Christians
Citizenship-based taxation is premised on the assumption that the citizen is the property of the state. Although citizenship-based taxation is not okay for the rest of the world it is somehow okay for the U.S. What would be the the U.S. reaction if other countries subjected U.S. residents to taxation? What would be the consequences? This was explored in Don Whitely’s article:
The Expatriation Act of 1868 guaranteed all citizens (including U.S. citizens) the right to renounce their citizenship. In other words, assuming that citizenship-based taxation assumes the state has a property right in the citizen, the citizen has the right to remove himself from bondage by renouncing citizenship.
The Expatriation Act of 1868 was an act of the 40th United States Congress regarding the right to renounce one’s citizenship. It states that “the right of expatriation is a natural and inherent right of all people” and “that any declaration, instruction, opinion, order, or decision of any officers of this government which restricts, impairs, or questions the right of expatriation, is hereby declared inconsistent with the fundamental principles of this government”. Its intent was to counter other countries’ claims that U.S. citizens owed them allegiance; it was an explicit rejection of the feudal common law principle of perpetual allegiance.
Countries use residence based taxation, in part, because they recognize that they are part of a global village – that is part of a world. Does the United States view itself as part of the world? If citizenship-based taxation is any indication, the United States views itself as the world! On the back cover of Stone’s “The Untold History of America” you will find an interesting comment from Mikhail Gorbachev.
“At stake is whether the United States will choose to be the Policeman of a “Pax Americana”, which is a recipe for disaster, or partner with other nations on the way to a safer, more just and more sustainable future”.
U.S. Persons Abroad - Members of a Unique Tax, Form and Penalty Club 