Does Cook v. Tait really mean that citizenship-based taxation is constitutional in all cases?

In December 2012 U.S. Judge Robert Bork diedHe  taught at Yale Law School. His students included Bill and Hilary Clinton. He was once the Solicitor General of the United States. He was a prolific writer and a forceful intellect. Even those who disagreed with him respected him.

President Reagan attempted to appoint Judge Bork to the Supreme Court of  the United States. The Senate did NOT approve his nomination. The Senate judiciary committee (chaired by Senator Kennedy) orchestrated attack after attack (not Senator Kennedy’s finest moment) on Judge Bork’s personal views. It was not pretty.

Some years later I had the privilege of attending a  University lecture where Judge Bork was the guest speaker. He gave an excellent presentation –  making the point that “governments have the right to make bad laws. Not all things done by governments are or should be reviewable in the courts.” (In the Q and A that followed, Judge Bork was attacked by a number of  University academics who did not accept that principle).

What I remember most about his lecture  was his reminder that: once a case is decided by the Supreme Court, the rationale for the decision is forgotten. He gave the example of “Roe v. Wade” (the case that ) established the principle that the states could not impose a total ban on abortions. (Subsequent Supreme Court decisions have added to the law – defining some circumstances that allow for abortion to be regulated). At one point Judge Bork (who was clearly not a fan OF THE REASONING in Roe v. Wade), asked the audience the following question:

“Have you ever actually read Roe v. Wade? There is almost no legal analysis in the decision. Then all of a sudden Justice Blackmun simply “finds a right of privacy” in the constitution.”

I also remember Judge Bork saying that:

1. He did not like the “reasoning in Roe v. Wade”, questioning where the “right of privacy” was found in the constiution;

2. He was NOT taking a “personal position” on abortion;

3. He might have found a way to restrict states from banning abortion in another part of the constitution.

Every election politicians make noises about (somehow) getting Roe v. Wade overturned. Every judge nominated to the Supreme Court is asked about his/her views on abortion. The real question (which of course cannot be answered by a judge) is:

What are your views on finding a right of privacy in the constitution in the manner that Judge Blackmun did?

The identification of the “right of privacy” was the “assumption/presumption” that justified the decision in Roe v. Wade. Absent the finding of the right of privacy, Roe v. Wade would not have been decided the way it was.

My points are:

1. It is important to understand the rationale for a decision. This includes an examination of any “assumptions/presumptions” that it is based on.

2. It is possible for the Supreme Court to revisit decisions. We are reminded of this every election year.

So, what’s this got to do with Cook v. Tait – The case cited for establishing U.S. citizenship-based taxation is constitutional?

Cook v. Tait was decided in 1924. This is almost 100 years ago. The world has  changed. One hundred years ago dual citizenship was not common and few U.S. citizens lived abroad.  In 2013 dual citizenship is common and many U.S. citizens live abroad. The estimates of Americans living abroad ranges from five to seven million. This makes the populations of Americans abroad larger than the population in many states. Yet, Americans abroad have no political representation. This is a clear case of:

Taxation without representation!

After 100 years it might be worth reconsidering the reasoning in Cook v. Tait. It’s a short decision that adopts certain “assumptions/presumptions” and contains very little legal reasoning (sound familiar?).

Cook v. Tait – The Facts

The case involved a U.S. citizen who lived in Mexico and had property in Mexico. The U.S. was attempting to levy income taxes on this U.S. citizen abroad. To his credit, the taxpayer managed to have the case heard by  the Supreme Court of the United States.

The taxpayer argued that:

The U.S. did NOT have the constitutional right to levy income taxes on U.S. citizens living outside the U.S. and on income earned outside the U.S.

The U.S. government argued that:

It did have the constitutional right to levy income taxes on citizens living outside the U.S. and that it could levy those taxes on the citizen’ s world income.

Nothing has changed in almost 100 years.

The decision was written by Judge McKenna and the rationale is in the following paragraph:

The contention was rejected that a citizen’s property without the limits of the United States derives no benefit from the United States. The contention, it was said, came from the confusion of thought in “mistaking the scope and extent of the sovereign power of the United States as a nation and its relations to its citizens and their relations to it.” And that power in its scope and extent, it was decided, is based on the presumption that government by its very nature benefits the citizen and his property wherever found, and that opposition to it holds on to citizenship while it “belittles and destroys its advantages and blessings by denying the possession by government of an essential power required to make citizenship completely beneficial.” In other words, the principle was declared that the government, by its very nature, benefits the citizen and his property wherever found and, therefore, has the power to make the benefit complete. Or to express it another way, the basis of the power to tax was not and cannot be made dependent upon the situs of the property in all cases, it being in or out of the United States, and was not and cannot be made dependent upon the domicile of the citizen, that being in or out of the United States, but upon his relation as citizen to the United States and the relation of the latter to him as citizen. The consequence of the relations is that the native citizen who is taxed may have domicile, and the property from which his income is derived may have situs, in a foreign country and the tax be legal — the government having power to impose the tax.

In “people talk” the decision is saying:

A. The U.S. has two kinds of sovereign power:

1. It’s sovereignty as a country in relation to other countries. This kind of sovereignty stops at its border.

2. It’s relation to it’s citizens and the citizens relation to the U.S. which exists no matter where the citizen is located. (How does the U.S. view its citizens? Is citizenship a consensual relationship? Does the U.S. view its citizens as property of the state?)

Cook v. Tait is concerned only with the relation of the U.S. to it’s citizens and vice-versa. In considering the relationship between the U.S. as a country and it’s citizens:

1. There is a “presumption” that the U.S. government benefits its citizens and their property wherever they may be in the world (note the word “presumption”);

2. Because the U.S. benefits the citizen wherever the citizen lives, it is fair and reasonable to allow the U.S. to impose a tax in exchange for that benefit.

That’s all folks!

Analysis of the reasoning in Cook v. Tait

The Supreme Court is an appellate court and is there to address matters of law. Appellate courts should NOT decide facts. The factual predicate for the decision is “the presumption that government by its very nature benefits the citizen and his property wherever found”. Note that the Judge is PRESUMING WITHOUT DECIDING that the U.S. benefits its citizens wherever they live. (A highly dubious claim) Hence, the decision is much narrower than is commonly believed.

Therefore:

The decision in Cook v. Tait is NOT that the U.S. can tax its citizens wherever they live.

The decision in Cook v. Tait is that the  U.S. can tax its citizens wherever the citizen may live, based on the presumption, that the U.S.  benefits the citizen wherever the citizen lives.

Therefore, absent a showing of either benefits coming from the U.S. government or a convincing demonstration of the validity of the presumption that the U.S. government provides benefits to U.S. citizens abroad:

It’s difficult to see how Cook v. Tait can be used to justify the constitutionality of levying income taxes on U.S. citizens living outside the U.S. (As Judge Bork reminds us: this doesn’t mean that there couldn’t be another justification. It’s just that this justification doesn’t makes sense.)

Does Cook v. Tait require that the U.S. provide benefits as a condition of citizenship-based taxation? Cook v. Tait is not clear on this point.

Interestingly, one year ago a post (and interesting comments) appeared on the Isaac Brock Society blog titled: “You want taxes, I want services“.

The post strongly suggests that the U.S. does NOT by its very nature benefit U.S. citizens abroad.

The issue of “benefits” was discussed in the next  significant case discussing citizenship-based taxation.  This was the 1968 case of Felix Benitez Reckach. In this case the United States Court of Appeals – First Circuit considered the question of whether the United States was required to provide benefits to its citizens as a condition of taxing them. The facts are interesting and the lawyering is clever (Mr. Reckach clearly had money).  The decision of the court included the following:

‘Appellant does not claim that his citizenship was lost as a result of the renunciation, but that as a result of the determination of the Secretary of State and consequent issue of the Certificate of Loss of Nationality, the United States was freed of its obligations to him as a citizen and he in fact lived and existed as an alien to the United States during the period in question.’

He concludes that since the United States ‘owed’ him, or apparently owed him, no citizen’s protection, he, in turn, owed no tax.

While there is language in Cook v. Tait, supra, indicative that these are reciprocal obligations, the Court also observed that ‘government by its very nature benefits the citizen * * *.’ 265 U.S. at 56, 44 S.Ct. at 445. We cannot agree that the reciprocal obligations are mutual, at least in the sense that taxpayer contends. It is sufficient that the government’s stem from its de jure relationship without regard to the subjective quid pro quo in any particular case. We will not hold that assessment of benefits is a prerequisite to assessment of taxes.

This is interesting and like many legal opinions unclear.

On the most minimal level the Rexach confirms that:

– the U.S. jurisdiction to tax citizens abroad is NOT dependent on the government owing the citizen “protection”;

– the U.S. is not required to “assess” (demonstrate benefits) as a condition to levy taxes on U.S. citizens abroad (note this does not mean that the government can provide NO benefits);

– the U.S. may tax its citizens abroad because of the “presumption” that “government by its very nature benefits the citizen”.

So the question is: Can the presumption that ” the U.S. government by its very nature benefits U.S. citizens abroad be justified?”

The answers to the following questions, although they are not determinative,  must be considered:

1. Does the U.S. actually provide benefits to its citizens who live outside the U.S.?

There is a wealth of evidence suggesting that the taxation of U.S. citizens abroad is extremely damaging to them and provides them with no benefits at all. The U.S. might argue that the benefit of citizenship is that one has the right to live in the U.S. But Cook v. Tait focuses on a “presumption that the GOVERNMENT by its very nature benefits” citizens.   It is the 14th amendment of the constitution that guarantees citizenship and not the government.  Assuming a constitutional right to enter the U.S., this is a right granted by the constitution and NOT by the government. Hence, the search for government  benefits provided to citizens abroad is elusive.

On this point see another post that appeared on at the Isaac Brock Society: “How I really feel about citizenship-based taxation“. The comments on this post are absolutely worth reading to understand the impact of citizenship-based taxation!

2. Does the U.S. impose costs on U.S. citizens living abroad? If so, what are they?

It is becoming increasingly clear that the “compliance costs” of  U.S. citizenship are such that it is too expensive for many to retain it. (It is difficult to find tax preparers for U.S. citizens abroad.) Furthermore, the “compliance costs” do not include the increasing cost of double taxation.

3. If the U.S. does provide benefits to U.S. citizens abroad,  are the benefits in proportion to the cost that U.S. citizens are expected to pay for those benefits?

It is important to note that U.S. citizens abroad must pay in three ways:

First, they must pay taxes to the U.S.;

Second, they must pay taxes in their country of residence;

Third, the effect of this is that a significant number of U.S. citizens abroad are subjected to costly double taxation which is NOT saved by tax treaties.

On this point note the comments of Roger Conklin:

*The statement that tax treaties beetween the US and other countries “avoid double taxation” is not correct.  Such treaties may mitigate double taxaxation but each and every one of these treaties clearly acknowledge the right of the US government to subject its citizens resident in the other country to US taxation.

The tax laws of the different countries are often so different that these tax treaties mean little to US citizens living abroad – unless the the foreign system mirrors the US tax system – which few of them do. There is invariably income which is tax free in the foreign country which is taxed under US law. Tax incentives provided by foreign countries are rarely recognized as such under US tax law, so what the US citizen person in the foreign country saves in foreign taxes by taking advantage of these incentives is penalized, usually dollar-for-dollar, by increasing the tax due to the IRS.

In many coungtries there are no capital gains taxes. So the US citizen has no foreign tax credit to offset the US tax on these capital gains. Many foreign countries have net worth taxes which subject assets to an annual tax based on the value of those assets. Not one penny of this net worth tax can be used to offset the US tax on capital gains when these assets are sold.

Likewise, some countries raise there revenue primarily through consumption rather than income taxes, In fact they have no income tax whatsoever. Yet no US tax treaty recognizes these consumption taxes as either deductible or creditiable against the US tax obligation on foreign income.

Given this reality, it is absolutely false to assert that tax treaties avoid double taxation.  Period.

4. Do the answers to questions 1, 2, and 3 provide strong evidence that could overcome the presumption that the the U.S. government “by its very nature” benefits U.S. citizens abroad?

The views of U.S. citizens abroad need to be considered. See (among others) the following thread from the Isaac Brock Society “Has your life been stolen by the IRS?“.

And finally, doesn’t this reasoning raise the following question?

What if  a U.S. citizen abroad simply says that he will neither accept not request any benefit from the U.S.? This should negate the rationale in Cook v. Tait. Can the U.S. force a citizen to pretend that he/she receives benefits from the government?

Cook v. Tait dealt with the taxation of U.S. citizens abroad. What does this have to do with Green Card Holders?

The answer is nothing at all. There has never been even the slightest suggestion that the U.S. provides benefits to Green Card Holders outside of the United States. In the case of Green Card Holders the question is:

Where does the U.S. imagine it gets the right to levy income taxes on Green Card Holders who do NOT live in the U.S. and while they are residents of other countries?

There is no way that this can be justified under the Cook. v. Tait decision! Furthermore, it is very clear that to levy income taxes on Green Card Holders who are residents of other countries is to levy taxes on residents of other countries. One would think that this would violate the principle of sovereignty between nations identified by Judge McKenna.

In closing …

This post is based only on the decision of the Supreme Court of the United States in Cook v. Tait and the decision of  the United States Court of Appeals – First Circuit in Felix Benitez Reckach. I have had not attempted to locate any subsequent decisions that specifically consider the legal reasoning in these two cases. I will leave that for another post, but welcome any comments on Cook v. Tait and any other cases of relevance.

The reasoning in this post could be used to develop the arguments that:

1. Cook v. Tait cannot be used to justify the claim that citizenship-based taxation is constitutional. But, the failure of the “ratio” in Cook v. Tait does NOT mean that citizenship-based taxation is unconstitutional.

2. Even if the reasoning in this post were NOT accepted, Cook v. Tait does NOT mean that citizenship-based taxation is constitutional. For example:

citizenship-based taxation could be permitted under another part of  the constitution.

3.  Cook v. Tait could be used to argue that citizenship-based taxation is constitutional, if the presumption that the “government by its nature benefits its citizens”, was demonstrated to be true.

4. Although citizenship-based taxation might be constitutional as a general principle, certain aspects of it might not be. Should the taxation of U.S. citizens abroad be allowed if:

– it means that U.S. citizens abroad cannot get bank accounts (FATCA)

– it means that U.S. citizens abroad cannot use retirement planning vehicles in their country of residence  (TFSA, RESP, etc.)

– it means that their investments in mutual funds in the countries where they live subjects them to punitive PFIC taxes rendering effectively disabling them from retirement planning

– it subjects to expensive and frightening reporting requirements (FBAR, FATCA Form 8938 etc) that makes U.S. citizens undesirable as employees, business partners, shareholders, marriage partners, in their country of residence

– it means that U.S. citizens abroad live in a constant state of fear of the U.S. government

– it completely disables U.S. citizens abroad from living normal productive lives

Many things that are legal as a general principle but become illegal when they go too far. For example free speech is generally allowed until it goes too far. Citizenship-based taxation may be generally legal, but certain aspects of it might go too far making it:

– unconstitutional under U.S. law; and

– a violation of international law

Does Cook v. Tait really mean that citizenship-based taxation is constitutional in all cases?

If the U.S. has a constitutional right to tax its citizens abroad, does that allow them to do anything under the guise of Cook v. Tait?

The time has come to reconsider the legal, moral and practical considerations of citizenship-based taxation. Even if it is legal, it is unwise. Citizenship-based taxation is not consistent with the best of America’s traditions. The U.S. is an will continue to pay a heavy price for this “ill advised” policy.

Two examples of the “heavy price” of citizenship-based taxation:

1. Roger Conklin (and others) have argued persuasively that citizenship-based taxation is harmful to U.S. trade and the trade deficit.

2. The most articulate and growing voice of anti-Americanism is from U.S. citizens abroad.

The fastest and newest growing form of anti-Americanism is from U.S. citizens abroad.

The IRS attack on U.S. citizens abroad may become a diplomatic  issue. Many U.S. citizens abroad are also citizens of  their country of residence. Therefore, through citizenship-based taxation the U.S. is taxing the residents of other countries and harming those countries!

Epilogue: Cook v. Tait and the basic principles of logical reasoning

The decision in Cook v. Tait is an example of a false premise justifying the conclusion.

Consider the following argument:

1. Hockey players have three legs.

2. Steve is a hockey player.

Therefore Steve has three legs.

The conclusion “Steve has three legs” is a conclusion that is perfectly valid from the facts given. It’s just that the facts are wrong. Hockey players do NOT have three legs.

Consider the following argument:

1. The U.S. government always benefits its citizens.

2. Steve is a U.S. citizen

Therefore, Steve benefits from the U.S. government.

The conclusion “Steve benefits from the U.S. government” is a conclusion that is perfectly valid from the facts given. It’s just that the facts are wrong. U.S. citizens abroad receive no benefits from the U.S. Furthermore, the U.S. is destroying their lives.

Cook v Tait does NOT provide a constitutional justification for the way that U.S. attempts to tax its citizens abroad.

This argument needs to be developed with a view to getting the Supreme Court of the United States to reconsider the reasoning in Cook v. Tait.

_________________________________________________________________________________________

The text of the decision follows:

265 U.S. 47 (1924)

COOK
v.
TAIT, UNITED STATES COLLECTOR OF INTERNAL REVENUE FOR THE DISTRICT OF MARYLAND.

No. 220.Supreme Court of United States.

Argued April 15, 1924.Decided May 5, 1924.ERROR TO THE DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF MARYLAND.

Mr. Charles Claflin Allen, Jr., and Mr. Charles Claflin Allen, with whom Mr. Frederic N. Watriss was on the briefs, for plaintiff in error.

Mr. Solicitor General Beck for defendant in error.

53*53 MR. JUSTICE McKENNA delivered the opinion of the Court.

Action by plaintiff in error, he will be referred to as plaintiff, to recover the sum of $298.34 as the first installment of an income tax paid, it is charged, under the threats and demands of Tait.

The tax was imposed under the Revenue Act of 1921, which provides by § 210 (42 Stat. 227, 233): “That, in lieu of the tax imposed by section 210 of the Revenue Act of 1918, there shall be levied, collected, and paid for each taxable year upon the net income of every individual a normal tax of 8 per centum of the amount of the net income in excess of the credits provided in section 216: Provided, That in the case of a citizen or resident of the United States the rate upon the first $4,000 of such excess amount shall be 4 per centum.”[1]

54*54 Plaintiff is a native citizen of the United States and was such when he took up his residence and became domiciled in the City of Mexico. A demand was made upon him by defendant in error, designated defendant, to make a return of his income for the purpose of taxation under the Revenue Laws of the United States. Plaintiff complied with the demand, but under protest, the income having been derived from property situated in the City of Mexico. A tax was assessed against him in the sum of $1,193.38, the first installment of which he paid, and for it, as we have said, this action was brought.

The question in the case, and which was presented by the demurrer to the declaration is, as expressed by plaintiff, whether Congress has power to impose a tax upon income received by a native citizen of the United States who, at the time the income was received, was permanently resident and domiciled in the City of Mexico, the income being from real and personal property located in Mexico.

Plaintiff assigns against the power not only his rights under the Constitution of the United States but under international law, and in support of the assignments cites many cases. It will be observed that the foundation of the assignments is the fact that the citizen receiving the income, and the property of which it is the product, are outside of the territorial limits of the United States. These two facts, the contention is, exclude the existence of the power to tax. Or to put the contention another way, as to the existence of the power and its exercise, the person receiving the income, and the property from which he receives it, must both be within the territorial limits of the United States to be within the taxing power of the United States. The contention is not justified, and that it is not justified is the necessary deduction of recent cases. In United States v. Bennett, 232 U.S. 299, the power of the United States to tax a foreign built yacht owned and used during the taxing period outside of the 55*55 United States by a citizen domiciled in the United States was sustained. The tax passed on was imposed by a tariff act,[2] but necessarily the power does not depend upon the form by which it is exerted.

It will be observed that the case contained only one of the conditions of the present case, the property taxed was outside of the United States. In United States v.Goelet, 232 U.S. 293, the yacht taxed was outside of the United States but owned by a citizen of the United States who was “permanently resident and domiciled in a foreign country.” It was decided that the yacht was not subject to the tax — but this as a matter of construction. Pains were taken to say that the question of power was determined “wholly irrespective” of the owner’s “permanent domicile in a foreign country.” And the Court put out of view the situs of the yacht. That the Court had no doubt of the power to tax was illustrated by reference to the income tax laws of prior years and their express extension to those domiciled abroad. The illustration has pertinence to the case at bar, for the case at bar is concerned with an income tax, and the power to impose it.

We may make further exposition of the national power as the case depends upon it. It was illustrated at once in United States v. Bennett by a contrast with the power of a State. It was pointed out that there were limitations upon the latter that were not on the national power. The taxing power of a State, it was decided, encountered at its borders the taxing power of other States and was limited by them. There was no such limitation, it was pointed 56*56 out, upon the national power; and the limitation upon the States affords, it was said, no ground for constructing a barrier around the United States “shutting that government off from the exertion of powers which inherently belong to it by virtue of its sovereignty.”

The contention was rejected that a citizen’s property without the limits of the United States derives no benefit from the United States. The contention, it was said, came from the confusion of thought in “mistaking the scope and extent of the sovereign power of the United States as a nation and its relations to its citizens and their relations to it.” And that power in its scope and extent, it was decided, is based on the presumption that government by its very nature benefits the citizen and his property wherever found, and that opposition to it holds on to citizenship while it “belittles and destroys its advantages and blessings by denying the possession by government of an essential power required to make citizenship completely beneficial.” In other words, the principle was declared that the government, by its very nature, benefits the citizen and his property wherever found and, therefore, has the power to make the benefit complete. Or to express it another way, the basis of the power to tax was not and cannot be made dependent upon the situs of the property in all cases, it being in or out of the United States, and was not and cannot be made dependent upon the domicile of the citizen, that being in or out of the United States, but upon his relation as citizen to the United States and the relation of the latter to him as citizen. The consequence of the relations is that the native citizen who is taxed may have domicile, and the property from which his income is derived may have situs, in a foreign country and the tax be legal — the government having power to impose the tax.

Judgment affirmed.

MR. JUSTICE McREYNOLDS took no part in the consideration or decision of this case.

[1] The following regulation, No. 62, promulgated by the Commissioner of Internal Revenue under the Revenue Act of 1921, provides in Article 3: “Citizens of the United States except those entitled to the benefits of section 262 . . . wherever resident, are liable to the tax. It makes no difference that they may own no assets within the United States and may receive no income from sources within the United States. Every resident alien individual is liable to the tax, even though his income is wholly from sources outside the United States. Every nonresident alien individual is liable to the tax on his income from sources within the United States.”

[2] Section 37, Tariff Act of August 5, 1909, c. 6, 36 Stat. 11, 112, provided in part as follows: “There shall be levied and collected annually on the first day of September by the collector of customs of the district nearest the residence of the managing owner, upon the use of every foreign-built yacht, pleasure-boat or vessel, not used or intended to be used for trade, now or hereafter owned or chartered for more than six months by any citizen or citizens of the United States, a sum equivalent to a tonnage tax of seven dollars per grosston.”

________________________________________________________________________

390 F.2d 631: Felix Benitez Rexach, Defendant, Appellant, v. United States of America, Plaintiff, Appellee

United States Court of Appeals First Circuit. – 390 F.2d 631

March 11, 1968

Walter L. Newsom, Jr., San Juan P.R., with whom Rene Benitez Rexach, San Juan, P.R., and Brown, Newsom & Cordova, San Juan, P.R., were on brief, for appellant.

Mitchell Rogovin, Asst. Atty. Gen., with whom Francisco A. Gil, Jr., U.S. Atty., and Meyer Rothwacks, Thomas Silk, Louis M. Kauder, John J. McCarthy and Jerome H. Fridkin, Attys., Dept. of Justice, were on brief, for appellee.

Before ALDRICH, Chief Judge McENTEE and COFFIN, Circuit Judges.

ALDRICH, Chief Judge.

1This is an appeal by permission under 28 U.S.C. 1292(b) from the denial of defendant’s motion for a summary judgment dismissing the complaint. The record consists of certain stipulations and exhibits, and the testimony of the defendant, warranting the following findings.1
2Felix Benitez Rexach, hereafter taxpayer, a native-born Puerto Rican, became an American citizen by virtue of the Jones Act of March 2, 1917, 48 U.S.C. 731 et seq. In 1944 he left Puerto Rico and became a resident of the Dominican Republic, where he remained until 1961. In July 1958 he executed a written renunciation of his American citizenship before United States consulate official in the Dominican Republic pursuant to the Immigration and Nationality Act of 1952, 8 U.S.C. 1481(a)(6). A certificate of loss of nationality was duly approved by the Department of State. On July 26 taxpayer was decreed to be a citizen of the Dominican Republic. Thereafter, he naturally suffered certain losses of status and benefits as a consequence of being declared a non-resident alien of the United States.
3Taxpayer was engaged in large scale contracting activities in the Dominican Republic in connection with the then dictator, Trujillo. In 1961 Trujillo was assassinated. The following year taxpayer applied for an American passport, claiming that his 1958 renunciation was not voluntary but had been compelled, against his will, by economic pressure and physical threats that he feared to resist. The United States Consul denied his application, and taxpayer appealed to the Department of State. The Board of Review on the Loss of Nationality took taxpayer’s testimony and accepted it, as a result of which his certificate of loss of nationality was cancelled, and his passport application granted. There followed the present chapter. The Commissioner of Internal Revenue assessed taxpayer with an income tax on account of income earned in the Dominican Republic during the years following his renunciation of citizenship, alleged to be due because of his continued American citizenship. Cook v. Tait, 1924, 265 U.S. 47, 44 S.Ct. 444, 68 L.Ed. 895. Taxpayer not responding, the present suit was brought to foreclose liens in payment of such taxes. Taxpayer moved, unsuccessfully, for summary judgment on the claim that no taxes could be due.
4Taxpayer concedes that as a matter of law he is precluded by the record from claiming that he ever ceased to be a United States citizen, and concedes that during the period in question he was a de jure citizen. However, he says that he was not a ‘de facto’ citizen.
5’Appellant does not claim that his citizenship was lost as a result of the renunciation, but that as a result of the determination of the Secretary of State and consequent issue of the Certificate of Loss of Nationality, the United States was freed of its obligations to him as a citizen and he in fact lived and existed as an alien to the United States during the period in question.’
6He concludes that since the United States ‘owed’ him, or apparently owed him, no citizen’s protection, he, in turn, owed no tax.
7While there is language in Cook v. Tait, supra, indicative that these are reciprocal obligations, the Court also observed that ‘government by its very nature benefits the citizen * * *.’ 265 U.S. at 56, 44 S.Ct. at 445. We cannot agree that the reciprocal obligations are mutual, at least in the sense that taxpayer contends. It is sufficient that the government’s stem from its de jure relationship without regard to the subjective quid pro quo in any particular case. We will not hold that assessment of benefits is a prerequisite to assessment of taxes.2
8Affirmed.

2 thoughts on “Does Cook v. Tait really mean that citizenship-based taxation is constitutional in all cases?

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