Monthly Archives: April 2013

Cook v. Tait 8: Does citizenship-based taxation cross the boundaries of tax justice?

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.


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 Accidental Kenyan

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.

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Coming soon: The #PFIC Memorial in Washington, DC

I have never met a Homelander who would believe the story referenced in this tweet.

Q. What do the U.S. and Eritra have in common?

A. They both terrorize their citizens abroad.



Roger Conklin: This battle is far from over. In fact it hasn’t really begun.

This post is a “follow up” to an earlier post called: “Why are we so cruel to U.S. citizens living abroad.” That post also referenced the above Twitter Exchange. That post included the following poll:

The preceding twitter exchange identified at least part of the reason for citizenship-based taxation as “Congressional ignorance”. The exchange also referenced the need to get the message to the Ways and Means Committee. With the help of the advocacy of American Citizens Abroad and others Congress received many submissions on the topic of citizenship based taxation. Thanks to AbusedExpat for taking the time to transcribe excerpts from the submissions in comments starting here.

As Patrick Henry notes the comment from Jackie Bugnion of ACA rated a 10 on the “emotion scale” and was a true “Declaration of Independence” for Americans Abroad. Patrick Henry comments that:

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Excellent submissions to the ways and means committee

The deadline has no passed to submit comments to the Ways and Means Committee on Tax Reform. Comments are posted here. There were (and hopefully continue to be) a large number of letters from U.S. citizens abroad. Who knows what will happen? I am hopeful that Shadow Raider’s optimism will “carry the day”. For those who missed his comment:

Shadow Raider

@Just Me, You can keep your hopes up. The reporters who wrote that article on The Hill probably contacted both chairmen of the international tax reform working group, Devin Nunes and Earl Blumenauer, and I suspect that the Republican aide who responded is the same Devin Nunes’s assistant whom I met last year. Yes, he defends citizenship-based taxation, but he is the only aide that I met who does. His opinion is not representative of what Congress thinks about the subject, so I think we can safely ignore his comments. All other aides that I met were supportive or at least open to changing the tax system to one based on residence.

Speaking of congressional aides, most of them are young, as you noticed (20-40 years old), highly educated, motivated and friendly. Also, most of them have traveled abroad, and they live in or around DC, which has a substantial international presence. Perhaps because of these characteristics, they are open-minded about the rest of the world and are interested in new ideas. A 150-year old policy that restricts international mobility is not something that they support. I think citizenship-based taxation is not going to survive much longer.

Also, Earl Blumenauer responded himself to the article on The Hill, and his response seems positive. I think I finally found the point that makes Congress care about the subject: thecompetitiveness of Americans for jobs abroad. When Bill Alexander proposed expanding the FEIE to all kinds of foreign income in 1992, he titled his bill “Overseas American EconomicCompetition Enhancement Act”. When Jim DeMint and Gregory Meeks proposed making the FEIE unlimited in 2007, they titled their bill “Working American Competitiveness Act”. Earlier this year, Dave Camp wrote that tax reform is needed to make US workers more competitiveinternationally. Now Earl Blumenauer mentioned something similar. The Senate Finance Committee scheduled a meeting on “international competitiveness” for next month, and I don’t think they are just talking about corporations. So congressmen don’t care much about logic, simplicity or fairness in the tax code, banking problems, exports or additional tax revenue, but they don’t want Americans to be undesired for jobs outside of the US simply due to their citizenship. In the past, this problem could be mostly solved with the FEIE, but today, with FATCA and the enforcement of FBAR penalties, even excluding all foreign income wouldn’t be enough. For Americans and foreigners to be considered equally for jobs abroad, Americans abroad can’t have tax or financial reporting requirements to the US either.

The Joint Committee on Taxation should say something about the subject in its report on May 6, and the Senate Finance Committee should also say something after its meeting on May 23. I think we’re in for a pleasant surprise.

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April 17, 2013: Happy Birthday to Canada’s Charter of Rights

On Sunday Justin Trudeau became the newest leader of the Liberal Party of Canada. Canadians over the age of 55, have been denied “Freedom 55” by accident of where they were born, remember the day Justin was born. Yes, he is the son of former Prime Minister Pierre Trudeau. Love him or hate him, Trudeau Senior made his mark on Canada. His legacy was the “Canadian Charter of Rights and Freedoms”. At the time the Charter was enacted, the focus was on “individual rights”. Interestingly, many opposed the Charter because they thought that to give Canadians individual rights would make the country too much like the United States. Most would agree, on balance that the Charter has been a good thing for Canada.

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I pledge allegiance to the flag of the United States of ..


From time to time I have turned my mind to the question of what is “patriotism”. “Patriotism” is NOT blind loyalty to a government. “Patriotism” is NOT blind obedience to a government.  “Patriotism” is NOT the mindless retention of U.S. citizenship.

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