Cook v. Tait 23: The evolution of citizenship, taxation and citizenship taxation

This post references the following two posts on the site.

The post referenced in the above tweet discusses the evolution of U.S. tax law since 1924.

The post referenced in the above tweet discusses the evolution of U.S. citizenship law since 1924.

The discussion at Citizenship Solutions begins with:

As Charles Adams argued in his classic book, “For Good and Evil: The Impact of Taxes On The Course Of Civilization“, as go the taxing practices of a nation, so goes the nation. Given that taxes are a certainty, tax laws are a certainty, and those laws speak volumes about the “state of the nation” and the “values of the nation”. Tax laws evolve on an almost daily basis. The changes in tax laws reflect changes in societal values.

(See the videos of Mr. Adams which are referenced in the above tweet.)

In 1924, the Supreme Court of the United States, per Justice McKenna ruled in Cook v. Tait that U.S. “citizenship taxation” was constitutional. Since that time Cook v. Tait has been cited to justify the constitutionality, although not necessarily the propriety, of “citizenship taxation”. Note that “citizenship taxation” contains both the words “citizenship” and “taxation”. As a result, Justice McKenna’s decision along with the relevant statutes, may tell us a great deal about what “taxation” and “citizenship” meant in 1924.

Cook v. Tait – Justice McKenna’s decision

Cook v. Tait was argued on April 15, 1924 and decided on May 5, 1924 (those were the days).  The taxpayer plaintiff “Cook” was described by Justice McKenna as:

a native citizen of the United States, and was such when he took up his residence and became domiciled in the city of Mexico.

Note that there is no evidence that Cook had become a naturalized citizen of Mexico or that he had taken an oath of allegiance to Mexico. (The relevance of this will be clear later.)

In holding that Cook was a taxable U.S. citizen, Justice McKenna ruled:

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 relation 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, nor 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.

I have bolded the parts that I think are most important.

Cook v. Tait is now almost 100 years old. The case was decided in the context of the world as it was in 1924. The world has changed and changed a great deal. The concepts of both “taxation” and “citizenship” have evolved.

The purpose of this post is to explore:

1. How “taxation” has evolved since 1924.

2. How “citizenship” has evolved since 1924.

3. How the changes in each of “taxation” and “citizenship” would and should lead to a different result in 2015.

The post at Citizenship Solutions ends with:

Cook v. Tait was decided 100 years ago. The concept of a “citizen” has evolved since 1924. The concept of “taxation” has evolved since 1924. Each of these has evolved in a way that makes “citizenship taxation” untenable and bad tax policy.

That said, BOTH “citizenship” and “taxation” have evolved to make “citizenship taxation” untenable. In its existing form “citizenship taxation” is primarily the U.S. harassment of citizens and residents of other countries. For reasons of diplomacy alone, U.S. “citizenship taxation” must be abolished.

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