Cook v. Tait 29: “Citizenship-based taxation” or “Taxation-based citizenship” – From @IsaacBrockSoc

1. Citizenship-based taxation?

The above tweet references the following comment which is certainly “food for thought”.

A small change in vocabulary may be helpful. In point of fact, the US primarily practices RBT. More than 99.9% of tax returns are filed on by US residents. Within the US, the US tax net applies to RESIDENTS, both citizens and aliens and without distinction. It is meaningless to talk of taxing resident citizens based on citizenship when non-citizens are taxed on precisely the same basis. It is like saying we only tax people with blue eyes, but all people with eyes must pay the same tax. Within the US, it is meaningless to talk of CBT, since citizens and non-citizen residents are taxed on exactly the same basis.

The ONLY instance where the US practices CBT is in respect of NON-residents. That is a tiny fraction – fewer than a million filed returns from “compliant” non-resident citizens. With 7.6 million citizens outside the US and fewer than a million filed returns, one can only conclude that FATCA + CBT of non-residents has created is a situation of MILLIONS of US citizens hiding from the US government (7.6 million expats or duals can’t ALL be earning less than $2,500 per year…). The queue of renunciants is of course only the tip of the iceberg since almost all non-resident citizens are unquestionably non-compliant and simply live off the (US) grid and have ever done so.

Viewed in that light, the case for finding CBT to be discriminatory would seem to be a whole lot more evident since it ONLY applies to non-residents. A theoretical US resident who somehow renounced US citizenship would still be liable for precisely the same tax the next day as the day before. Citizenship is only a meaningful criterion for eligibility for taxation OUTSIDE the US; it is completely irrelevant within it. I’m sure someone who knows this better than I can check, but I’d be surprised if the domestic US tax return even asked if you are a citizen: why should they care?

2. If NOT “citizenship-based taxation”, then perhaps “taxation-based citizenship”?

The above tweet references the beginning of the discussion on whether the essence of U.S. citizenship really is just taxation. Remember that in 2004 the United States legislated a new kind of U.S. citizenship – that is the “U.S. Tax Citizen”.

Does the U.S. practice “citizenship-based taxation” or is it just “taxation-based citizenship”?

Bubblebustin suggests an answer.

We’ve had it all wrong! Unlike the rest of the world, the US practices taxation-based citizenship.

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Bubblebustin: “Taxation-based citizenship”. Wow! Why haven’t we noticed that before? Well done! Actually, this very morning I woke up with the realization that those expat Americans who are quoted in articles or surveys as being perfectly happy and willing to pay their U.S. taxes from “overseas” because “they’re American and they owe it” are actually filing and paying their U.S. taxes *in order to keep their American citizenship*. That is, indeed “taxation-based citizenship” …. which is about as un-American as it gets!

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Echoing MuzzledNoMore, great phrase you coined @Bubblebustin, re;
“… “Taxation-based citizenship”..”

Got to get that into common usage! Very insightful and useful turn of phrase.
Thanks!

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Leave it to you, dear bubblebustin, one among others of the most creative here, to come up with this descriptive term — CBT turned on its head.

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Taxation-Based Citizenship — TBC

Best one yet, Bubblebustin. It expresses perfectly the mindset of the U.S. government and those shadowy figures behind the U.S. government. Americans at home and abroad are nothing but tax fodder (some are both tax and cannon fodder). And they all thought they were being “loved” for their devotion to flag and country.

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Thanks everybody, but can we make the argument that Taxation-Based Citizenship is correct? I’ve struggled with the term CBT for quite some time and always thought there’s a better, less incriminating way to frame the issue. This all ties into the Human Rights Complaint that I’m actually just reading through now, which is very inspiring in terms of freedom, equality.

I think the argument here would be whether one can still enjoy US citizenship regardless of their personal tax situation. Can someone be denied certain benefits of US citizenship if they aren’t tax compliant?

Language matters. It’s important that we be clear in how we describe the taxation of U.S. citizens abroad.

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