Assistance required. Many people defend (not justify) citizenship taxation on the basis that:
- All U.S. citizens are subject to the same provisions of the Internal Revenue Code
- Americans abroad are U.S. citizens
Therefore, Americans abroad should be subject to the same provisions of the Internal Revenue Code as Homelanders.
Or in Homelanderspeak:
All U.S. citizens are subject to exactly the same set of tax laws. What could be unjust about that? We are ALL citizens. Therefore, we should ALL be subject to the same set of laws.
Could you please address your mind to the following question:
What is the best response to this argument? How can one best explain that it is wrong to justify citizenship taxation on the basis that ALL citizens are subject to it in the same ways?
What follows is my comment (final thought to 2014) to the post referenced in the above tweet. I believe that it is becoming more and more relevant.
1. Citizenship-based taxation?
The above tweet references the following comment which is certainly “food for thought”.
The above tweet references a post at the “Citizenship taxation Facebook Group“.
The post raises questions that include the following:
Can a Swiss bank be sanctioned because it fails to discriminate against U.S. citizens? Can the United States ensure that its citizens be subjected to discrimination because they are U.S. citizens? This is what is happening with FATCA and the the FATCA IGAs.
Should U.S. citizens be required to live in a world where, if they are outside the United States, they are permitted only the freedoms that the U.S. Government allows?
Interesting questions indeed.
The post about the “Non-prosecution agreement” entered into between the U.S. Department of Justice and thw Swiss Bank EKS. This was discussed on Jack Townsend’s blog as follows:
Mr. Townsend reports that:
The above tweet references a fascinating discussion about the best Thomas Jefferson quotes. Homelander lawyers often justify U.S. citizenship-based taxation by citing the 1924 U.S. Supreme Court decision in Cook v. Tait. The world in 1924 is very different from the world today. What is meant by “taxation” in 1924 is very different from what “taxation is today”. Neither the factual context nor the reasoning in Cook v. Tait bears any relation to the world today. The quote referenced in the above tweet is:
The above tweet references the following comment at Robert Wood’s blog.
The comment includes:
Tax loopholes? You must be joking Robert! Pity the poor US Slave (sorry, Citizen) who is self employed and happens to live in New Zealand (or any other country on the planet except for the 25 without an International Social Security agreement with the US). Having paid their taxes to their country of residence, they then face paying US self employment tax to the US as there is no exemption. In the case of New Zealand this is 33% local tax + 15.3% US self employment, a marginal tax rate of almost 50%.
It gets better – Firstly, non-US residents are not eligible for Medicare anyway. Secondly, even if they qualify for Social Security, New Zealand will simply deduct the benefit from their New Zealand state pension which has been funded and paid for from general taxation.
So, a person may spend half a lifetime paying 15.3% of their income in self employment taxes to receive NOTHING in return. Oh, did I mention PFIC, FBAR and all the other “gotchas” faced by the unfortunate US slave in New Zealand. Is it any wonder why people are willing to pay almost anything to get out from under this financial terrorism?
This comment is a reminder that there are no consistent principles for Americans abroad are taxed by the U.S. It depends completely on what country they live in. The situation described in this comment would NOT be shared by a U.S. person in Canada.
The “country by country” discrepancies in how Americans abroad are taxed, compounds the pre-existing injustice.
This is one more reason why it’s impossible to live as a U.S. citizen abroad.
Renounce and rejoice!