Should Overseas Americans Be Required to Buy Their Freedom?
Snyder, Laura; Alpert, Karen; and Richardson, John, "Should Overseas Americans Be Required to Buy Their Freedom?" 172 Tax Notes Federal 223 (2021).
17 Pages Posted: 28 Jul 2021
Date Written: July 12, 2021
The United States is the only developed country to practice a system of extraterritorial taxation that treats the tax residents of other countries as simultaneously subject to U.S. worldwide taxation based on citizenship. This extraterritorial tax system is a separate and more punitive tax system than that applied to U.S. residents and imposes unwarranted restrictions on the right of U.S. citizens to live where they choose. For these reasons, the taxation of nonresident citizens must end.
Among the impediments to ending extraterritorial taxation is the widespread assumption that any legislative solution must be revenue neutral. This assumption is, for the most part, unchallenged. This belief, however, leads to a trap from which there is no escape. Further, it misconstrues the problem as one of mere payment of tax rather than of fundamental immorality and injustice, and it demonstrates a misunderstanding of the purpose of taxation and of how the U.S. federal government is funded.
The U.S. extraterritorial tax system appears to have been conceived and continues to exist only to discourage Americans from living outside the United States — a human right — and to punish those who dare to do so.
It is imperative to challenge the belief that revenue neutrality is a condition for ending extraterritorial taxation. Not to do so is to doom efforts to move the United States to a more just tax system for all its citizens.
Keywords: Revenue Neutrality, Extraterritorial Taxation, Citizenship-Based Taxation, Residency-Based Taxation, Morality, Modern Monetary Theory, Department of Treasury, Internal Revenue Service, Citizenship, International Taxation, Human Rights, Taxpayer Bill of Rights
JEL Classification: E42, E50, H20, H24, H30, H31, H50, H60, H61, H62, K33, K34
Suggested Citation: Suggested Citation