Extraterritorial Taxation #7: Inherently Suspect
SEAT Working Paper Series #2023/7 (June 5, 2023).
17 Pages Posted: 5 Jun 2023
Date Written: June 5, 2023
This is the seventh in a series of sixteen papers about the U.S extraterritorial tax system.
The classification of “citizens” as it is contained in federal tax rules constitutes a suspect classification based upon country of origin (or nationality) and, as such, it is subject to strict scrutiny by a court. The United States has no compelling interest in taxing the non-U.S. income of persons living overseas whose country of origin is the United States. While the United States has an interest in preventing tax abuses by wealthy persons whose fortunes were built using U.S. resources, the U.S. extraterritorial tax system’s classification of overseas persons based upon country of origin is not suitably tailored to serve that interest.
Further, an alternative perspective on equal protection further exposes the profound irrationality and immorality of the U.S. extraterritorial tax system.
The prevention of tax abuses by wealthy citizens can be achieved through a system of residence-based taxation that respects the fundamental rights of all Americans, wherever they live.
Keywords: Extraterritorial taxation, Citizenship-Based Taxation, Residence-Based Taxation, Expatriation, Equal Protection, Strict Scrutiny, Suspect Classification, Country of Origin, Nationality, Sovereignty, IRS, Self-Determination
JEL Classification: D63, E62, F22, F54, G21, G32, G28, H24, H25, H26, H87, J26, J61, K33, K34, K37
Suggested Citation: Suggested Citation