Discriminatory Taxes and Congress: Do as I Say, Not as I Do

Abstract

For decades, overseas Americans and others have appealed to Congress to act regarding the U.S. extraterritorial tax system. The long-standing system discriminates against persons of U.S. nationality living outside the United States, subjecting them to a tax regime that is more burdensome and punitive than for persons residing in the United States (of any nationality) and persons residing outside the United States who are not U.S. nationals. But their appeals are disregarded. No action to alleviate the situation has ever been taken (or, with few exceptions, even proposed), and nearly all members of Congress remain silent on the issue.

In contrast, in the past few months, multiple members of Congress have voiced objections to tax policies recently adopted by other countries that are considered discriminatory against Americans. Their objections are vociferous, and they have invested considerable time and effort into proposing alternatives and threatening retaliation if their demands are not met.

Unless these lawmakers seek to end all tax policies that discriminate against Americans - with at least equal indignation and effort – their demands cannot be understood as anything other than hypocritical. Any bill introduced to Congress seeking to end taxes that discriminate against Americans should encompass all taxes that discriminate against Americans, not just some. At a minimum, it should include the discriminatory taxes that are within the direct power of Congress to change.

Otherwise, when it comes to discriminatory taxation, for Congress, it’s a case of “Do as I say, not as I do.”

Keywords: Extraterritorial Taxation, Nationality-based taxation, Discrimination, Digital Services Taxes, Global Minimum Tax, International Taxation, Canada, Underused Housing Tax

JEL Classification: D63, E62, F22, F53, F54, H24, H25, H30, H87, K33, K34