Taxing Those Who Leave The U.S.

by Herbert I. London
September 29, 2011 at 3:30 am

http://www.gatestoneinstitute.org/2460/us-expatriates-taxes

Suppose you oppose the tax-and-spend policies of New York State and have decided to leave. Although tax collectors will pursue you and you will have to demonstrate that you spend more than half your time elsewhere, you can relocate. An American citizen can march with his feet to a state system consistent with his economic and political philosophy.

But suppose you want to vote with your feet outside the United States? Suppose you do not agree with Obama's tax policy or universal health care or military policy and wish to relocate. You will find that taxes are imposed based on citizenship, not place of residence. You may leave the United States but the United States will not leave you. Taxes will still have to be paid to a government with which you disagree. In fact, the United States is the only country that taxes the global income of its citizens.

According to the IRS: "If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad. Your worldwide income is subject to U.S. income tax, regardless of where you reside."

There is evidence that policies are moderated by the ability of citizens to leave their residence and find a congenial home for tax policy or other policy concerns. The French "wealth tax" was so onerous, that many wealthy residents moved to Belgium – the policy was soon was reformed.

According to Forbes, after Obama's tax laws were passed, many Americans gave up their citizenship rather than pay taxes at an extortionate rate. Their preference, however – in most instances – was to retain their citizenship even if they relocated.

The American government has, in effect, a leash around its citizens. It says even if you wish to express your freedom of conscience by moving to another nation, the IRS will not let go. American citizenship means the payment of American taxes even if you are living in Sydney or Saigon and have decided not to return to the United States.

Some have argued that if the U.S. abandoned its present policy the rich would relocate to avoid the tax collector. This may be true but most would probably not relocate as the value of being in the US is worth the additional expense, assuming, of course, a tax rate that isn't crushing. It just seems as if there is something odd about the present arrangement in the land of the free. It is also a condition about which most Americans are ignorant, until that time when exasperation leads you to leave. At that point the long hand of government reaches out for you wherever you may be.

Perhaps that explains why Mark Twain once asked "What is the difference between a tax collector and a taxidermist?" The answer: "A taxidermist leaves the skin." President Ronald Reagan once noted that "the government is like a baby's alimentary canal, with a happy appetite at one end and no responsibility at the other." Clearly a government that continues to impose its will on citizens who wish to leave the nation in body and soul is irresponsible.

It makes sense to tax those who live here and wish to retain their citizenship, but it makes very little sense to tax those who oppose the policies of the nation and, as a consequence, have moved elsewhere.

Herbert London is president emeritus of Hudson Institute, senior fellow at the Manhattan Institute and author of the book Decline and Revival in Higher Education (Transaction Books).

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