I came across a 2023 article published in the Florida Tax Review by Robert T. Kudrie of the University of Minnesota. The article is available here.

The title of the article is:

“Citizenship Taxation, Globalization and Inequality”

https://scholarship.law.ufl.edu/cgi/viewcontent.cgi?article=1410&context=ftr

Impressions based on a fairly quick read …

Despite its title the article seems to focus more on the importance and enhancement of tax enforcement on U.S. residents with “offshore income and assets” than on Americans abroad with income and assets in their country of residence. Put another way, I understand the article to more of an attempt to argue for enhanced enforcement of “resident-based taxation” and less of an argument for “citizenship-based taxation”. (The thesis seems to be more about ensuring that residents are taxed on their complete worldwide (offshore) income, rather than an argument that citizens living outside the United States should be taxed on their non-U.S. source income.) By confusing this issue, the article becomes one more of a series of articles that claims to justify “citizenship-based taxation” because U.S. residents are not paying tax on their non-U.S. source income.

There is very little analysis on the question of why the United States should be imposing its worldwide tax regime on nonresidents.

The author argues that Americans abroad living in select countries (those with tax systems similar to the U.S. system) should be subject to the tax system of their country of residence (residence-based taxation).

Generally the article replicates the U.S. tax academics’complete misunderstanding of how the U.S. extra-territorial tax regime affects Americans abroad. (He lives in the “echo chamber” of Avi-Yonah, Kirsch, Zelinsky, etc.) He makes not the slightest mention that the U.S. (citizenship based) extra-territorial tax regime is really about the application of U.S. taxation to the non-U.S. source income received by people who do not live in the United States.

That said, he does seem to recognize that as a matter of lack of connection to the United States, certain U.S. citizens abroad (those with less than three years of U.S. residence after the age of 18) ought to be able to cease being taxed under the U.S. tax rules and be allowed to live solely under the tax regimes of their country of residence (a good thing).

The author concludes with:

Vii. summinG up

Human mobility across states is increasing even as skepticism about some aspects of globalization grows. Concern about material inequality within states is also high and growing.

The policy proposals presented here attempt to increase the fiscal grip of the U.S. government on high income and wealth citizens who have benefited from the U.S. national environment while reducing tax interference with most Americans who choose to live abroad. The suggested policies also change the rules for those relinquishing citizenship to recover more fully tax revenue that should have gone to the U.S. Treasury. Revised policies should allow those below the top ten percent of the U.S. citizenry in income and wealth to live and pay taxes as locals in foreign countries with personal tax systems similar to that of the U.S. The very well off and those who reside in low tax jurisdictions should stay in the U.S. system. Any shift to a foreign system should entail mark-to-market capital gains taxation. Relinquishing U.S. citizenship should require the payment of both deemed capital gains and deemed estate taxation without step-up. None of this will be possible unless administration is tightened and enforcement is greatly increased. Truly effective enforcement will require greater international cooperation, but U.S. initiatives should meet success among states striving to reduce tax escape.

Generally good news for Americans abroad …

John Richardson – Follow me on X.com @Expatriationlaw