Mission impossible for the IRS: administering a worldwide tax system fairly

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Dear Congress,

In a recent, eloquent article for Tax Notes, Laura Snyder, President of Stop Extraterritorial American Taxation and a member of the Board of Tax Fairness for Americans Abroad, argues that the IRS’s failure to administer a worldwide tax system raises constitutional issues and has serious repercussions not only for overseas Americans but also for the U.S. tax system as a whole. She bases this analysis on recent comments by none other than the IRS’s own National Taxpayer Advocate (NTA).

In her recent report to Congress, the NTA, Erin Collins, makes clear that citizenship-based taxation has a profound effect on overseas Americans, including driving many to renounce U.S. citizenship “to escape the complexity.”

Laura argues that this occurs in violation of the 14th Amendment, which guarantees citizenship to every person born or naturalized in the United States. As the U.S. Supreme Court held in Afroyim v. Rusk, the 14th Amendment completely controls citizenship, placing it beyond the power of any governmental unit or anyone else to destroy. No governmental unit or anyone else may impose any obligation that shifts, cancels, dilutes, destroys, abridges, or affects citizenship.

As most people reading this blog will be aware, however, double taxation, combined with FATCA, FBAR, PFIC, GILTI and other filing hassles essentially makes second-class citizens out of Americans abroad. This is the reason that Tax Fairness for Americans Abroad exists: If we felt we were getting a fair deal already, we would not need to exist.

Laura argues that ultimately, because of the impossibility of administering a worldwide tax system, the IRS is one of the biggest victims of citizenship-based taxation.

We sincerely urge every member of Congress to read Laura’s article — as well as the NTA’s recent report — to understand the gravity of a tax system so unfair and broken that tends of thousands of U.S. citizens abroad feel they are being forced to relinquish their U.S. citizenship in order to be able to lead normal lives. It doesn’t have to be this way. Rep. Darin LaHood’s Residence-Based Taxation for Americans Abroad Act provides an out. It’s time to use it. Urgently. A citizen is a terrible thing to waste.

Sincerely,

Tax Fairness for Americans Abroad

LINK TO LAURA’S FULL ARTICLE