May 12, 2010 - Phil Hodgen

The Case Against Taxing Citizens, by Reuvan S. Avi-Yonah

Law school professor writes a paper.  Reuvan S. Avi-Yonah.  University of Michigan Law School.  Download the paper here.  There is a link to a PDF on that web page.

In the article he argues that the current system of taxing U.S. citizens who reside outside the United States is dumb, and an artifact of history.  (Note that he doesn’t say “dumb.”  He uses scholarly language to convey that message).

Yep.  He’s right.

What I see when I travel

When I travel abroad I meet bankers.  There are lots of people from Britain, Canada, Australia, New Zealand, and all over Europe working in banks. Very, very few Americans.

Guess what?  A British citizen who gets a job working for a bank in the UAE doesn’t pay U.K. income tax.  An American working at that same bank in Abu Dhabi will pay U.S. income tax.

From the individual’s perspective, there is a huge economic advantage to that British banker accepting a job offer in Abu Dhabi.  That advantage does not exist for a U.S. citizen.

From the employer’s perspective outside the United States, it means that getting a U.S. citizen to accept a job posting outside the United States will be much more expensive than getting a “Yes” answer from a non-U.S. person.

Invoking Bismark, Kissinger, and everyone in between

If your economic, political, and cultural aim is Total World Domination 🙂 wouldn’t it make sense that you’d WANT U.S. citizens self-deploying themselves all over the world?

Or let me rephrase this in a touchy-feely way, in line with current political cant.  If you want the rest of the world to love us, wouldn’t it make sense to have millions of U.S. citizens living all over the world so people outside our borders can see that we’re pretty nice people?

Never mind the bollocks

Note that I haven’t talked about the tax compliance simplicity that would result from taking Professor Avi-Yonah’s suggestion.  Millions of Americans abroad wouldn’t be caught up with the FBAR kerfluffle.