Paul L. Caron

Thursday, September 5, 2013

Harvey: Worldwide Taxation of U. S. Citizens Living Abroad

J. Richard (Dick) Harvey (Villanova), Worldwide Taxation of U. S. Citizens Living Abroad: Impact of FATCA and Two Proposals, 5 Geo. Mason J. Int'l Comm. L. ___ (2013):

This article addresses several questions, including:

  • Do US citizens living abroad face significant tax compliance burdens and have those burdens been further increased by FATCA?
  • Do ultra-wealthy US citizens have an incentive to expatriate under current law, and should a deemed estate tax be imposed at the time of their expatriation?
  • Does FATCA justify a change from a worldwide system of individual taxation to a residence-based system?
  • Do the cumulative burdens on US citizens abroad justify legislative action?
  • If so, what law changes should be considered?

The article concludes the answers to the first four questions are: (i) yes and yes, (ii) yes and yes, (iii) no, and (iv) yes. As to the fifth question, the article does not explicitly take a position on a worldwide vs. a residence-based system of taxation. Rather, two proposals are made. The first assumes Congress retains the existing worldwide tax system, while the second assumes Congress takes the unlikely step of adopting a residence-based tax system.

The goal of each proposal is to (i) reduce compliance burdens for citizens abroad, and (ii) minimize fairness and revenue issues. For example, if the US adopts a residence-based system, safeguards will clearly be necessary to avoid a material loss in tax revenue attributable to ultra-wealthy US citizens moving their residence abroad.

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Do US citizens expect the Marines to save them in times of trouble whether they have lived in the US the last decade or not? My general impression is that they do, and that the US use its resources to help its citizens in crisis whether ex pats or not. Should there be a free lunch?

Posted by: GSo | Sep 7, 2013 1:23:01 AM