Is the taxation of US citizens abroad constitutional?

The United States of America started as a country very sensitive to tax issues. Thirteen colonies of King George’s England rose up in unified rebellion because the Crown did not respect the rights of colonists. Furthermore, they resented this extra-territorial taxation and insisted upon a basic principle of English democracy, “No taxation without representation”. This protest was in spite of Parliament’s claim to have protected the Colonists in the war with France.  The slogan helped to incite the American Colonies to rebel against the King and to declare independence in 1776.

Now 235 years later, the numbers of Americans living in foreign countries has grown to six million and Congress believes that it has right to tax them because it “protects”  them (for a history of taxation of non-resident citizens see renunciationguide.com)–mind you, Congress does not provide customary services, such as roads, post office, or social welfare, which are available to residents. I recently asked where the US Federal Toronto office for unemployment, food stamps and welfare could be located and found that no one has had a reply. Yet there are phone numbers to call for help from the IRS if you are living abroad.  It’s like that bad friend who borrows from you but never lends when you need help.

Now my question in this post is whether this extra-territorial taxation is legal in the first place.  From the standpoint of international law, it is highly suspect and the only other nation in the world which taxes its non-resident citizens is Eritrea, and most civilized people see Eritrea’s attempts to tax their citizens living abroad as “extortion“.  Yet since the US doesn’t care what the rest of the world thinks, we will get no where with that approach: you cannot shame this government.  But if we approach it from a constitutional perspective, then we have to deal with the superstructure of lower and Supreme Court case law wherein even legal experts disagree.  My contention in this post is that the Constitution belongs to the People and the People are the final arbiters of what it means. The Supreme Court gets its power from the Constitution and the Constitution gets its power from the People.  Therefore, if I can convince enough People that what I think it means is correct, then I will be satisfied.  Here then are my arguments:

Taxing people residing outside of the United States violates the fundamental right of “no taxation without representation”.   Very simply put, the US census doesn’t count those of us who live outside the United States and since the US Census determines the number of representatives for each state on the basis of population, the non-resident citizen does not have representation.  This is a fundamental principle of Constitutional law that extra-territorial taxation violates to the core.  I was alerted to this by a comment on Phil Hodgen’s blog (see below).

Applying the so-called exit tax, created by Heroes Earnings Assitance and Relief Tax Act of 2008, to non-resident former Americans is unconstitutional because it violates the fundamental right to expatriate.  From the standpoint of American law, the right to expatriate is supported by the Declaration of Independence.  It is also supported by an Act which Congress passed in 1868.  It says explicitly:

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That any declaration, instruc- tion, opinion, order, or decision of any officers of this government which denies, restricts, impairs, or questions the right of expatriation, is hereby declared inconsistent with the fundamental principles of this government.

Ironically, Congress was trying to protect those who would leave their countries to become citizens of the United States and to forbid other countries from not permitting their expatriation.  Now, the requirement that former U.S. citizens fill out Form 8854 to determine if they are covered expatriates or not, is a violation of this 1868 law, which to my knowledge has never been repealed.  I have other objections to the Form 8854: for one, it requires that I list all my assets, which I flatly refuse to do on the grounds that the IRS has no right to that information (has anyone in the IRS or Congress ever read the Fourth Amendment?).  But my understanding of fundamental rights, is that government is not allowed to tax you, require fees, or prevent you in any other way from exercising them.  For example, no impediment is allowed to hinder the right to vote.  This would apply also to the $450 renunciation fee, in my opinion, but you could whistle till you’re blue in the face, the State Department won’t budge.  The $450 is an impairment to expatriation and it is a violation of the 1868 law quoted above, which is based upon a “fundamental principle of this government”.  The exit tax is likewise an impediment.

Finally, in case anyone is worried that the Bill of Rights does not support the right to “no taxation without representation” or the right to expatriate, don’t ever forget that the Ninth Amendment covers those fundamental rights:

The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.

Thus, the Bill of Rights supports these fundamental rights and the attempt by Congress and the IRS to collect taxes from non-residents and an exit from those who would renounce their citizenship, is in my opinion unconstitutional.  Class action lawsuit anyone?

See also:  William Thomas Worster, “The Constitutionality of the Taxation Consequences for Renouncing U.S. Citizenship“, Florida Tax Reviw 9 (2010) 923-1020 (can be downloaded at link: see “One-Click Download”).

Appendix:  Comment by Jeff D. TomAugust 8, 2011 | 3:42 am, on Phil Hodgen’s blog:

DISCLAIMER: The following is lay opinion and not legal advice; I am not a/your lawyer, and never played one on TV.

I fully agree with and support your constitutional arguments, but would go much further as to the issue of the authority (nay, lack thereof!) of the US government to impose taxes or any law whatsoever on bona fide residents of a foreign country and especially as regards their activities abroad. This goes for FuBAR, FATCA, and double taxation.

According to Article I, Section 2, Paragraph 3 of the US Constitution « Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers, which shall be determined by adding to the whole Number of free Persons, including those bound to Service for a Term of Years, and excluding Indians not taxed, three fifths of all other Persons. The actual Enumeration [Census] shall be made within three Years after the first Meeting of the Congress of the United States, and within every subsequent Term of ten Years, in such Manner as they shall by Law direct.”

Americans abroad are not counted in the Census, thus are not proportionally represented in Congress as the Constitution provided. Many are unable to vote due to the complexities of registration or inability to prove a home precinct in the US. This means that the legislative process that resulted in extraterritorial tax laws was inherently flawed and thus the legislation affecting those in the disenfranchised category null and void, at least and especially as such legislation may be to their detriment.

Some might argue that the 16th Amendment “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.” would void my argument of the last paragraph. I disagree, believing that the intent of the language of the 16th Amendment is to allow the federal government to maintain a progressive tax system, allowing the taxation of entities according to their level of income; regardless of how populous each State might be, in order to distribute funds to finance projects in whatever state required.

The 16th Amendment supersedes only the “…direct taxes shall be apportioned among the several states” part of Article 1, Section 2, and the part of Article 1 Section 9 that states “No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or enumeration herein before directed to be taken.” The 16th Amendment does not use the word “Representative”, “Representation”,”Representatives”, or “Congress”. It does not seek to strip the citizenry of proportional representation as provided by Article 1, Section 2!

Furthermore, according to the 1st Amendment “Congress shall make no law … abridging the freedom of speech…. or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.” This means that those laws which Congress has established to direct the conduction of a Census that does not include Citizens resident abroad are unconstitutional because they abridge the right to petition the government for a redress of grievances (by abridging the access of Americans abroad to their constitutionally-mandated proportional representation). As Congress’ laws for the conduction of the Census are unconstitutional, there has been no valid Census, again meaning that Congress is not properly apportioned as the Constitution requires.

Therefore Congress loses legitimate authority, the legislative process is inherently flawed, and the IRS, FBAR, expatriate taxation, and even FATCA thus have no valid legislative mandate to exist, at least, and especially as to those whose representation is abridged.

The IRS threatens people with prison terms for making what they deem “frivolous arguments”. Any basis in federal law for such a prosecution is invalid as it would violate the “Congress shall make no law… abridging the freedom of speech” requirement of the 1st Amendment.

No Taxation without Representation !

Source for the Constitution: http://www.archives.gov/exhibits/charters/constitution.html

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6 thoughts on “Is the taxation of US citizens abroad constitutional?

  1. Hello Petros, taxation without representation and over taxation has been crippling this nation for years. Especially at the county and municipal levels. I can sympathize with all Americans living abroad that are being overtaxed. I do think however that they should pay some tax. Here is my reasoning: The U.S. embassy is there to help its citizens during times of strife and unrest. You can still vote on the direction you think the country should head to. When an American ever does return home after living abroad, he or she is entitled to all the benefits of food stamps, unemployment, social security, medicaid, medicare, paved roads, schools, etc. And also they should chip in to support the U.S. Military, because after all, it was the military who made it possible for those Americans to live in places like England, Japan, Germany, etc. I don’t have a problem with Americans renouncing their citizenship. That is their perogative. But they have to remember that the U.S. embassy is not going to evacuate non U.S. citizens during civil unrest or natural disasters abroad. If you don’t want all the services above, then renounce. How much is someone’s fair share living abroad? I don’t know, but I do know it’s damn too much here and abroad.

    • Hi T:
      Thanks for this comment. I wonder if you are aware of the horror stories of Americans living abroad now being side-swiped by the IRS? (see for example: expatsinca.wordpress.com; and Predatory government). The expectations are completely extortionate and unconstitutional and comparable to the manner that Eritrea has gone about attacking its citizens abroad.

      I recently renounced, so I’ve made my position clear. I haven’t lived in the United States since 1986, and I do no longer have the right to take up residence there. So you never have to worry about me and thousands of other Americans now renouncing ever taking up residency and enjoying the benefits of being American. Even as an American abroad, I never received protection from the United States in all my travels, but I did once eat a lunch sponsored by the US Embassy in Bangui and I swam a few times in its swimming pool, for whatever that’s worth. It is questionable if, I as a Canadian owe the US military anything, since brave Canadians also have given their lives in WWI, WWII, Korea, and more recently, Afghanistan.

      But still, you do not disagree with the fundamental principles that I raise. Thus, while it would be nice to tax Americans abroad and make them pay their fair share of the services and protection that the US provides, how can it be done constitutionally? Meanwhile, shouldn’t the US also exact tribute from every man, woman, and child in the world since the whole world benefits from Pax Americana? I think that the problem with the tax scheme is that it is not sufficiently extensive in its scope.

  2. Thanks for another great blog post. Friday was Veterans Day in Canada. This is a day to honor those who engaged in armed conflict to protect our democracy, freedoms and liberties. As Ronald Reagan said:

    “Freedom is never more than one generation away from extinction. We didn’t pass it to our children in the bloodstream. It must be fought for, protected, and handed on for them to do the same.”

    Many countries grant their citizens constitutional rights. But, the government must respect the rights given in the constitution. The United States has abandoned its constitutional and historical roots. The U.S. government no longer values the very freedoms and democracy that its veterans fought so hard for. This is a sad sad situation.

    During the 60s and 70s, the U.S. government tried to strip “draft dodgers” of their citizenship. Forty years later, that same government is arguing that anyone born in the U.S. is a U.S. citizen. This is of course to try to collect taxes.

    • I’ve heard that the IRS has called upon draft dodgers to pay up. I wonder how that would stand up in court. Best thing is just to ignore the IRS.

  3. Pingback: Pillaging one person at a time: why I’m coming out in the open with my fight against the IRS « The Righteous Investor

  4. If you seriously want to start a class action law suit, count me in. It is fundamentally unjust to ask some citizens to pay taxes that can be double or more those of others, particularly when you factor in the cost and time of preparing returns, to confront, alone and the problems of having bank accounts shut down due to local banks unwillingness to risk running afoul of FATCA rules, to mention only the most obvious little tortures imposed by the current crop of US overseas tax-driven rules for us ordinary expatriates, and all this without any services other than an embassy often located far from where we live and that is open to the public only by appointment and at hours that make it impossible to attend the appointment without at least one night’s stay in a hotel, without representation in Congress or even without a right of vote (a little known factoid: overseas votes — if you can successfully obtain an overseas voting ballot (I didn’t, because I couldn’t remember the street address where I last lived in the US, 35+ years ago) — are not counted in presidential elections, unless there is a tie.

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