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by arcticbull 1261 days ago
Citizenship-based taxation was brought in as a way of punishing deserters during the civil war and simply never dropped.

It doesn't make sense to tax citizens who aren't resident when you are also taxing residents who aren't citizens. That's having your cake and eating it too - which I can only imagine is part of the reason no other country on Earth does this (except Eritrea, who obviously cannot enforce).

If resident aliens have to pay taxes while resident, and can stop when they leave - doesn't it also make sense for resident citizens to be afforded the same luxury?

The state department operates on a cost-recovery basis anyways so if you avail yourself of emergency or consular services you get mailed a bill no matter what.

[edit] Remember if you live abroad you have to pay taxes to that government too! So the question is why is it a fair impingement on your freedom to live abroad to have to pay taxes to two different governments simply because you're an American?

You're being punished as a de facto civil war deserter! The war is over, friend. The North won! Let freedom ring! lol.

[edit2] As @drewcoo pointed out I used the term 'deserter' inappropriately in context, I should have said 'deadbeats.' I was in fact referring to citizens who left the United States around the time of the war and the way they were viewed by congress as not paying their fair share while retaining a vested interest in the outcome of the war. It was a colloquialism used as flourish that was wrong in context. h/t.

3 comments

This is not what it seems.

The exemption amount isn't exactly a windfall level ($120K). Amounts earned over that are taxed in both countries - the US and the foreign country - and the only way to avoid double-taxation on that is if the US has a tax treaty with the country [1]. But that treaty generally means you end up having to pay whichever rate is higher: the US rate or the local rate, in aggregate.

More importantly you're not exempt from filing even if you have no net tax obligation to the US.

These returns are not easy to prepare, and so you may end up spending thousands of dollars per year paying one of the likely very few people with experience filing returns to both countries and properly attributing income and deductions.

It gets much, much worse if you want to start a business in the foreign country in which you live because then you're the owner of what the IRS considers a Controlled Foreign Corporation. The paperwork for this is a waking nightmare and will cost you thousands more per year, if you're even in a position to complete it. [2] Notice in [2] the US definitely on of a CFC is also different than the rest of the world.

[1] https://www.irs.gov/businesses/international-businesses/unit...

[2] https://www.investopedia.com/terms/c/cfc.asp

> ..the US definitely on of a CFC..

Ugh. ..the US definition of** a CFC...

> Citizenship-based taxation was brought in as a way of punishing deserters during the civil war and simply never dropped.

Have a resource for this? From what I remember, income tax started around the 1910's with the 16th amendment and grew to take out a large portion of citizens' income when prohibition severely cut sales tax proceeds from alcohol.

> Citizenship-based taxation was brought in as a way of punishing deserters during the civil war and simply never dropped.

It was started in 1861 as a way to raise revenue to fight a war.

https://nomadcapitalist.com/global-citizen/citizenship-based...

Deserters would most likely have gone home, remaining citizens and living in the US. And I'm unaware of US IRS attempt to collect taxes from the CSA during the war.

https://teachinghistory.org/history-content/ask-a-historian/...