Notre Dame Legal Studies Paper No. 1527
Over the past decade, a number of scholars have addressed the United States’ continuing use of citizenship as a jurisdictional basis upon which to tax the foreign-source income of individuals in the modern international setting. Some writers, including myself, have defended this citizenship-based taxation (“CBT”), while others have rejected it and proposed some form of residence-based taxation (“RBT”) for citizens.
This Article considers the competing normative arguments raised in this context, and attempts to distill the strengths and weaknesses of each. In so doing, it attempts to highlight the most important factors upon which the debate hinges, and illustrates the importance of difficult-to-measure predictions of how both individuals and society will react to different regimes.
The Article ultimately concludes that, due mainly to residence neutrality and related social cohesion concerns that would arise if an RBT regime were adopted, the normative case for CBT remains strong. However, the United States should continue to impose CBT only if the IRS and Congress are willing to address the significant practical compliance concerns faced by many citizens living abroad.
Kirsch, Michael S., "Citizens Abroad and Social Cohesion at Home: Refocusing a Cross-Border Tax Policy Debate" (2016). Journal Articles. 1226.