This post original appeared at the Righteous Investor. It argues that since the US census does not count US persons abroad, they do not have proportional representation in the House of Representatives. Thus, even though citizens abroad may vote in Federal elections, they are voting for someone else’s representative, not their own. This is a violation of the Ninth Amendment of the United States Constitution.
Is it taxation without representation if you can vote? Damn right!
Do United States persons abroad differ substantially from residents of Washington D.C.?
Tax Treaty in conflict with Canada’s Human Rights Act
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 nowhere 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 Review 9 (2010) 923-1020 (can be downloaded at link: see “One-Click Download”).
Appendix: Comment by Jeff D. Tom, August 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
The 13th Amendment was supposed to abolish slavery and involuntary servitude. Seems like the 16th amendment overturned it.
Pharoah enslaved all of Egypt with a 20% flat tax (Genesis 47.20-26).
I agree with Boiled Frog. Double taxation seems to me to be a form of involuntary indentured servitude.
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@Petros: Moses says to Pharoah: “LET MY PEOPLE GO!” Somebody give me a staff with which I can part the waters.
Interesting article on the matter.
I wonder about the IRS’s tactic whereby filing and/or paying income tax implies your acceptance of it; that has apparently been hashed out domestically, though I don’t know much about it.
I’d also mention that in some states, like Mississippi, even if you do manage to vote from abroad, which is no mean feat and can cost into the hundreds of dollars depending on where you live, they only count expatriates’ votes if their total number could impact on the election. So, some people who think they’ve voted actually haven’t, thus not even having theoretical representation that some people claim that voting from abroad provides.
@Petros, I just read the paper you mention above – “William Thomas Worster, “The Constitutionality of the Taxation Consequences for Renouncing U.S. Citizenship“, Florida Tax Review 9 (2010) 923-1020” and though I had trouble with the finer points, I was amazed at just how many of the points raised here, (and in some ways, the TAS latest report to Congress) were addressed and supported by the author. No hardship to read it, though it was long. I think it deserves to be posted more prominently somehow – things get buried and are never seen again…. thank you for sharing this.
If Kenya had citizenship based taxation like the US, then Presdident Obama, having been born in the US to a Kenyan father, would be subject to Kenyan Income tax. He would have to file FBAR reports on his US bank accounts with the Kenyan Treasury Department and file FATCA forms as well. And all US banks would have to file reports of Kenyan citizens (including those with dual US citizenship) with the Kenyan tax authorities.
And if Mexico had citizenship based taxation like the US, then Mitt Romney would have to file Mexican tax returns and, since Mexico’s tax rates are higher than those in the US, he would end up owing taxes to Mexico each year. Mitt’s father George was born in Mexico to US citizen parents and was born a dual citizen of both countries. Matt, having been born outside of Mexico to a Mexican father is a dual citizen of Mexico.
Both of them would likely have problems opening and maintaining bank accounts with US banks because of the extraterritorial tax laws of those two countries.
This information could be useful in highlighting the situation of US citizens resident abroad under the US’s citizenship based taxation polcies..
Obama has in-laws from S.Ontario http://www.cbc.ca/news/canada/story/2008/06/18/f-ng.html – and I’m really worried that just like the IRS didn’t make any effort to ‘educate’ expats abroad, they probably didn’t tell his Canadian-in-law about the FBAR and FATCA forms they would need – after moving down to the US – if they left even the tiniest ‘foreign’ accounts ‘offshore’ up in that real den of iniquity and tax havens – Canada. In fact, Ontario is notorious globally for it’s high concentration of criminal expats, terrorists, money launderers and tax evaders – and also, pirates. Could S.Ontario actually be at the very epicentre for US ‘persons’ looking to offshore foreign accounts? No wonder it says in the CBC story that :
“If you’ve taken the Queen Elizabeth Way from Toronto to Niagara Falls you know what Barack Obama, the potential next leader of the free world, faced in August 2004 when he made the sometimes white-knuckle drive with his wife Michelle.”
It wasn’t the traffic on the QEW, the offgassing from the steel mills, or the wind on the Skyway bridge – it was arriving in the very stillness of the eye of the FBAR pirate storm.
Forgot to mention – the IRS should warn people that once they cross into the US via any border crossing, and become US taxable ‘persons’ – the very same tiny daily chequing accounts they’ve used all those years to buy groceries at home in Canada, suddenly become transformed overnight into ‘foreign’ pirate treasure that is so dangerous, that it has to be very very carefully handled by a certified IRS tax preparer, inflated through imaginary calculations, and then, for safety and freedom’s sake – FINED into dust. Funny how that happens when you’re not looking. One day it was just mere pennies in an almost empty and forgotten account – and next thing you know, it’s a credible threat to the civilized world….
Reblogged this on Stop Unconstitutional Double Taxation.
The purpose of the US census is, I think, to count the persons who live in the US of all nationaities; regardless of their citizenship or legal or illegal presence in the US.. Maybe it is supposed to count US citizens living abroad, but I am not aware of this if it is. It did try a few years back to count US citizens living abroad, but the responses and results were so dismal that this project was abandoned as a total failure. Some of our ACA people in Europe were deeply involved in this attempt to count Americans abroad.
Do other countries count and include in their census those who are citizens iving abroad?
I can imagine that one of the reasons US citizens abroad did not want to be counted was the possible consequenc that in so doing they would be detected by the radar of the IRS. The Swiss are very proud of the fact that they have good records on Swiss citizens who live abroad.
They are proud of their Swiss citizenship and apparently are very faithful in keeping their embassies abroad informed of the names, addresses, children born abroad so they can have documentation of their Swiss citizenship, etc. Just the opposite of Americans residing abroad.
Article 1, Section 2, Paragraph 3 US CONST : “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 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. The Number of Representatives shall not exceed one for every thirty Thousand, but each State shall have at Least one Representative; and until such enumeration shall be made, the State of New Hampshire shall be entitled to chuse three, Massachusetts eight, Rhode-Island and Providence Plantations one, Connecticut five, New-York six, New Jersey four, Pennsylvania eight, Delaware one, Maryland six, Virginia ten, North Carolina five, South Carolina five, and Georgia three.”
Source : http://www.archives.gov/exhibits/charters/constitution_transcript.html
@Jefferson, I also checked the Census Bureau website and Wikipedia. Clearly the Census Bureau mandate is to count the persons residing in the US, both legally and illegally, including the prison population, and proportion the seats in the House of Representatives accordingly. Illegals and those in prison are included in determining representation apportionment even though they have no right to vote. The only overseas citizens who are included in the census are military personnel, diplomats and other Federal employees. Private citizens resident abroad are specifically excluded.
@Roger Your readings on websites lead me to believe that the census situation is wierd. If certain States get more representatives than others in congress due to illegal populations, then the result is to dilute the constitutionally-madated proportional representation of all US citizens: homelanders, and US citizens abroad alike. What do you think Roger? I would uphold the right of even a non-citizen to petition (write, call, speak to, amble around government places with placards and handbills) his congressman or senator for redress of grievances, however I believe that non-citizens should not be allowed to vote, except perhaps in township and school-board elections. If one wishes to vote in constitutional referenda (which occur in some states) or for state and federal offices one must be a citizen.
@thomas, no, illigal immigarats cannot vote nor would their petitons merit any attention of the congressman whose district they live in. Just one of the manay anormalities that exist today in a world that has changed so rapidly. No place to we realize it more than in this area of citizenship based taxaton.
Hey, an exciting development re the ACA – a Washington DC office, and appointment of legal counsel!
‘American Citizens Abroad (ACA) Announces New
Washington DC Office and Appointment of New Legal Counsel, Helping to
Strengthen Key Initiatives, including Residence-Based Tax Reform’
“American Citizens Abroad (ACA)
recently held its Annual General Meeting in Geneva, Switzerland and
announced several major initiatives as part of its ongoing commitment to
promote the interests of U.S. citizens living outside of the United
States. New developments announced at the meeting include a major
legislative push in Congress towards residence-based taxation, with
ACA’s own alternative tax proposal as a basis, the creation of a new
liaison office in Washington D.C., and the appointment of Washington
D.C. attorney Charles M. Bruce as the organization’s Legal Counsel.”
……….”Executive Director MaryLouise Serrato, announced that ACA will focus
efforts in 2012 and 2013 on introducing legislation which would
introduce Residence-based taxation as part of comprehensive tax reform
legislation in the United States, replacing the current system of
Citizenship-based taxation. The United States is the only developed
country in the world which uses a system of taxation based on
citizenship rather than residence, and ACA has documented the major
disadvantages this system has for the U.S. economy on the whole and
ordinary Americans who live and work all over the world.”……..
Geneva, Switzerland (PRWEB) June 12, 2012
So apt for those trying desperately to understand and comply with US imposed extraterritorial tax and reporting burden for those deemed US taxable chattel ‘abroad’:
Posted on June 6, 2012
by Rhodri C. Williams
“Writing on the current ultra-nationalist government of Hungary, one observer
recently made a basic observation on the rule of law that I
increasingly feel applies to my own personal situation with regard to
*If they are going to persist in taxing “U.S. persons” worldwide regardless of residency, and requiring onerous annual reporting even from such persons who owe no tax, they should stop calling it the INTERNAL Revenue Service. As it is, it sounds way too Orwellian.
The US will tax us and punish us, but won’t bother to spend any money to count us for voting and other purposes. That doesn’t stop Douglas Shulman of the IRS, and Treasury officials from inventing their own numbers when it suits them, to promote imaginary numbers for the so-called ‘international tax gap’ – and attribute it to those of us who live outside the US (including duals by birth and naturalization).
Note that in the GAO report, privacy laws were considered a barrier to counting citizens in France for example. Contrast this with the demands of FATCA, and FBARs (re joint account information of non-US persons) where the US coerces people and institutions into breaching privacy, and local law. The GAO notes that one important use of the census data is to challenge voting districts and election results where states and districts say they are underrepresented – underscoring the importance of counting those abroad for political representation – which the US decided they didn’t want to spend money on. “These overseas counts are used solely for reapportioning seats in the U. S. House of Representatives.””
The US GAO Government Accountability Office reported that:
“Congress may wish to consider
eliminating funding for additional
research related to counting
Americans abroad as part of the
decennial census, including funding
for tests planned in 2006 and 2008.
However, funding for the
evaluation of the 2004 test should
continue as planned, particularly to
inform congressional decision
making on this issue. Should
Congress desire better data on
overseas Americans for certain
policymaking and other
Congress may wish to consider
funding research on the feasibility
of counting this group using
alternatives to the decennial
census. To facilitate this, we
recommend that the Bureau, in
consultation with Congress,
research options such as a separate
survey, administrative records, and
data exchanges with other
countries’ statistical agencies. The
Bureau agreed with our
conclusions and recommendations.”
August 19, 2004
“Although more than four million American citizens are believed to reside
abroad, the precise number of overseas Americans is unknown. The U.S.
Census Bureau (Bureau), the federal agency tasked with counting the
nation’s population every 10 years, has generally included in the census
overseas members of the military, federal civilian employees, and their
dependents (a group known collectively as “federally affiliated”
individuals), but has typically excluded private citizens such as retirees,
students, and business people.1
Under the Constitution and federal statutes, the Bureau has discretion over
whether to count Americans abroad. However, in recent years, the Bureau’s
policy of excluding private citizens from the decennial census has been
called into question. For example, advocates of an overseas census claim
that better demographic data on this population group would be useful for
a variety of policy-making and business purposes, and would better
represent their unique interests in Congress.”…
“As we noted in our May 2004 report on this issue, counting Americans
abroad as an integral part of the 2010 Census would be a monumental task
that would introduce new resource demands, risks, and uncertainties to an
endeavor that was already facing a variety of difficulties.4 Specific
challenges include policy questions such as who should be counted and
how should the data be used, as well as logistical difficulties such as
ensuring a complete count and verifying U.S. citizenship.”…
…”Ensuring a smooth overseas count could also stretch the Bureau’s
resources, and thus detract from domestic efforts. For example, at each
test site the Bureau encountered various difficulties that needed to be
worked out. The difficulties included addressing French privacy laws“…
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has anyone ever heard of a possible class action to challenge the constitutionality of citizen-based taxation of US Citizens living abroad? Or some sort of suit or legal action against the grossly unfair tax, FBAR and FATCA laws which discriminate against US expats and in fact penalize us? I would be interested in joining or supporting a project along those lines.
@dje-dje, Perhaps something against the unfairness of FBAR has a chance, particularly on eighth amendment grounds. But the citizenship-based taxation has no hope in the courts, based on previous Supreme Court decisions. It must be changed legislatively.
That said, that doesn’t mean that this post is not a valid objection. On historical grounds, I believe that I am correct. That only serves to highlight how far American democracy has strayed from its Constitution.
@dje-dje, I would like to add that similar penalties of the Report of International Transportation of Currency or Monetary Instruments (CMIR), another form also created by the Bank Secrecy Act, were considered excessive and thus unconstitutional by the Supreme Court in 1998. The case was United States v. Bajakajian (http://en.wikipedia.org/wiki/United_States_v._Bajakajian, http://www.law.cornell.edu/supct/html/96-1487.ZO.html), the only time that the excessive fines clause of the 8th amendment was considered by the court. A challenge against the FBAR penalties has a chance.
I agree with Petros that citizenship-based taxation itself would not be deemed unconstitutional because of previous court decisions, and that only Congress can change it. It is also possible, although extremely unlikely, for the IRS to stop enforcing it by executive order, similar to the recent order to stop deportation of certain illegal immigrants, or through a presidential pardon.