One of the last acts of the House before they went on summer recess was to pass HR 6169. It has a snowball’s chance in Hell of passing the Senate as currently configured. It was seen as a partisan political document to campaign on, rather than a realistic attempt at tax reform. That is how the game is viewed in DC by the political wonks, and in fact it is how it plays out in reality. However, since it is “game on” time, I like that this gauntlet was thrown down. The title appeals.
It was called “Pathway to Job Creation through a Simpler, Fairer Tax Code Act of 2012”
Here is the text version. It got NO votes from the Dems in the House. So why do I bring it up?
Take a look at Section 2, (B) (5) (F) of the legislative language, and you will see the following language that should be of interest to all here:
(5) makes American workers and businesses more competitive by–
(F) transitioning to a globally competitive territorial tax system;
Here is how the non partisan global publication, Tax News reported it, if you wish to read further. You can Google search for many partisan opinions if you are interested.
Even if this passed and the US later on offered an amnesty to resume citizenship (and a huge apology for the stress caused) I wouldn’t want it back. Good find though!
This is good news. Maybe the politicians are beginning to see the light. It obviously would be nice if this passed but I don’t see it happening unless the composition of both chambers of Congress were favor the Republicans. Hopefully they wouldn’t get cold feet about the territorial tax clause.
*Do not count any chickens before they hatch
My reading, which I hope is wrong, is the only territorial taxation this bill addresses is corporate taxation. I find no mention of eliminating citizenship-based taxation.
Most countries do not tax the the foreign earnings of their corporations but allow them to repatriate these earnings tax free. They of course pay taxes in the foreign countries where the earnings are generated. The US taxes the foreign earnings of US corporations at 35% when they are repatriated. They are not taxed as long as they remain abroad. But when they are repatriated they are currenty subject tol this double taxation.
There is still a lot of work to be done to have personal taxation changed from citizenship based to territorial based on residence. So don’t take too much encouragement just yet. there is a lot of hard work yet to be done.
*doesn’t say anything about REPEALING FATCA which is what I want to see done.
*I should probably check the IRS site but one thing I learned in tax class was that there are three types of taxpayers (individual, trust and corporations) and the Canadian system at least, endeavors to be fair to each. I would think if they allowed territorial taxation for corporations, they would almost certainly, have to extend that to all taxpayers. Just my $.02.
*@nobledreamer, I sincerely hope you are right, but I would not take it for granted. Right now corporations pay US taxes only when they repatriate foreign earnings whereas individuals are taxed immediatly on foreign income even though it is never repatriated. This alone is a vast difference.
Most Americans, including those legislators that write the tax laws, are totally oblivious to this . They assume that all Americans are taxed, no matter where they live, and “That’s the way it has always been.” There is no one still in Congress who was there when this became the law of the land in 1962. And after all, the prevailing view in Washington is that “all Americans should pay their fair share of taxes, no matter where they live. After all, there are millions in the world just dying to immigrate to the United States and become American citizens.
Even Congressman Charley Rangle, for many years chairman of the House Ways and Means Committee when Democrats were in the majority in the house, which committe is responsible for writing US tax laws, when he was caught not reporting income from renting his villa in the Dominican Republic, pleaded to not be punished because (1) I never brought any of that income back to the States and (2) his tax accountants who prepared his tax returns just failed to include it in his tax filing, because they did not know that it was taxable.
Pure hogwash, of course, but he hoped others would treat him kindly for this gross violation of US tax laws. He received a slap on the hands in the form of a repramend and was allowed to resign as chairman of that committe. But he won the next election hands-down, and has just one the primaries election in his home district and has a more than even chance of being re-elected for another 2 year term in the November election.
Change may be possible from US exceptionalism. US patent system recently changed from first-to-invent to first-to-file, to align US system with majority of industrial nations.
@Roger Conklin- I would think that since the U.S. Supreme Court has declared U.S. corporations to in fact be citizens for the purpose of exercising their right to free speech that it would discriminatory for the Congress to deny to unincorporated citizens the same right that has been given to corporate entities in the basis that they are people.
The U.S. can’t have two classes of citizenship.
The U.S. already has two classes of citizens: those who live in the homeland and those who don’t.
*Yes, and also one has representation while the other doesn’t.
*And one receives government services while the other doesn’t.
And two classes of extraterritorial slaves who seek to formalize their escape:
(1) Relinquishers who possess a rare get-out-of-jail-free card
(2) Renouncers who fork over $450 to buy their freedom
*@recalcitrantexpat, even though the Supremene courth has declared corporationsto be persons, there are two sets of tax laws – one for corporate persons and another for physical persons. This is “standard in probably most countries of the world.
In Brazil, for example, corporations are defined as “pessoas juridicas,” whereas individuals are described as “pessoas fisicas.” These are the common “daily usage” expressions that are always used. And there, like everywhere else which ascribes personhood to corporations, corporations are treated tax-wise very differently from “human being” persons.
Brazilinan citizens domiciled abroad are not taxed, but Brazilian citizens, along with all foreigners resident in Brazil, are taxed on their world-wide income. Brazilian owned companies located outside of Brazil are not taxed. .
Nice find, Just Me! Unfortunately, I fear this is aimed just at the corporations based on Mitt Romney’s statements, which I’m sure his statements reflect the party line. And to my knowledge, he’s only expressed concern over territorial-based taxation for corporations. It is true that corporations should be taxed territorially. But individuals need it too!
On the plus side, maybe this will help open the conversation for territorial-based taxation for individuals too.
I also think that the bill refers to corporations, as this was even mentioned during the presidential debates. Although territorial taxation for individuals would make things much more simple, I doubt that Congress would accept it because it allows international tax competition. It is used in only about 35 countries and territories, and they are all small economies. (On the other hand, the US does many things that almost no other country does.)
However, I think that at least the republicans would agree with residential taxation for individuals if they would just listen to the concerns of Americans abroad. I still think that they are not aware of the problems, as I haven’t gotten any response from a congressman. Maybe I’ll take more drastic steps and schedule a meeting in person, if I can. There is no logical justification for citizenship-based taxation and I can beat any argument for it, if they would just give me a chance.
@roger conklin- well expats are domiciled abroad just like the foreign subsidiaries of the U.S. based corporations so it should be a no brainer to tax both parties in the same way. To no longer tax U.S. citizen based upon his her worldwide income is a logical step in territorial taxation.
My point is that although the bill may refer only to corporations, just as Simpson/Bowles does, that a good argument can be made to the court that such a limitation is unconstitutional. If a fabricated person and a biological person have to be treated the same when it comes to this area of taxation.
*@recaolcitrantexpat, I agree totally. The probloem is in getting our legislators on Capital Hill to accept and recognize this. I had correspondence with the chairman of the Joint Tax Commission of the House and Senate some months back in which I had strongly argued in favor of Territorial taxation over Citizenship-based taxation.
He sent me a written reply when I followed him for a response to my message to him on this. He indicated that his Commission did not propose or recommend tax policy but he recognized that competitiveness of US corporations does include the competetiveness of US citizens.
So that gave me a glimmer of hope in case congress should ask for his thoughts.
@roger conklin- I am glad that we agree on this. How ever my response to the Chairman would be this. Ultimately the Congressional members are going to have to explain to the American people why it is that their government believes that it is in the best interest of the country to give up thei claim on taxing world wide income. If the reply is competitiveness then the Congressmen and women will have to prove that the increased competitveness will bring in more revenue than that which is lost.
I don’t think that this is a proof that Congress will be able to make and certainly any proof on paper is no guarantee. In the end I believe that the basic argument that will be resorted to is that of aligning U.S. corporate taxation policy for overseas operations with that of our competitors. Once this basic appeal is made then it will be necessary to extend the validity of the argument to individuals. It is based on the universality of this fundamental argument, that of the need to align U.S. tax policy abroad with its fellow trading partners, that I believe a Supreme Court challenge will succeed. Ultimately I think that even the threat of a court challenge will make the Congress cave and write the legislation to cover all none resident U.S. persons.
The thing is that we have to let them know NOW that we are on to their game and that we will not be ignored or kicked aside. We must DEMAND now that territorial taxation INCLUDE none corporate U.S. persons.
*@recalcitrant expat, you are “preaching to the choir” on this. for the past 35 years I have been raisintg my voice and I have walked the halls of Congress many times, testified in two Congressional hearings, submitted written testimony for others. Progress is slower than the melting of a glacier. The cold hard truth is that is not an issue that is of any importance to the electorate that decdes who to vote for at election time so they spend their efforts on issues that will enhance their probabiolityy of reelection. Tragic but true.
But until my last breath I will not give up.
We are so lucky to have you continuing the fight with us. You make us stronger. Thanks.
My point is that although the bill may refer only to corporations, just as Simpson/Bowles does, that a good argument can be made to the court that such a limitation is unconstitutional. If a fabricated person (corporation) and a biological person have to be treated the same when it comes to this area of taxation.
I had correspondence with the chairman of the Joint Tax Commission of the House and Senate some months back in which I had strongly argued in favor of Territorial taxation over Citizenship-based taxation. He sent me a written reply when I followed him for a response to my message to him on this. He indicated that his Commission did not propose or recommend tax policy but he recognized that competitiveness of US corporations does include the competetiveness of US citizens.
What’s not to understand, Congressmen and Congresswomen?
*Roger Conklin, you’re not alone and we’ll be fighting with you. There has got to be some way to mix some sense into the madness.
*usxcanada, if I were to spend $450 to renounce, then I might save over $21000 when I refinance my mortgage next year. I’ll look into this further and maybe write about it, but I still have to finish filing for 2009.
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