We FairTax supporters have been contacted by two different gentlemen who are United States citizens who live abroad. One lives in Paris, and the other lives in Tokyo. Both support the FairTax. Why should six million US expatriates support the FairTax? And why does their support matter?
Expatriate Americans are unique in the world. United States citizens are subject to income taxation on their worldwide income even if they have no home in the United States.
This curious rule puts the United States in an exclusive club of countries. As best we know, the only other members are North Korea and the Philippines. One might understand the Philippines, who inherited our tax code when they became independent from us in 1946.
By contrast, a French citizen, or a Japanese citizen, who lives in the United States and who has no home in France or Japan has no income tax obligation to France or Japan. The French and Japanese expat, as well as the US expat, is subject to the full body of law of the host country.
Why then, should a US expat be required to file a federal tax return in addition to the return required by the host country? Is this requirement fair?
To be sure, there are provisions in the Internal Revenue Code to avoid technical double taxation. There is also a so-called “foreign earned income” exclusion of $95,100 (but that amount counts in pushing remaining income into higher tax brackets). However, the US expat gets the worst of both tax worlds.