Introduction – Citizenship Taxation Eritrea Style
My last post discussed the United States Net Investment Income Tax (“NIIT”) AKA the 3.8% Obamacare surtax.
Part A – How Does One Compare U.S. citizenship Taxation To Eritrea Citizenship Taxation?
About the United States Net Investment Income Tax
At it’s core the NIIT is a straight 3.8% calculation on taxable net investment income (subject to the usual U.S. aversion to simplicity). It’s important to understand that the NIIT is a separate tax that is calculated separately from the basic income tax. The NIIT is found in Chapter 2A of the Internal Revenue Code and NOT in Chapter 1. (See the Appendix below.) Any NIIT owing is reported on the Form 1040 along with taxes owing from Chapter 1. U.S. citizens abroad with investment income are required to comply with BOTH:
1. Taxes calculated under Chapter 1 (a detailed calculation with all kinds of deductions, exclusions, forms, taxes and penalties); and
2. Taxes calculated under Chapter 2A (a 3.8% charge on taxable investment income).
The Net Investment Income Tax has had a particularly harsh impact on impact on Americans abroad. Those interested in the details are invited to read a 2023 post by Virginia La Torre Jeker describing how the NIIT impacts Americans abroad. You will find a podcast with Virgina as Appendix B of this post.
The purpose of the NIIT is to pay for health care for resident Americans. Americans abroad do NOT benfeift from this tax.
Significantly, the Net Investment Income Tax is a tax imposed on Americans abroad which is specifically designed to benefit resident Americans and exclude Americans abroad from the benefits.
About Eritrea’s (kinder and more gentle) version of citizenship taxation
