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The Proposed Expatriation Tax a Human Rights Violation

The Proposed Expatriation Tax a Human Rights Violation

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Published by punktlich
American Journal of International Law, vol. 89, p. 579 (1995)
EDITORIAL COMMENT: THE PROPOSED EXPATRIATION TAX-A HUMAN RIGHTS VIOLATION? Income tax law and human rights law operate in quite separate worlds, but a proposal recently presented to Congress brings them together. I The Clinton administration has advocated a tax on certain unrealized capital gains of expatriates and some of its opponents have claimed that it constitutes a violation of human rights law.2 They evoke the hardships visited on those who fled from Nazi Germany in the 1930s and from the Soviet Union and the German Democratic Republic more recently. They assert that a similar wrong would be inflicted by this proposed tax on those who surrender United States citizenship. The reaction of this writer is that of Justice Cardozo to the charge that twentieth-century administrative practices are "Star Chamber" procedures: "Historians may find hyperbole in the sanguinary simile. "
American Journal of International Law, vol. 89, p. 579 (1995)
EDITORIAL COMMENT: THE PROPOSED EXPATRIATION TAX-A HUMAN RIGHTS VIOLATION? Income tax law and human rights law operate in quite separate worlds, but a proposal recently presented to Congress brings them together. I The Clinton administration has advocated a tax on certain unrealized capital gains of expatriates and some of its opponents have claimed that it constitutes a violation of human rights law.2 They evoke the hardships visited on those who fled from Nazi Germany in the 1930s and from the Soviet Union and the German Democratic Republic more recently. They assert that a similar wrong would be inflicted by this proposed tax on those who surrender United States citizenship. The reaction of this writer is that of Justice Cardozo to the charge that twentieth-century administrative practices are "Star Chamber" procedures: "Historians may find hyperbole in the sanguinary simile. "

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EDITORIAL COMMENT
THE
PROPOSED
EXPATRIATION
TAX-A
HUMAN
RIGHTS VIOLATION?
Income
tax law
andhuman
rights law
operate
in
quite
separate
worlds,
but
a
proposal
recently
presented
to Congress brings
them
together.
The
Clinton
administration
hasadvocated a tax
on
certain unrealized
capital gains
of
expatriates
and
some
of
its
oppo
nents
have
claimed
that it
constitutes a violation
of
human
rights law.
2
They
evoke
the
hardships
visited
on
those
who
fled
from
Nazi
Germany
in the
1930s
and
from
the
Soviet
Union
and
the
German
Democratic
Republic
more
recently.
They
assert
that
a similar
wrong would
be
inflicted by this
proposed
tax
on
those who
surrender United
Statescitizenship.
The
reaction
of
this writer is
that
of
Justice
Cardozo
to
the
charge
that
twentieth-century administrative practices
are
"Star Chamber"
procedures: "Historians
may find
hyperbole
in the
sanguinary simile. "
3
A
predicate for
understanding
this claim
is
some
basic knowledge
of
the
tax proposal,
although
the
pages
of
this
Journal
are
not
an
appropriate
place
in
which
to explore
the
details
of
this
complex innovation
or
evaluate its fiscal wisdom.
It
would
impose a tax
on
unrealized
gains
inhering
at
the time
of
renunciation
of
citizenship
inpropertyheld
by
the
person
expatriating
him-
or
herself.
In
effect,
it
treats
expatriation
as equivalentto a sale. Its practical effect,
then,
is
to
accelerate
to
the
time
of
expatriation
a tax
that
in most
cases would fall
due
eventually.
In
most
cases
the
property
involved would
be
subject to tax
on
the
gain
realized
at
a
later
time
when
the
expatriate sold it,
but
the
intervening
years
abroad might
make
it
hard
to trace
the
ownership
of
those assets
to
the
expatriate.
Andin
some cases
the
asset
would never
be
sold because
it
was still
held
by
the
expatriate
at
the
time
of
his
or her
death.
It
is
asserted
that theamounts
of
revenue
lost
are
very substantial, even
in
billions
of
dollars.
This
is
not
because
there
are
so
many
Americans
who expatriate
themselves-indeed,
the
number
taking
that
step
is
only
an
average
of
about
650 a year, as
compared
with 50,000
or
so
who
apply
for
American
citizenship
each
month.
4
It
is
because
of
the
great
wealth possessed by alimited
number
of
persons who
see this
step
as
animportant
tax-saving device.
5
The
focus
of
the endeavor
on
very wealthy individuals is
underlined
by
the
fact
thatit
would
exemptthe
first $600,000
of
gains.
Therefore,
the
situation
lends
itself
to
soak-the
rich
populism,
includingreferencesto
the "Benedict
Arnoldtax."
Historians may find
hyperbolein
this sanguinary simile as well.
It
needs to be
remembered thatthe United
States,
unlikemost
countries,
does
tax
the
income,from
whatever
source
derived,
of
its
citizens-and
that the United
States is almost
alone
among
nationsin
so doing.
In other
countries
only residents
are
taxed.
One
version
of
the
proposal would impose
a similartax
on
the unrealized
gains
of
aliens
who are
long-term residents
of
the United
States.Does this tax
impose
an
unacceptable
burden on
an
international
right?
To
begin
with,
international
law
does
not
protect
the
right
to expatriate
oneself, as distinguished
from
emigrating.
The
terminology
here
is
confusing;
in
circles
of
Americans living
in
1
Various versions have
appeared in
the
congressional process, particularly
S.
453
and
H.R. 981, which was
entitled
"Tax
Compliance
Act
of
1995."
It
won Senate approval
but
was
deleted in
the
House.
As
of
April1995,
it
seemed
likely
that
the proposal
would
be
reintroduced,
with retroactive effect.
See
TAX
NoTES
INT'L,
Apr. 17, 1995,
at
1387.
2
Perhaps
the
fullest
statement
of
this is
the
one
by Professor
Robert
F.
Turner,
available
from
Tax
NotesInternational
as 95
TNI
60-8.
'Jones
v.
SEC, 298 U.S.
1,
33 (1936).
4
Compare
Marshall Langer,
Proposed
U.S.
Departure
Tax
on Expatriates,
TAXNOTES
INT'L,
Mar. 6, 1995,
at
829,834
with
N.Y.TIMES,
Apr. 2, 1995, §1,
at
28.
'For
brief
biographies
of
six individuals
in
this category, see
N.Y.TIMES,
Apr. 12, 1995,
atAl.
578
 
1995]
EDITORIAL COMMENT
579Saudi Arabia
or
Paris,
there
is a
tendencyto
refer
to
oneself
as
an
''
expat''
or
expatriateeven
thoughone
retains
one's
U.S. passport.
It
is
true that
since 1868
the United
States
has
asserted
the
existence
of
a
right
to
slough
off
one's
citizenship:
"the
right
of
expatriation
is a
natural
and inherent
right
of
all
people,
indispensable to
the
enjoyment
of
the
rights
of
life, liberty,
and
the pursuit
of
happiness.'
6
It
achieved
some
success
in
getting
other
countries
to recognize
that their
citizens,
on
obtaining
U.S. citizenship,
had
terminated their
other
nationality.
But
this success
has
evidently
not
resulted
in
a
rule
of
international
law
compelling countries to
recognize
their
citizens' actions
in
breaking
the bond.
7
In
fact,
the
U.S. law
of
expatriation
is
itself subject to conditions.
Under
the present
statutory
scheme,
one cannot
usually divest
oneself
of
U.S. nationalitywhile
one
is
in
this
country (except
in
time
ofwar).
8
And
rather
precise formalities haveto
be
followed to
make
the renunciation
effective.
To
be
sure,
the
consequences
of
a
denial
of
the right
to
expatriate
oneselfare
not
drastic-one
is
still subject
to
the
obligations
of
military service (if
such
there
are),
9
to
the
obligation
to
return
home
to
testify
if
required,
10
to
the
duty
not
to
commit
treason
11
and
to
the
duty
to
pay taxes.
In
contrast,
the Supreme Court
has
made it
clear
that
citizenship
cannot
be
ended
without
the
individual's voluntary action.
12
The
right
to
emigrate,
on
the
other
hand,
has
considerable
status as
an
international
human
right.
13
From
Article 13(2)
of
the
Universal Declaration
of
Human
Rights
to
Article 12(2)
of
the
International Covenant
on
Civil
and
Political Rights,
the right
toleave a country,
including
one's
own, has
been
spelled
out.
14
The
inability
to make
aphysical move
from
one point
to
another
is
a
much more
drastic
infringement
of
one's
personal
liberty
than
is
the
inability
to
sever
one's
legal ties.
The
right
to choose
a
different country
and
society within which
to rebuild
one's
life
is
often
basic
to
one's
development
and
happiness. Professional
and
public
opinion
was first focused
on
this
set
of
issues
whenthe
Nazis employed various
means
to prevent
disfavored
groups
fromemigrating
or
to
strip
them
of
their
possessions
if
they were allowed to go.
The
former
Soviet
Union
and
countries
within its
sphere
of
influence, most
particularly
theGerman
Democratic
Republic, followed
rather
similar tactics. Symbolic
of
the
parallelism
between
Nazi
and
Communist
behavior
was
the
refusal
of
each
system to allow
Nobel
Prize winners
togoto Stockholm to accept
their
awards.
Human
rights law does, however, recognize
the
legitimacy
of
certain restrictions
on
the
right to
emigrate. Thus,
the
International Covenant
on
Civil
and
Political Rights
says:
The
above-mentioned
rights shall
not
be
subject to any restrictions
except
those
which
are
provided
by law,
are
necessary to
protect
national
security,
public
order
(
ordre public),
public
health
or
morals
or
the
rights
and
freedoms
of
others,
and
are
consistent
with
the
other
rights
recognized
inthepresent
Covenant. (Art. 12(3))
6
Rev.
Stat.
§1999, 15 Stat.
223(1868).
For
background
to
its
enactment,
see
4
CHARLES
GORDON,
STANLEY MAILMAN
&
STEPHEN
YALE-LOEHR, IMMIGRATION
LAW
AND
PROCEDURE
§100.03
[1]
[b]
(1994).
7
Thus,Albrecht
Randelzhofer,
Nationality,
in
[Installment] 8
ENCYCLOPEDIA OF
PUBLICINTERNATIONAL
LAW
416, 420
(Rudolf
Bernhardt
ed., 1984),
says:
"International
law
contains
no
general rule
limiting
the
possibility
of
renunciation
of
nationality.
On
theother
hand
it
does
not
oblige States
to
provide this possibility
in
municipal
law."
"Immigration
and
Nationality
Act
§349, 8 U.S.C. §1481 (1988).
9
Jolley
v.
INS, 441 F.2d 1245
(5th
Cir.),
cert.
denied,
404 U.S. 946 (1971).
10
Blackmer
v.
United
States, 284 U.S. 421 (1932).
II
18 U.S.C. §2381 (1988).
12
Vance
v.
Terrazas, 444 U.S. 252 (1980);
Mroyim
v.
Rusk, 387 U.S. 253 (1967).
13
The
rightto
enter
a
country does
not,
however, exist
exceptin certain
cases involving asylum seekers
and, without
thatright
to enter,
the right
to
leave may
be an
empty one.
14
For
reviews
of
the international
law
on
the
right
to
leave
one's
country, see
HURST
HANNUM,
THE
RIGHTTO
LEAVEAND
RETURN
IN
INTERNATIONAL
LAW
AND
PRACTICE
(1987);
LIBERTE
DE
CIRCULATION
DES
PERSONNES
EN
DROIT
INTERNATIONAL
(Maurice Flory
&
Rosalyn Higgins eds., 1988);
RAINERHOFMANN,
DIE
AUSREISE·
FREIHEIT
NACH
VOLKERRECHT
UND STAATLICHEM
RECHT
(1988).

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