Florida Tax Review


Grace Nielsen


The United States is the only country in the world to exercise taxing jurisdiction over the income of its citizens and long-term permanent res¬idents, even when they reside abroad. This citizenship-based taxation (CBT) is controversial, especially among tax scholars, though there appears to be only limited political appetite for realigning U.S. tax juris¬diction to reach only domestic-source and domestic-resident income, as peer countries do. After reviewing the normative value of CBT and the existing multiple taxation mitigation measures, this Article pres¬ents two alternatives to the current U.S. regime. First, I propose the U.S. tax only the incomes of current-year residents and recent expatri¬ates but exempt the foreign-source income of nonresident citizens after a five-year extended residency period in order to more closely correlate tax jurisdiction and nonresidents’ meaningful connections to the Amer¬ican taxing community. Recognizing that this may be politically infea¬sible, however, I propose that Congress uncap the existing foreign earned income exclusion in IRC § 911 for American expatriates living in high-tax countries, reducing their substantial compliance burdens without sacrificing revenue that would effectively be eliminated by the foreign tax credit or creating new opportunities for tax-motivated expatriations.