Abstract
U.S. citizens are held to a special taxation regime as a consequence for renouncing citizenship that is unique in the world and, this article will argue, unconstitutional. Originally, renunciation of citizenship was seen as the ultimate income tax reduction device, but this option has now lost much of its attractiveness as Congress has passed "exit tax" provisions that impose a tax liability on individuals who have renounced U.S. citizenship similar to that imposed on U.S. citizens.
This article will argue that, as it currently stands, the exit tax is not constitutional because it is not narrowly tailored to achieve a compelling government interest and must be judged at that standard because it infringes on the fundamental right to expatriate and discriminates based on national origin. Although it is not specifically stated in the Constitution, the fundamental right to expatriate oneself has been recognized and acknowledged for more than 100 years as such. Furthermore, it also satisfies other traditional bases for assessing fundamental rights, such as its nexus to the existing constitutional political rights and right to travel.
In addition to demanding strict scrutiny for infringing on a fundamental right, the exit tax also discriminates on the basis of national origin, in this case, U.S. national origin. Although the individual has expatriated and, under immigration law, falls into the general class of aliens, the government is making a classification between types of aliens for different tax treatment based on whether the person once had American nationality. Although national origin discrimination is often seen as a kind of ethnicity discrimination, this is not necessarily the case. National origin discrimination is treatment based on where a person is "from" and is broad enough to encompass a variety of measures of national origin, including both ethnicity and former nationality.
If we apply strict scrutiny to the expatriate tax provisions, examining the several justifications for the tax that have been advanced, we find that none of the potential justifications involve a compelling governmental interest, and moreover, the measure is not narrowly tailored to achieve any of them if they were.
Recommended Citation
William Thomas Worster,
The Constitutionality of the Taxation Consequences for Renouncing U.S. Citizenship,
9 Fla. Tax Rev.
(2010).
Available at: https://scholarship.law.ufl.edu/ftr/vol9/iss1/15