Under no circumstances does this post suggest that slavery, Jim Crow and the subjugation of women are on the same par with the U.S. citizenship (nationality)-based tax system. The former very clearly represent examples of exceptionally gross injustice. Even if the U.S. citizenship (nationality)-based tax system is in no way as horrible as those injustices, we can still learn from governmental and societal responses to those injustices. There are lessons to be learned from attempts to right the wrongs of the past. Even – and perhaps especially – the worst wrongs, because their lessons are so much easier to discern and are so much more important to learn. And we should learn those lessons. Situations do not need to be equivalent to be instructive. If they did have to be, we would learn nothing. (The stubborn belief that they have to be equivalent is perhaps why we wind up learning so little).
When a law or a group of laws unjustly restricts your life opportunities, are you morally obliged to comply with those laws?
Can or should you be blamed if you do not comply?
Is it right to conclude that those who do not comply with the unjust laws are not, because they do not comply, negatively affected by the laws?
If the unjust laws are, finally, to be changed, what should happen with those who have not complied? Should they continue to be subject to prosecution or other punishment for noncompliance? Would that remedy – or, on the contrary, would that perpetuate – the injustice of the laws?
History offers examples of unjust laws. Laws that stunted the lives of those who were subject to them. Typically such laws singled people out based on some identity group, such as race, ethnicity or nationality, social class, religion, gender, sexual orientation, or disability. Those singled out were, for no reason other than their identity, then subject to rules, restrictions, and/or obligations to which others – those who did not share that identity – were not subject. In essence, the laws stigmatized the members of the identity group and denied them opportunities that were available to others.
Coverture
One example is the laws of “coverture.” Under these laws, married women did not legally exist. They were “covered” by their husbands. They could not make contracts or be sued. They could not own or work in businesses. They owned nothing – not even their home – and could not have bank accounts. They had no rights to their children, so if they divorced they risked not being able to see their children again. (Unmarried women also had few rights, as they were “covered” by their fathers).
Given how coverture restricted a woman’s life and life opportunities, it should not come as a surprise that some women did not comply with the laws. Charley Parkhurst, for example, disguised herself as a man in order to work in a livery stable and, later, to drive a stagecoach. While there are examples from throughout the centuries and around the world, perhaps the best documented examples from the United States are the hundreds of women who disguised themselves as men in order to serve in the military, most notably during the Revolutionary and Civil Wars. The women include Deborah Sampson (“Robert Shurtleff”), Sarah Edmonds (“Frank Thompson”), Sarah Pritchard (“Sam Blalock”), and Sarah Rosetta Wakeman (“Lyons Wakeman”). Even though they indisputably broke the law – which forbade women from serving in the military – the women are today celebrated on the websites of the U.S. Army, the U.S. Navy, and the United Service Organizations (USO), among other places. Some laud the women as “badass” because they, as well as other women throughout history and around the world who disguised themselves as men, “took a gamble […] in order to live life on their terms,” and “[didn’t have] many options and they wanted to […] get shit done.”
To repeat – the objective here is to learn from wrongs of the past. Not to draw equivalencies.
Black Codes and Jim Crow
To repeat – the objective here is to learn from wrongs of the past. Not to draw equivalencies.
Another example of unjust laws that stunted the lives of those who were subject to them are referred to as the “Black Codes” and “Jim Crow.” The former, enacted immediately after the Civil War, and the latter, enacted after Reconstruction and remaining in effect until the adoption of the Civil Rights Act of 1964 and the Voting Rights Act of 1965, severely limited the rights of African-Americans. The Black Codes included requirements to be employed while, at the same time, restricting the types of employment that were permitted (farmer or servant); heavy penalties for vagrancy, including forced labor; and restrictions on property and business ownership. Under Jim Crow, not only were African-Americans strictly segregated from whites, but also they continued to be subject to restrictions on property ownership. Business ownership was perilous because Jim Crow laws made them vulnerable to targeting and destruction. African-Americans were allowed only certain jobs – the lowest paid. The inability to open an account in a mainstream bank was also common.
Like women subject to coverture (discussed above), given how the Black Codes and Jim Crow restricted an African-American’s life and life opportunities, it should not come as a surprise that some African-Americans did not comply with the laws. Some, we know, disobeyed openly. Others did so less openly. Notably, some of those with lighter complexions opted to “pass” as white or as another nationality (examples include Mexican and Indian). If they were successful (and by all accounts many were), they were able to circumvent at least some of the limitations imposed by the Black Codes and Jim Crow.
Some of the more publicized examples of persons who “passed,” more or less successfully, are Dr. Albert Johnston, who hid his race in order to obtain a medical residency; Anita Hemmings, who hid her race in order to attend Vassar College more than 40 years before it desegregated; and Elsie Roxborough, who hid her race seeking to make it as a playwright in New York City. An often-cited example of double passing – in this case prior to the Civil War – is Ellen Craft. The daughter of a white enslaver and an enslaved mother in Macon, Georgia, she reportedly appeared “almost white.” She disguised herself as a man and pretended to be the master of her husband, William, who was also enslaved. With this ruse, the couple successfully escaped to Massachusetts.
Like the women discussed above, African-Americans who passed as white during these periods, indisputably, broke the law. Nevertheless, history looks upon them with understanding and compassion, if not admiration. The National Park Service describes the Crafts’ story as exemplifying “bravery, ingenuity, and perseverance.” The story of Dr. Johnson and his family is told in the 1948 book “Lost Boundaries” as well as in the 1949 film of the same title. Kelly McWilliams, author of the 2022 novel “Mirror Girls” about passing, reflects “Passing might be a sin, but when the terror is so old and so strong, isn’t it an understandable one?” Professor Meena Krishnamurthy writes “evasion and deceit […] arguably serve just ends when they function as ways of challenging or escaping […] oppression, of contesting or correcting […] injustice.” Ultimately, the decision to pass was (is) “highly personal.” At the same time, however, “every act of passing also illuminates greater social truths.”
To repeat – the objective here is to learn from wrongs of the past. Not to draw equivalencies.
Taxation of Overseas Americans
What does all this have to do with the taxation by the United States of overseas Americans? What has prompted a post on this website discussing women disguising themselves as men and African-Americans passing as white?
Recently Representative Darin LaHood (R-IL) introduced H.R.10468 (“To establish an elective residency-based income tax for nonresident citizens of the United States”). The bill includes provisions that would allow overseas Americans who have lived outside the United States for a specified minimum length of time (since age 25 or since 2010) and who are not currently in compliance with U.S. taxation to be able to elect the (so-called) residency-based tax regime without first coming into U.S. tax compliance. While SEAT has expressed certain reservations about the bill, these provisions are not among them.
As a general matter, SEAT’s position is that regardless of their U.S tax compliance, all Americans who live outside the United States and are tax residents of other countries should be relieved of any and all tax obligations to the United States with respect to non-U.S. source income earned/gained while living outside the United States and as a tax resident of another country. Unfortunately this position is not universally held.
Instead, some take the position that allowing Americans currently living outside the United States who are not in current U.S. tax compliance to elect into a (so-called) residency-based tax regime would be to grant them an unwarranted and undeserved “amnesty.” According to those who take this position, “the best way to deal with bad laws is to sue and/or pass legislation while still obeying them. It means that I still pay my income tax even though I don’t believe it is constitutional.” Overseas Americans should still be “paying” U.S. income tax. Those who are not in current U.S. tax compliance at the time the system is changed should remain liable for prosecution for noncompliance because they did not “[do] the right thing [by complying] and [have not] been suffering under the tyranny of CBT and FATCA.”
This position does not take into account the full reality of the situation. As discussed in detail elsewhere, the principal problem of the U.S nationality-based tax system is not the payment of U.S. tax. As shown in the graph below, most U.S. tax returns filed from outside the United States show that no U.S tax is owed. Instead, the principal problem is that the system stunts the lives of overseas Americans.
The U.S. nationality-based tax system singles people out based on their nationality (American). For no reason other than the fact that they are Americans living outside the United States, they are subject to rules, restrictions, and obligations to which others are not subject. The U.S. nationality-based tax system stigmatizes Americans living outside the United States and denies them opportunities that are available to others. Although there is obviouly no comparison in magnitude to the problems of coverture and Jim Crow, the U.S. nationality-based tax system results in overseas Americans having difficulty owning their own homes, owning their own businesses, and having bank accounts. They struggle to save for retirement and to otherwise invest. They are denied certain opportunities for employment and community service.
While there are many obvious differences between coverture and Jim Crow, on the one hand, and the U.S. nationality-based tax system on the other hand – the order of magnitude being one very obvious difference – this does not mean that lessons cannot be learned. To repeat – the objective here is to learn from wrongs of the past. Not to draw equivalencies.
Who Suffers, and How?
To repeat – the objective here is to learn from wrongs of the past. Not to draw equivalencies.
Clearly, those overseas Americans who attempt to be in U.S tax compliance suffer severe limitations on their lives. But what about those who are not in U.S. tax compliance? Does the fact that they are not in compliance mean they do not suffer?
Before answering that question, let’s consider again the women under coverture who disguised themselves as men, and the African-Americans under the Black Codes and Jim Crow who passed as white. Did they fail to “do the right thing?” Yes, they were able to take advantage of opportunities that would not otherwise have been available to them. But they had to always be on guard to avoid the discovery of their secret. They had to be extraordinarily careful of who they trusted, and perhaps many could trust no one. In order to avoid discovery, they had to cut off ties with their family and with the friends they had as women/as African-Americans. They had to be evasive and deceitful, hiding from the world who they actually were. Ultimately, they lived with fear, distrust, and inauthenticity. At any moment their secret could be discovered and the consequences could be severe. Clearly, then, they suffered under the unjust laws – it’s just that their suffering took forms that were different as compared to those who complied with the law.
This is how we should understand the situation of overseas Americans who are not U.S. tax compliant. Can they take advantage of opportunities denied to those who seek to be compliant (such as the opportunity to own their home, operate a small business, or have a bank account)? Definitely. But this does not mean that they do not suffer as a result of the U.S. tax regime. They must also be on guard to avoid discovery of their secret (non-compliance). They have to be careful who they trust (some have reported experiencing blackmail – that their U.S. citizenship would be outed to a bank or to an employer). Some, because they are not U.S tax complaint, fear travel to the United States. This results in being cut off from family and friends there. They have to be evasive and deceitful; For example, in order to be able to make certain investments, have a bank account, or hold a certain job, they must hide or outright deny their U.S. citizenship. For any rational person, the failure to be in compliance with U.S. tax law – no matter how justified they believe noncompliance to be – necessarily carries some amount of fear, if not quite a bit. Clearly, then, overseas Americans who are not U.S. tax compliant suffer under the unjust laws – it’s just that their suffering takes forms that are different from those who seek to comply.
To repeat – the objective here is to learn from wrongs of the past. Not to draw equivalencies.
Amnesty For Wrongdoing or Ending Injustice?
To repeat – the objective here is to learn from wrongs of the past. Not to draw equivalencies.
Should the repeal of the laws of coverture be considered as having granted amnesty to the women who disguised themselves as men? Should the Civil Rights Act be considered as having granted amnesty to African-Americans who passed as white? The responses to these questions must be no. Amnesty assumes that the laws in question were just and that the persons who did not comply engaged in wrongdoing. Amnesty involves forgetting the wrongdoing and waiving the need for punishment. The purpose of amnesty is to end confrontation and revive community life. The laws ending coverture and Jim Crow did not grant amnesty because amnesty was not needed. Today we understand that the women who did not comply with the laws of coverture and the African-Americans who did not comply with Jim Crow did not engage in wrongdoing. On the contrary, as discussed above, the women are described as “badass” and are celebrated by no less than the U.S. military, and the African-Americans continue to be the subject of novels, films, and academic papers produced yet today. There was no need to punish them. There was no confrontation that could be ended or community life that could be revived by granting them amnesty.
Rather than granting amnesty, the way to understand the laws ending coverture and Jim Crow is that they righted wrongs. Coverture and Jim Crow stunted lives regardless of compliance. The laws ending them corrected manifest injustice. Prosecuting or otherwise punishing a person for not complying with laws that have since been repealed and that were manifestly unjust and stunted their life makes no sense. Doing so would serve no purpose other than perpetuating the injustice.
This is how we should understand ending the current citizenship (nationality)-based tax system. Ending the system will right a wrong. It will allow overseas Americans to lead full rather than stunted lives. It will correct manifest injustice. Prosecuting or otherwise punishing people for failing to comply with a system that has since been repealed, that was manifestly unjust, and that stunted lives would not make any sense. Doing so would serve no purpose other than perpetuating the system’s injustice. Either we believe that the current citizenship (nationality)-based tax system is unjust or we do not. The fact of its injustice is not dependent upon the extent of a person’s compliance, or even upon their outright and total defiance of the law.
It may be important to repeat here that the injustice of the current citizenship (nationality)-based tax system does not lie in the payment of taxes. The objection to the current system is not an objection of principal to all income taxation regardless of its form or source. Overseas Americans are subject to taxation in the countries where they live, like all other residents of those countries. Further, they should remain subject to U.S. income taxation on their U.S.-source income. No – again – the injustice of the U.S. citizenship (nationality)-based tax system lies in the manner by which the system stunts lives. It singles out Americans living outside the United States for treatment that is worse than the treatment of both those living in the United States (U.S. citizens or not) and those who are not Americans living outside the United States. As explained above, as a result of the system, overseas Americans have great difficulty owning their own homes, owning their own businesses, and having bank accounts. They struggle to save for retirement and to otherwise invest. They are denied certain opportunities for employment and community service. These are the reasons the system is unjust. No other taxpayers in the world suffer these injustices.
The bottom line: when the U.S. citizenship (nationality)-based tax system is finally ended, it should be ended for everyone, regardless of the extent of any individual’s past compliance. The system is manifestly unjust. It causes harm to all Americans regardless not only of where they live but also of the extent of their compliance. Prosecuting or otherwise punishing individuals for past noncompliance with a law recognized to be unjust would only serve to perpetuate the injustice.
To repeat – the objective here is to learn from wrongs of the past. Not to draw equivalencies.
Aside from the problems or difficulties of not being able to own a home, have a bank account and simply, just the fear of being non-compliant, there is also the great burden of the filing a tax return. Reporting income SOLEY earned and taxed in the country (not US) one lives, to the IRS (US) is complex. Many have to pay a tax person to do it. Not only is it hard to find a person who knows how, but it usually requires travel somewhere in the country to meet with them. This is very expensive. All this, to just be ‘in compliance’ is an added burden, financially and mentally. unjust. In many cases, the American (ex-pat), owes no taxes, yet had to pay out ridiculous amounts, needlessly. It is, in my opinion, US’s way of punishing that American for leaving their country. For not earning the taxable income on their soil. For not feeding into their money machine in the daily life of purchasing everyday taxable items (house, car, gas, food, etc). We would appreciate it if you add these points as well. The fear of not being compliant is very real. The imposed ‘daily’ IRS penalties are real. None of this is fair for the everyday American who happens to live outside of the country, probably living paycheck to paycheck there. The US gives back nothing to this person. The American is no burden on the US.