Source: https://renounceuscitizenship.wordpress.com/2013/01/04/does-cook-v-tait-really-mean-that-citizenship-based-taxation-is-constitutional-in-all-cases/
Timestamp: 2019-04-23 17:58:07+00:00

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Some years later I had the privilege of attending a University lecture where Judge Bork was the guest speaker. He gave an excellent presentation – making the point that “governments have the right to make bad laws. Not all things done by governments are or should be reviewable in the courts.” (In the Q and A that followed, Judge Bork was attacked by a number of University academics who did not accept that principle).
3. He might have found a way to restrict states from banning abortion in another part of the constitution.
What are your views on finding a right of privacy in the constitution in the manner that Judge Blackmun did?
The identification of the “right of privacy” was the “assumption/presumption” that justified the decision in Roe v. Wade. Absent the finding of the right of privacy, Roe v. Wade would not have been decided the way it was.
1. It is important to understand the rationale for a decision. This includes an examination of any “assumptions/presumptions” that it is based on.
2. It is possible for the Supreme Court to revisit decisions. We are reminded of this every election year.
So, what’s this got to do with Cook v. Tait – The case cited for establishing U.S. citizenship-based taxation is constitutional?
After 100 years it might be worth reconsidering the reasoning in Cook v. Tait. It’s a short decision that adopts certain “assumptions/presumptions” and contains very little legal reasoning (sound familiar?).
The case involved a U.S. citizen who lived in Mexico and had property in Mexico. The U.S. was attempting to levy income taxes on this U.S. citizen abroad. To his credit, the taxpayer managed to have the case heard by the Supreme Court of the United States.
The U.S. did NOT have the constitutional right to levy income taxes on U.S. citizens living outside the U.S. and on income earned outside the U.S.
It did have the constitutional right to levy income taxes on citizens living outside the U.S. and that it could levy those taxes on the citizen’ s world income.
Nothing has changed in almost 100 years.
The contention was rejected that a citizen’s property without the limits of the United States derives no benefit from the United States. The contention, it was said, came from the confusion of thought in “mistaking the scope and extent of the sovereign power of the United States as a nation and its relations to its citizens and their relations to it.” And that power in its scope and extent, it was decided, is based on the presumption that government by its very nature benefits the citizen and his property wherever found, and that opposition to it holds on to citizenship while it “belittles and destroys its advantages and blessings by denying the possession by government of an essential power required to make citizenship completely beneficial.” In other words, the principle was declared that the government, by its very nature, benefits the citizen and his property wherever found and, therefore, has the power to make the benefit complete. Or to express it another way, the basis of the power to tax was not and cannot be made dependent upon the situs of the property in all cases, it being in or out of the United States, and was not and cannot be made dependent upon the domicile of the citizen, that being in or out of the United States, but upon his relation as citizen to the United States and the relation of the latter to him as citizen. The consequence of the relations is that the native citizen who is taxed may have domicile, and the property from which his income is derived may have situs, in a foreign country and the tax be legal — the government having power to impose the tax.
1. It’s sovereignty as a country in relation to other countries. This kind of sovereignty stops at its border.
2. Because the U.S. benefits the citizen wherever the citizen lives, it is fair and reasonable to allow the U.S. to impose a tax in exchange for that benefit.
The Supreme Court is an appellate court and is there to address matters of law. Appellate courts should NOT decide facts. The factual predicate for the decision is “the presumption that government by its very nature benefits the citizen and his property wherever found”. Note that the Judge is PRESUMING WITHOUT DECIDING that the U.S. benefits its citizens wherever they live. (A highly dubious claim) Hence, the decision is much narrower than is commonly believed.
The decision in Cook v. Tait is NOT that the U.S. can tax its citizens wherever they live.
The decision in Cook v. Tait is that the U.S. can tax its citizens wherever the citizen may live, based on the presumption, that the U.S. benefits the citizen wherever the citizen lives.
Does Cook v. Tait require that the U.S. provide benefits as a condition of citizenship-based taxation? Cook v. Tait is not clear on this point.
Interestingly, one year ago a post (and interesting comments) appeared on the Isaac Brock Society blog titled: “You want taxes, I want services“.
The post strongly suggests that the U.S. does NOT by its very nature benefit U.S. citizens abroad.
He concludes that since the United States ‘owed’ him, or apparently owed him, no citizen’s protection, he, in turn, owed no tax.
While there is language in Cook v. Tait, supra, indicative that these are reciprocal obligations, the Court also observed that ‘government by its very nature benefits the citizen * * *.’ 265 U.S. at 56, 44 S.Ct. at 445. We cannot agree that the reciprocal obligations are mutual, at least in the sense that taxpayer contends. It is sufficient that the government’s stem from its de jure relationship without regard to the subjective quid pro quo in any particular case. We will not hold that assessment of benefits is a prerequisite to assessment of taxes.
This is interesting and like many legal opinions unclear.
– the U.S. may tax its citizens abroad because of the “presumption” that “government by its very nature benefits the citizen”.
1. Does the U.S. actually provide benefits to its citizens who live outside the U.S.?
There is a wealth of evidence suggesting that the taxation of U.S. citizens abroad is extremely damaging to them and provides them with no benefits at all. The U.S. might argue that the benefit of citizenship is that one has the right to live in the U.S. But Cook v. Tait focuses on a “presumption that the GOVERNMENT by its very nature benefits” citizens. It is the 14th amendment of the constitution that guarantees citizenship and not the government. Assuming a constitutional right to enter the U.S., this is a right granted by the constitution and NOT by the government. Hence, the search for government benefits provided to citizens abroad is elusive.
On this point see another post that appeared on at the Isaac Brock Society: “How I really feel about citizenship-based taxation“. The comments on this post are absolutely worth reading to understand the impact of citizenship-based taxation!
2. Does the U.S. impose costs on U.S. citizens living abroad? If so, what are they?
It is becoming increasingly clear that the “compliance costs” of U.S. citizenship are such that it is too expensive for many to retain it. (It is difficult to find tax preparers for U.S. citizens abroad.) Furthermore, the “compliance costs” do not include the increasing cost of double taxation.
3. If the U.S. does provide benefits to U.S. citizens abroad, are the benefits in proportion to the cost that U.S. citizens are expected to pay for those benefits?
Third, the effect of this is that a significant number of U.S. citizens abroad are subjected to costly double taxation which is NOT saved by tax treaties.
*The statement that tax treaties beetween the US and other countries “avoid double taxation” is not correct. Such treaties may mitigate double taxaxation but each and every one of these treaties clearly acknowledge the right of the US government to subject its citizens resident in the other country to US taxation.
The tax laws of the different countries are often so different that these tax treaties mean little to US citizens living abroad – unless the the foreign system mirrors the US tax system – which few of them do. There is invariably income which is tax free in the foreign country which is taxed under US law. Tax incentives provided by foreign countries are rarely recognized as such under US tax law, so what the US citizen person in the foreign country saves in foreign taxes by taking advantage of these incentives is penalized, usually dollar-for-dollar, by increasing the tax due to the IRS.
In many coungtries there are no capital gains taxes. So the US citizen has no foreign tax credit to offset the US tax on these capital gains. Many foreign countries have net worth taxes which subject assets to an annual tax based on the value of those assets. Not one penny of this net worth tax can be used to offset the US tax on capital gains when these assets are sold.
Likewise, some countries raise there revenue primarily through consumption rather than income taxes, In fact they have no income tax whatsoever. Yet no US tax treaty recognizes these consumption taxes as either deductible or creditiable against the US tax obligation on foreign income.
Given this reality, it is absolutely false to assert that tax treaties avoid double taxation. Period.
4. Do the answers to questions 1, 2, and 3 provide strong evidence that could overcome the presumption that the the U.S. government “by its very nature” benefits U.S. citizens abroad?
The views of U.S. citizens abroad need to be considered. See (among others) the following thread from the Isaac Brock Society “Has your life been stolen by the IRS?“.
And finally, doesn’t this reasoning raise the following question?
What if a U.S. citizen abroad simply says that he will neither accept not request any benefit from the U.S.? This should negate the rationale in Cook v. Tait. Can the U.S. force a citizen to pretend that he/she receives benefits from the government?
Cook v. Tait dealt with the taxation of U.S. citizens abroad. What does this have to do with Green Card Holders?
Where does the U.S. imagine it gets the right to levy income taxes on Green Card Holders who do NOT live in the U.S. and while they are residents of other countries?
There is no way that this can be justified under the Cook. v. Tait decision! Furthermore, it is very clear that to levy income taxes on Green Card Holders who are residents of other countries is to levy taxes on residents of other countries. One would think that this would violate the principle of sovereignty between nations identified by Judge McKenna.
This post is based only on the decision of the Supreme Court of the United States in Cook v. Tait and the decision of the United States Court of Appeals – First Circuit in Felix Benitez Reckach. I have had not attempted to locate any subsequent decisions that specifically consider the legal reasoning in these two cases. I will leave that for another post, but welcome any comments on Cook v. Tait and any other cases of relevance.
1. Cook v. Tait cannot be used to justify the claim that citizenship-based taxation is constitutional. But, the failure of the “ratio” in Cook v. Tait does NOT mean that citizenship-based taxation is unconstitutional.
citizenship-based taxation could be permitted under another part of the constitution.
3. Cook v. Tait could be used to argue that citizenship-based taxation is constitutional, if the presumption that the “government by its nature benefits its citizens”, was demonstrated to be true.
If the U.S. has a constitutional right to tax its citizens abroad, does that allow them to do anything under the guise of Cook v. Tait?
The time has come to reconsider the legal, moral and practical considerations of citizenship-based taxation. Even if it is legal, it is unwise. Citizenship-based taxation is not consistent with the best of America’s traditions. The U.S. is an will continue to pay a heavy price for this “ill advised” policy.
1. Roger Conklin (and others) have argued persuasively that citizenship-based taxation is harmful to U.S. trade and the trade deficit.
2. The most articulate and growing voice of anti-Americanism is from U.S. citizens abroad.
The IRS attack on U.S. citizens abroad may become a diplomatic issue. Many U.S. citizens abroad are also citizens of their country of residence. Therefore, through citizenship-based taxation the U.S. is taxing the residents of other countries and harming those countries!
The decision in Cook v. Tait is an example of a false premise justifying the conclusion.
1. Hockey players have three legs.
2. Steve is a hockey player.
Therefore Steve has three legs.
The conclusion “Steve has three legs” is a conclusion that is perfectly valid from the facts given. It’s just that the facts are wrong. Hockey players do NOT have three legs.
1. The U.S. government always benefits its citizens.
Therefore, Steve benefits from the U.S. government.
The conclusion “Steve benefits from the U.S. government” is a conclusion that is perfectly valid from the facts given. It’s just that the facts are wrong. U.S. citizens abroad receive no benefits from the U.S. Furthermore, the U.S. is destroying their lives.
Cook v Tait does NOT provide a constitutional justification for the way that U.S. attempts to tax its citizens abroad.
This argument needs to be developed with a view to getting the Supreme Court of the United States to reconsider the reasoning in Cook v. Tait.
TAIT, UNITED STATES COLLECTOR OF INTERNAL REVENUE FOR THE DISTRICT OF MARYLAND.
No. 220.Supreme Court of United States.
Argued April 15, 1924.Decided May 5, 1924.ERROR TO THE DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF MARYLAND.
Mr. Charles Claflin Allen, Jr., and Mr. Charles Claflin Allen, with whom Mr. Frederic N. Watriss was on the briefs, for plaintiff in error.
Mr. Solicitor General Beck for defendant in error.
53*53 MR. JUSTICE McKENNA delivered the opinion of the Court.
Action by plaintiff in error, he will be referred to as plaintiff, to recover the sum of $298.34 as the first installment of an income tax paid, it is charged, under the threats and demands of Tait.
54*54 Plaintiff is a native citizen of the United States and was such when he took up his residence and became domiciled in the City of Mexico. A demand was made upon him by defendant in error, designated defendant, to make a return of his income for the purpose of taxation under the Revenue Laws of the United States. Plaintiff complied with the demand, but under protest, the income having been derived from property situated in the City of Mexico. A tax was assessed against him in the sum of $1,193.38, the first installment of which he paid, and for it, as we have said, this action was brought.
Plaintiff assigns against the power not only his rights under the Constitution of the United States but under international law, and in support of the assignments cites many cases. It will be observed that the foundation of the assignments is the fact that the citizen receiving the income, and the property of which it is the product, are outside of the territorial limits of the United States. These two facts, the contention is, exclude the existence of the power to tax. Or to put the contention another way, as to the existence of the power and its exercise, the person receiving the income, and the property from which he receives it, must both be within the territorial limits of the United States to be within the taxing power of the United States. The contention is not justified, and that it is not justified is the necessary deduction of recent cases. In United States v. Bennett, 232 U.S. 299, the power of the United States to tax a foreign built yacht owned and used during the taxing period outside of the 55*55 United States by a citizen domiciled in the United States was sustained. The tax passed on was imposed by a tariff act, but necessarily the power does not depend upon the form by which it is exerted.
It will be observed that the case contained only one of the conditions of the present case, the property taxed was outside of the United States. In United States v.Goelet, 232 U.S. 293, the yacht taxed was outside of the United States but owned by a citizen of the United States who was “permanently resident and domiciled in a foreign country.” It was decided that the yacht was not subject to the tax — but this as a matter of construction. Pains were taken to say that the question of power was determined “wholly irrespective” of the owner’s “permanent domicile in a foreign country.” And the Court put out of view the situs of the yacht. That the Court had no doubt of the power to tax was illustrated by reference to the income tax laws of prior years and their express extension to those domiciled abroad. The illustration has pertinence to the case at bar, for the case at bar is concerned with an income tax, and the power to impose it.
Walter L. Newsom, Jr., San Juan P.R., with whom Rene Benitez Rexach, San Juan, P.R., and Brown, Newsom & Cordova, San Juan, P.R., were on brief, for appellant.
Mitchell Rogovin, Asst. Atty. Gen., with whom Francisco A. Gil, Jr., U.S. Atty., and Meyer Rothwacks, Thomas Silk, Louis M. Kauder, John J. McCarthy and Jerome H. Fridkin, Attys., Dept. of Justice, were on brief, for appellee.
Before ALDRICH, Chief Judge McENTEE and COFFIN, Circuit Judges.
2Felix Benitez Rexach, hereafter taxpayer, a native-born Puerto Rican, became an American citizen by virtue of the Jones Act of March 2, 1917, 48 U.S.C. 731 et seq. In 1944 he left Puerto Rico and became a resident of the Dominican Republic, where he remained until 1961. In July 1958 he executed a written renunciation of his American citizenship before United States consulate official in the Dominican Republic pursuant to the Immigration and Nationality Act of 1952, 8 U.S.C. 1481(a)(6). A certificate of loss of nationality was duly approved by the Department of State. On July 26 taxpayer was decreed to be a citizen of the Dominican Republic. Thereafter, he naturally suffered certain losses of status and benefits as a consequence of being declared a non-resident alien of the United States.
3Taxpayer was engaged in large scale contracting activities in the Dominican Republic in connection with the then dictator, Trujillo. In 1961 Trujillo was assassinated. The following year taxpayer applied for an American passport, claiming that his 1958 renunciation was not voluntary but had been compelled, against his will, by economic pressure and physical threats that he feared to resist. The United States Consul denied his application, and taxpayer appealed to the Department of State. The Board of Review on the Loss of Nationality took taxpayer’s testimony and accepted it, as a result of which his certificate of loss of nationality was cancelled, and his passport application granted. There followed the present chapter. The Commissioner of Internal Revenue assessed taxpayer with an income tax on account of income earned in the Dominican Republic during the years following his renunciation of citizenship, alleged to be due because of his continued American citizenship. Cook v. Tait, 1924, 265 U.S. 47, 44 S.Ct. 444, 68 L.Ed. 895. Taxpayer not responding, the present suit was brought to foreclose liens in payment of such taxes. Taxpayer moved, unsuccessfully, for summary judgment on the claim that no taxes could be due.
4Taxpayer concedes that as a matter of law he is precluded by the record from claiming that he ever ceased to be a United States citizen, and concedes that during the period in question he was a de jure citizen. However, he says that he was not a ‘de facto’ citizen.
6He concludes that since the United States ‘owed’ him, or apparently owed him, no citizen’s protection, he, in turn, owed no tax.

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