Citizenship And Worldwide Taxation: Citizenship As An Administrable Proxy For Domicile (Part 3)

Edward Zelinsky ( Part 3)
  1. Three Theories of Citizenship

In this Part, I identify three conceptions of U.S. citizenship that help to evaluate the propriety of citizenship-based taxation. Some commentators describe citizenship in terms different from those identified in these three models. 65 Whatever the value of these alternative conceptions of citizenship in other contexts, for the issue explored in this Article – the propriety of taxing on the basis of citizenship – these three models are the useful approaches to citizenship and the benefits defense of citizenship based taxation.

  1. The Minimalist Model

For Professor Bickel, a minimalist conception of U.S. citizenship both describes the reality of U.S. law and embodies a normatively desirable state of affairs: “Happily,” Professor Bickel wrote, “the concept of citizenship [*1304] plays only the most minimal role in the American constitutional scheme.” 66 Prior to the adoption of the post-Civil War Amendments, the U.S. Constitution “contained no definition of citizenship and precious few references to the concept altogether.” 67 Citing the First and Second Amendments, Professor Bickel noted that “the Bill of Rights throughout defines rights of people, not of citizens.” 68 Thus, “the original Constitution presented the edifying picture of a government that bestowed rights on people and persons, and held itself out as bound by certain standards of conduct in its relations with people and persons, not with some legal construct called citizen.” 69

Professor Bickel’s minimalist argument has venerable origins. During the administration of John Adams, Albert Gallatin criticized the Alien Friends Act as violating noncitizens’ rights under the Fifth Amendment. 70 That amendment, Gallatin observed, protects all persons, not just citizens, from deprivations of “life, liberty, or property, without due process of law.” 71

Moreover, according to Professor Bickel, the post-Civil War Amendments and the Supreme Court’s immediate response to one of them in the Slaughter-House Cases 72 confirmed the U.S. Constitution’s extension of rights to persons, citizens and noncitizens alike. At first blush, those amendments seem to increase the import of citizenship under the Constitution. The Fourteenth Amendment overruled Dred Scott 73 by declaring, inter alia, that “all persons born … in the United States” are citizens and thereby bestowed citizenship upon former slaves and their offspring. 74 The Fourteenth Amendment also prohibited the states from “abridging the privileges or immunities of citizens of the United States,” while the Fifteenth Amendment guaranteed citizens the right to vote regardless “of race, color, or previous condition of servitude.”

Nevertheless, these provisions made citizenship less central to the revised constitutional order than first appears for, at the same time that the Fourteenth Amendment confirmed the citizenship of former slaves, it extended “equal protection of the laws” and “due process of law” to “any person.” Through the nineteenth century and into the twentieth, many [*1305] states permitted aliens to vote. 75 In the Slaughter-House Cases, the U.S. Supreme Court advanced a distinctly minimalist conception of the rights flowing from U.S. citizenship and the Fourteenth Amendment’s privileges and immunities clause. 76 The U.S. Supreme Court in McDonald v. City of Chicago has recently reaffirmed the Slaughter-House Cases and their minimalist construction of the privileges and immunities of U.S. citizenship. 77

The net result of extending equal protection and due process rights to all “persons” while reading narrowly the rights of citizens under the privileges and immunities clause, Professor Bickel wrote, is that “resident aliens are under the protection of our Constitution substantially no less than citizens … .” 78 For Professor Bickel “the traditional minimal content of the concept of citizenship” 79 is to be applauded:

A relationship between government and the governed that turns on citizenship can always be dissolved or denied. Citizenship is a legal construct, an abstraction, a theory. No matter what the safeguards, it is at best something given, and given to some and not to others, and it can be taken away. It has always been easier, it always will be easier, to think of someone as a noncitizen than to [*1306] decide that he is a nonperson, which is the point of the Dred Scott case. 80

Although Professor Bickel articulated this minimalist understanding of U.S. citizenship over a generation ago, contemporary commentators adhere to this understanding today. Professor Bosniak, for example, writes that, under U.S. law, “citizenship, it turns out, is not actually “the right to have rights,’ despite the conventional wisdom. In many situations, only personhood is required.” 81 Even those who are normatively skeptical of the minimalist model of U.S. citizenship acknowledge that it accurately describes the law today. For example, Professor Schuck, a prominent voice concerned about the “devaluation of citizenship,” 82 acknowledges that, as a matter of positive law, “the liberal, minimalist conception of citizenship celebrated by Bickel [is] dominant in American law.” 83

In the judicial realm, the seminal statement that aliens enjoy the same Fourteenth Amendment right to equal protection as citizens is Yick Wo v. Hopkins. 84 In that case, San Francisco applied its ordinance to prohibit Yick Wo, a resident alien, from operating his laundry business in that city while other persons, U.S. citizens, were permitted to conduct such businesses. This arbitrary application of municipal law, the Court held, violated the Fourteenth Amendment which, by virtue of the Equal Protection Clause, protects “all persons within the territorial jurisdiction [of the United States], without regard to any differences of race, of color, or of nationality.” 85 As a constitutional matter, Yick Wo, a “subject[] of the emperor of China,” 86 had the same right to earn his livelihood in San Francisco as a U.S. citizen.

[*1307] Similarly confirming the irrelevance of citizenship for most 87 rights under the U.S. Constitution is Graham v. Richardson. 88 In that case, the Supreme Court held that resident aliens have the same entitlement to welfare benefits as citizens because “an alien as well as a citizen is a “person’ for equal protection purposes.” 89

The minimalist conception of U.S. citizenship was recently endorsed in Boumediene v. Bush. 90 In Boumediene, a five-justice majority held that, as a procedural matter, an alien held at Guantanamo Bay, Cuba, can, under the U.S. Constitution, file a petition for habeas corpus to challenge the legality of his incarceration by U.S. forces. For the Boumediene majority, the issue posed in that case was whether “noncitizens detained by our Government in territory over which another country maintains de jure sovereignty” can apply for a writ of habeas corpus from a federal court. 91 Answering that question in the affirmative, the Court observed that “the Constitution’s separation-of-powers structure, like the substantive guarantees of the Fifth and Fourteenth Amendments, protects persons as well as citizens.” 92 It did not matter that Mr. Boumediene lacked U.S. citizenship. Despite his status as an alien, he was, as a procedural matter, entitled to challenge his incarceration via a habeas corpus petition. 93 Under the U.S. Constitution, citizenship is not a prerequisite for the right to seek judicial review of the legality of one’s confinement.

The minimalist conception of U.S. citizenship is reflected in the Restatement of the Law (Third) of Foreign Relations Law of the United States, which confirms that aliens within the jurisdiction of the United States enjoy the rights embodied in the Constitution. Although certain constitutional rights are “expressly reserved for citizens,” 94 as to all others, “an alien in the United States is entitled to the guarantees of the United States Constitution.” 95 Echoing Professor Bickel, the Restatement’s comment reiterates that “the Bill of Rights of the United States Constitution (Amendments I-X) declares the rights of persons, not of citizens only” 96 and that “the principal provisions of the Fourteenth [*1308] Amendment safeguarding individual rights against violation by the States also prescribe rights of persons, not only of citizens.” 97

In the context of this minimalist conception of U.S. citizenship, consider again the Court’s observation in Cook that a citizen who resides abroad and whose property is located outside the United States receives benefits from the federal government. Precisely what citizenship-based benefits did Mr. Cook receive while he resided in Mexico? In an influential analysis, T. H. Marshall divided citizenship into civil, political, and social rights. 98 By the civil aspects of citizenship, Marshall meant “the rights necessary for individual freedom – liberty of the person, freedom of speech, thought and faith, the right to own property and to conclude valid contracts, and the right to justice.” 99 For Marshall, “the political element” of citizenship is “the right to participate in the exercise of political power, as a member of a body invested with political authority or as an elector of the members of such a body.” 100 Finally, for Marshall, the most prominent of the social rights of citizenship pertain to “the educational system and the social services” available to the members of society. 101

Under Marshall’s framework, Mr. Cook, in political terms, at that time lacked the most basic political right – the right to vote – because Mr. Cook did not reside in any state and thus had nowhere he could cast a U.S. ballot. Since 1986, 102 a nonresident U.S. citizen, like Mr. Cook, has had the right to cast an absentee ballot in federal elections in the state which he “was domiciled before leaving the United States,” 103 though a U.S. citizen who has never established a domicile in a particular state still has nowhere to cast a ballot in U.S. elections.

In terms of civil rights, Mr. Cook (like any contemporary U.S. citizen living abroad) could, if necessary, have called on the United States for formal diplomatic protection, including representation in international negotiations or arbitration. Mr. Cook could also have requested of the United States less formal consular assistance or, at the other extreme, military protection, including evacuation by United States forces. The United States may or may not have granted any such requests for assistance. Mr. Cook merely had the right to ask. Other than that, Mr. Cook’s civil [*1309] rights as a Mexican resident were defined by Mexican law, as is true today of a U.S. citizen living in a foreign nation.

As a U.S. citizen, Mr. Cook had the right to return to the United States. An alien lawfully admitted to the United States for permanent residence does not have quite the same right in this respect as a citizen. For example, a permanently resident alien can be removed, i.e., deported, if he commits certain crimes. 104 A citizen committing these crimes faces punishment, but not expulsion. A permanent resident alien is effectively required to return to the United States after spending 180 days abroad. 105 Mr. Cook, as a U.S. citizen, faced no such requirement. Nevertheless, in significant measure, a lawful permanent resident, while an alien, has a right to reside within the United States similar to the residence right of a citizen.

In social terms, Mr. Cook lived at a time when the welfare state was nascent. However, in contemporary terms, there are few significant U.S. social benefits to which Mr. Cook would be entitled today while living in Mexico. Unemployment insurance and Medicaid, for example, are state-run programs to which Mr. Cook would have had no entitlement, as he had no state of residence. If the contemporary Mr. Cook is self-employed or works for a U.S. employer, he accrues U.S. social security benefits, since the United States and Mexico have not entered into a totalization arrangement. 106 If, however, Mr. Cook instead were to reside in any of the twenty-four nations with which the United States has such arrangements, he would not pay U.S. social security taxes or accrue U.S. benefits. Rather, in such a case, he would pay tax to and accrue retirement benefits from the social security system of the nation in which he resided, rather than from the U.S. social security system. The United States currently has totalization agreements with most European nations, as well as Canada, Japan, Australia, South Korea, and Chile. 107

In short, the citizenship-based benefits enjoyed by Mr. Cook and other U.S. citizens resident abroad are limited. As I discuss below, 108 these minimal benefits make it difficult to justify worldwide taxation of such citizens’ assets and income under a benefits theory of taxation. Minimal benefits do not justify maximal taxation.


  1. The Psychological Model

To others, a minimalist conception of U.S. citizenship misses the larger point: U.S. citizenship is not merely a “legal construct” 109 but, rather, constitutes psychologically and symbolically valuable membership in a historic and important polity, the United States of America. From this perspective, the relevant issue is not the legal rights tied to citizenship but, rather, the intangible, but quite real, psychological and symbolic value of belonging to the American community. Professor Schuck captures the underpinnings of this model when he writes of the “psychological dimension” of citizenship, 110 “the emotional and symbolic attractions of identifying as” an American. 111 In the same vein, Professor Bosniak observes that “in psychological or cultural terms, the term citizenship is invoked to refer to an experience of identity and solidarity that a person maintains in collective or public life.” 112

Consider again in this context Mr. Cook. From a psychological perspective, the significance of Mr. Cook’s U.S. citizenship is not the minimal package of tangible legal benefits which flow from that citizenship but, rather, the intangible pride engendered by such citizenship: The boast civis Americanus sum 113 is symbolically valuable, irrespective of the limited legal rights which derive from that status.

This is a popular and widespread conception of U.S. citizenship, as can be affirmed by anyone who has ever watched naturalized citizens swear allegiance to their new home country. True, such new citizens thereby attain the unrestricted 114 right of permanent residency in the United States and the right to vote. However, few who watch such citizenship ceremonies can doubt the immense psychological value of full membership in the American polity. 115

However, the question remains: Does the compelling psychological value of U.S. citizenship justify citizenship-based taxation on worldwide [*1311] income and assets? The answer, as I discuss below, 116 is “No,” since there is no necessary connection between the intangible symbolic benefits of U.S. citizenship and the United States’ global taxation of its citizens. The latter does not follow from the former.

  1. The Tiebout/Purchase Model

The Tiebout model of public finance is one of the truly seminal ideas of the twentieth century, an idea that has had a pervasive impact in many areas of legal and economic scholarship. 117 The Tiebout model conceives of political jurisdictions as competing among themselves in the marketplace for residents and capital. Each competing jurisdiction, e.g., every municipality in a metropolitan region, offers a package of public services at a price in the form of the taxes levied by that jurisdiction. The relationship between a political jurisdiction and its prospective and current residents is the relationship of seller and purchaser. The jurisdiction sells services. Residents purchase those services via their tax payments. Households and firms, continually

assessing their locational choices, sort themselves into different jurisdictions, depending upon their respective service and tax preferences. The ability of existing residents and businesses to emigrate to adjacent jurisdictions disciplines political decision-makers, who must concern themselves with the possibility that excessive taxes or unattractive services will cause individuals and firms to depart for neighboring communities with lower taxes or more appealing services.

The Tiebout test of a government service is the test of the marketplace. In this model, public services have no intrinsic value. They are worth whatever taxpayers are willing to pay for them through their respective tax payments. The classic Tiebout setting is the metropolitan area within which myriad municipalities provide mobile households and businesses multiple options in terms of tax and public-service packages.

Despite its enormous impact in other areas, the Tiebout model has had no influence on the citizenship literature. Indeed, in large measure, that literature is implicitly anti-Tiebout in its orientation, bemoaning those jurisdictions that make citizenship available for sale. 118 As Professor Schuck puts it, “Americans simply do not think of their polity as a mere club – a [*1312] transitory affiliation affording easy entry and exit for purely instrumental reasons with few strings attached.” 119 In contrast, from a Tiebout perspective, citizenship is a public service like any other, which individuals freely purchase (and change) with their tax payments “for purely instrumental reasons.” 120

Professor Abreu rejects measures like new Code § 877A, which, by making expatriation more costly, impair “personal autonomy”:

Whether the price of expatriation is high enough depends on the values of each individual. For most Americans, losing their U.S. citizenship is too high a price to pay for any tax savings. For such people, as for Justice Holmes, the tax costs of U.S. citizenship are worth the civilization it buys. For others, the tax costs of U.S. citizenship are too high. [Prior] law maximized the personal autonomy of taxpayers by allowing them to decide whether the price of expatriation – loss of citizenship – is too high. By respecting the change in status wrought by expatriation, the tax system allows individuals to decide whether the benefits of U.S. citizenship are worth its costs. 121

From this perspective, the core approach of the Tiebout model may be applied to the taxes and services offered by nation states, including citizenship. From this vantage, citizenship is a public service like any other, which the individual values through his tax payments. If an individual’s current citizenship is not worth the tax price he pays for it, the individual can seek an alternative, more affordable citizenship.

Certain features of current law can be understood as reflecting this Tiebout/purchase view of U.S. citizenship. In particular, if a minor who has resided in the United States for ten or fewer years renounces his U.S. citizenship upon the attainment of majority, he is not taxed under Code § 877A as a “covered expatriate.” 122 The Code thus gives this individual a purchase-type choice to continue as a U.S. citizen at the price of U.S. taxation of his worldwide income or to eschew U.S. citizenship as not worth the tax cost to him. However, as I discuss below, 123 the current system of citizenship-based taxation is in practice difficult to defend in Tiebout terms since different citizens face radically different prices for the same benefits of citizenship and because mobility among nations and nationalities is in practice far more limited than is mobility among municipalities.

All footnotes will be provided at the end of this multipart series by Edward Zelinsky

View Part 1, View Part 2

View Part 4


Professor Zelinsky has authored two books “Taxing The Church: Religion, Exemptions, Entanglements And The Constitution” and “The Origins Of The Ownership Society” both available on Amazon. In addition, he has written extensively on the topic of Citizenship Taxation And Defining Residence For Income Tax Purposes.

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