Categories

Pragmatic Capitalism

Practical Views on Money, Finance & Life

Regarding USA tax law

« Back to Previous Page
0

The USA is one of the few countries that tax residents on worldwide income, and also the only country that taxes non-resident citizens fully on their income (Eritria only taxes 5%).

I want to ask how did such draconian tax laws got implemented in the first place? Even full blown communist countries do not have such laws!

Marked as spam
Posted by FUЯ ION
Posted on 12/29/2016 6:15 AM
63 views
Private answer

Ordinary citizens and non-resident citizens basically have no clout in the nation’s capital.
As Warren Buffet famously said – ‘my secretary pays a much higher percentage in income taxes than I do’ – if you do not have a powerful lobby representing you, you get screwed..

Marked as spam
Posted by Mehul Gandhi
Answered on 12/29/2016 11:16 PM
    Private answer

    I want to know the history behind such draconian laws. What was the first legislation that mandated full taxation of non-resident citizens?

    Marked as spam
    Posted by FUЯ ION
    Answered on 12/30/2016 11:19 AM
      Private answer

      Although it is true that the USA taxes its citizens on their worldwide income, in practical terms, it does not mean much. For example, the first $100,000 of foreign earned income is excluded from US income tax. $100,000 is approximately twice the US median income and more than what about 90% of Americans make. So for most people working overseas, the worldwide aspect of taxation is actually moot.

      As far the the history goes, you can google it.

      Marked as spam
      Posted by Lucas
      Answered on 12/30/2016 5:41 PM
        Private answer

        I think the main reason for this is the unusual global nature of US corporations. The US govt is just trying to capture more revenue from institutions and individuals that can shelter that income due to favorable overseas rules. It doesn’t really work and I think the US govt would be better served by having no corporate income tax and no double taxation and instead raise the taxes on secondary markets like capital gains and dividends.

        Marked as spam
        Cullen Roche Posted by Cullen Roche
        Answered on 12/30/2016 6:08 PM
          Private answer

          All income taxes have always been applied to citizens and not territory. It is due to xenophobic patriotism — you know, the kind that conservatives like to fling at you if they suspect you don’t support your country, the flag, the military, etc.. Conservatives of the late 1800’s didn’t like expatriates “shirking their duty to the motherland”, so made sure to tax them from the very outset.

          Non-repatriated foreign profits of a U.S. subsidiary have always been exempt from taxes, so its not about revenue maximization. Don’t geek out about this stuff in terms of optimality — that’s purely an informed, modern perspective. Income taxes have always been first and foremost about funding politician’s wars and later on, correcting perceived social inequalities.

          Marked as spam
          Posted by MachineGhost
          Answered on 12/30/2016 7:55 PM
            Private answer

            BTW, although personally I loathe worldwide & income taxation, I think it is rather a fair deal considering you get the services and protection of the U.S. via embassies or military bases when out of the motherland. The joke is on the territorial-based countries, but they’re also the ones that don’t pay their fair share of GDP to support NATO, CENTCOM, etc.. Gee, I wonder why?

            Marked as spam
            Posted by MachineGhost
            Answered on 12/30/2016 8:02 PM
              « Back to Previous Page