EDITORIAL COMMENT

THE PROPOSED EXPATRIATION TAX-A HUMAN RIGHTS VIOLATION?

Income tax law and human rights law operate in quite separate worlds, but a proposal recently presented to Congress brings them together. I The Clinton administration has advocated a tax on certain unrealized capital gains of expatriates and some of its opponents have claimed that it constitutes a violation of human rights law. 2 They evoke the hardships visited on those who fled from Nazi Germany in the 1930s and from the Soviet Union and the German Democratic Republic more recently. They assert that a similar wrong would be inflicted by this proposed tax on those who surrender United States citizenship. The reaction of this writer is that of Justice Cardozo to the charge that twentieth-century administrative practices are "Star Chamber" procedures: "Historians may find hyperbole in the sanguinary simile. " 3 A predicate for understanding this claim is some basic knowledge of the tax proposal, although the pages of this Journal are not an appropriate place in which to explore the details of this complex innovation or evaluate its fiscal wisdom. It would impose a tax on unrealized gains inhering at the time of renunciation of citizenship in property held by the person expatriating him- or herself. In effect, it treats expatriation as equivalent to a sale. Its practical effect, then, is to accelerate to the time of expatriation a tax that in most cases would fall due eventually. In most cases the property involved would be subject to tax on the gain realized at a later time when the expatriate sold it, but the intervening years abroad might make it hard to trace the ownership of those assets to the expatriate. And in some cases the asset would never be sold because it was still held by the expatriate at the time of his or her death. It is asserted that the amounts of revenue lost are very substantial, even in billions of dollars. This is not because there are so many Americans who expatriate themselves-indeed, the number taking that step is only an average of about 650 a year, as compared with 50,000 or so who apply for American citizenship each month. 4 It is because of the great wealth possessed by a limited number of persons who see this step as an important tax-saving device. 5 The focus of the endeavor on very wealthy individuals is underlined by the fact that it would exempt the first $600,000 of gains. Therefore, the situation lends itself to soak-therich populism, including references to the "Benedict Arnold tax." Historians may find hyperbole in this sanguinary simile as well. It needs to be remembered that the United States, unlike most countries, does tax the income, from whatever source derived, of its citizens-and that the United States is almost alone among nations in so doing. In other countries only residents are taxed. One version of the proposal would impose a similar tax on the unrealized gains of aliens who are long-term residents of the United States. Does this tax impose an unacceptable burden on an international right? To begin with, international law does not protect the right to expatriate oneself, as distinguished from emigrating. The terminology here is confusing; in circles of Americans living in
1 Various versions have appeared in the congressional process, particularly S. 453 and H.R. 981, which was entitled "Tax Compliance Act of 1995." It won Senate approval but was deleted in the House. As of April 1995, it seemed likely that the proposal would be reintroduced, with retroactive effect. See TAX NoTES INT'L, Apr. 17, 1995, at 1387. 2 Perhaps the fullest statement of this is the one by Professor Robert F. Turner, available from Tax Notes International as 95 TNI 60-8. 'Jones v. SEC, 298 U.S. 1, 33 (1936). 4 Compare Marshall Langer, Proposed U.S. Departure Tax on Expatriates, TAX NOTES INT'L, Mar. 6, 1995, at 829, 834 with N.Y. TIMES, Apr. 2, 1995, 1, at 28. 'For brief biographies of six individuals in this category, see N.Y. TIMES, Apr. 12, 1995, at Al.

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Saudi Arabia or Paris, there is a tendency to refer to oneself as an '' expat'' or expatriate even though one retains one's U.S. passport. It is true that since 1868 the United States has asserted the existence of a right to slough off one's citizenship: "the right of expatriation is a natural and inherent right of all people, indispensable to the enjoyment of the rights of life, liberty, and the pursuit of happiness.' ' 6 It achieved some success in getting other countries to recognize that their citizens, on obtaining U.S. citizenship, had terminated their other nationality. But this success has evidently not resulted in a rule of international law compelling countries to recognize their citizens' actions in breaking the bond. 7 In fact, the U.S. law of expatriation is itself subject to conditions. Under the present statutory scheme, one cannot usually divest oneself of U.S. nationality while one is in this country (except in time ofwar). 8 And rather precise formalities have to be followed to make the renunciation effective. To be sure, the consequences of a denial of the right to expatriate oneself are not drastic-one is still subject to the obligations of military service (if such there are), 9 to the obligation to return home to testify if required, 10 to the duty not to commit treason 11 and to the duty to pay taxes. In contrast, the Supreme Court has made it clear that citizenship cannot be ended without the individual's voluntary action. 12 The right to emigrate, on the other hand, has considerable status as an international human right. 13 From Article 13(2) of the Universal Declaration of Human Rights to Article 12(2) of the International Covenant on Civil and Political Rights, the right to leave a country, including one's own, has been spelled out. 14 The inability to make a physical move from one point to another is a much more drastic infringement of one's personal liberty than is the inability to sever one's legal ties. The right to choose a different country and society within which to rebuild one's life is often basic to one's development and happiness. Professional and public opinion was first focused on this set of issues when the Nazis employed various means to prevent disfavored groups from emigrating or to strip them of their possessions if they were allowed to go. The former Soviet Union and countries within its sphere of influence, most particularly the German Democratic Republic, followed rather similar tactics. Symbolic of the parallelism between Nazi and Communist behavior was the refusal of each system to allow Nobel Prize winners to go to Stockholm to accept their awards. Human rights law does, however, recognize the legitimacy of certain restrictions on the right to emigrate. Thus, the International Covenant on Civil and Political Rights says: The above-mentioned rights shall not be subject to any restrictions except those which are provided by law, are necessary to protect national security, public order ( ordre public), public health or morals or the rights and freedoms of others, and are consistent with the other rights recognized in the present Covenant. (Art. 12(3))

6 Rev. Stat. 1999, 15 Stat. 223 (1868). For background to its enactment, see 4 CHARLES GORDON, STANLEY MAILMAN & STEPHEN YALE-LOEHR, IMMIGRATION LAW AND PROCEDURE 100.03 [1] [b] (1994). 7 Thus, Albrecht Randelzhofer, Nationality, in [Installment] 8 ENCYCLOPEDIA OF PUBLIC INTERNATIONAL LAW 416, 420 (Rudolf Bernhardt ed., 1984), says: "International law contains no general rule limiting the possibility of renunciation of nationality. On the other hand it does not oblige States to provide this possibility in municipal law." "Immigration and Nationality Act 349, 8 U.S.C. 1481 (1988). 9 Jolley v. INS, 441 F.2d 1245 (5th Cir.), cert. denied, 404 U.S. 946 (1971). 10 Blackmer v. United States, 284 U.S. 421 (1932). II 18 U.S.C. 2381 (1988). 12 Vance v. Terrazas, 444 U.S. 252 (1980); Mroyim v. Rusk, 387 U.S. 253 (1967). 13 The right to enter a country does not, however, exist except in certain cases involving asylum seekers and, without that right to enter, the right to leave may be an empty one. 14 For reviews of the international law on the right to leave one's country, see HURST HANNUM, THE RIGHT TO LEAVE AND RETURN IN INTERNATIONAL LAW AND PRACTICE (1987); LIBERTE DE CIRCULATION DES PERSONNES EN DROIT INTERNATIONAL (Maurice Flory & Rosalyn Higgins eds., 1988); RAINER HOFMANN, DIE AUSREISE FREIHEIT NACH VOLKERRECHT UND STAATLICHEM RECHT (1988).

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Surveys of national practice reveal a wide variety of burdens imposed by the states parties to that convention. 15 The United States itself permits citizens to leave the country freely, subject to occasional restrictions imposed for reasons of national security 16 and the administrative requirement that they possess passports. Restrictions on emigration imposed by the Soviet Union were a focus of the Helsinki process and in 1974 became the target of the Jackson-Vanik Amendment to the Trade Act. That provision denied mostfavored-nation treatment with regard to products coming from non-market economy countries that denied their citizens the right or opportunity to emigrate, or imposed more than a nominal tax on emigration or on the visas or other documents required for emigration, or imposed more than a nominal tax, levy, fine, fee or other charge on any citizen as a result of that citizen's desire to emigrate. 17 The provisions on taxes in the 1974 statute, which have been cited by foes of the 1995 proposal, do not seem to have a counterpart in international law. One is inclined in particular to question the idea that there is something unfair about a tax that is more than nominal if it has a rational connection to the relation between the emigrant and the state. For example, a developing country with "brain drain" problems might feel justified in imposing a fee upon an emigrant seeking high-paid employment in Europe or the United States after obtaining an expensive advanced education in his or her native country. 18 Other countries impose controls on foreign exchange that may frustrate travel plans. 19 Thus, the thought that there is a human rights violation here seems wide of the mark. At the first stage, one observes that the restriction is not on the right of emigration, which is recognized in international law, but on expatriation, which is not so recognized. An American seeking to avoid taxes would first have to go outside the country to renounce citizenship and would not have incurred any tax up to that point. The proposal to broaden the act by including foreign-national residents who have been in the United States for long periods presents a different problem since their freedom to move outside the United States would be affected. 20 In the second place, a tax that is designed to equalize long-term tax burdens as between those who keep their citizenship and those who surrender it does not impose such an unjust burden either on expatriation or on emigration as to render it a violation of U.S. human rights commitments. 21 It cannot fairly be compared with the confiscatory visa tax imposed by the Soviet Union that helped provoke the Jackson-Vanik Amendment.
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1' For suiVeys of national intJusions on the right to emigrate, see HANNUM, supra note 14, at 71-117; and HOFMANN, supra note 14, at 186-301. These suiVeys are based on a 1963 suiVey by Judge Jose Ingles and a further study by C. L. C. Mubanga-Chipoya in 1985 prepared for the UN Sub-Commission on Prevention of Discrimination and Protection of Minorities. See HANNUM, supra, at 13-15. 16 For a dramatic example of a restrictive action, see Haigv. Agee, 453 U.S. 280 (1981), sustaining revocation of Agee's passport on the ground that he exposed CIA secrets. 17 19 U.S.C. 2432 (a)-(e). For commentary, see Robert Brumley, Jackson-Vanik: Hard Facts, Bad Law?, 8 B.U. INT'L LJ. 363 (1990). Later developments in the Soviet Union are described in George Ginsburgs, Perestroika and Emigration: Background to the 1991 Law on Entry into and Exit from the USSR of Soviet Citizens, 18 REv. CENT. & E. EuR. L. 401 (1992). 1" HOFMANN, supra note 14, at 179-80. 19 HANNUM, supra note 14, at 114-16. 20 This is because the act of leaving the United States, coupled with an intent to change residence, would trigger the acceleration of tax on the alien's gains. 21 The author furnished an opinion to the Treasury Department, at its request, to the effect that the proposal did not represent a human rights violation. It can be retrieved electronically as 95 TNI 60-14.