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EDITORIAL COMMENTTHE PROPOSED EXPATRIATION TAX -A HUMAN RIGHTS VIOLATION?

Income tax law and human rights law operate in quite separate worlds, but a proposalrecently presented to Congress brings them together. The Clinton administration hasadvocated 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 thehardships visited on those who fled from Nazi Germany in the 1930s and from the SovietUnion and the German Democratic Republic more recently. They assert that a similarwrong would be inflicted by this proposed tax on those who surrender United Statescitizenship. The reaction of this writer is that of Justice Cardozo to the charge thattwentieth-century administrative practices are "Star Chamber" procedures: "Historiansmay 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 thedetails of this complex innovation or evaluate its fiscal wisdom. It would impose a taxon unrealized gains inhering at the time of renunciation of citizenship in property heldby the person expatriating him- or herself. In effect, it treats expatriation as equivalentto a sale. Its practical effect, then, is to accelerate to the time of expatriation a tax thatin most cases would fall due eventually. In most cases the property involved would besubject to tax on the gain realized at a later time when the expatriate sold it, but theintervening years abroad might make it hard to trace the ownership of those assets tothe expatriate. And in some cases the asset would never be sold because it was still heldby the expatriate at the time of his or her death. I t is asserted that the amounts ofrevenue lost are very substantial, even in billions of dollars. This is not because thereare so many Americans who expatriate themselves-indeed, the number taking thatstep is only an average of about 650 a year, as compared with 50,000 or so who applyfor American citizenship each month.4 I t is because of the great wealth possessed by alimited number of persons who see this step as an important tax-saving device.5 Thefocus of the endeavor on very wealthy individuals is underlined by the fact that it wouldexempt the first $600,000 of gains. Therefore, the situation lends itself to soak-therich populism, including references to the "Benedict Arnold tax." Historians may findhyperbole in this sanguinary simile as well. I t needs to be remembered that the UnitedStates, unlike most countries, does tax the income, from whatever source derived, of itscitizens-and that the United States is almost alone among nations in so doing. In othercountries only residents are taxed. One version of the proposal would impose a similartax 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 beginwith, international law does not protect the right to expatriate oneself, as distinguishedfrom 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 wasentitled "Tax Compliance Act of 1995." It won Senate approval bu t was deleted in the House. As of April1995, 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 on e by Professor Robert F. Turner, available from Tax NotesInternational 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 .578

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1995] EDITORIAL COMMENT 579Saudi Arabia or Paris, there is a tendency to refer to oneself as an ' 'expat' ' or expatriateeven though one retains one's U.S. passport. I t is true that since 1868 the UnitedStates has asserted the existence of a right to slough off one's citizenship: "the right ofexpatriation is a natural and inherent right of all people, indispensable to the enjoymentof the rights of life, liberty, and the pursuit of happiness.' 6 It achieved some success ingetting 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 arule of international law compelling countries to recognize their citizens' actions inbreaking 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. nationalitywhile one is in this country (except in time ofwar).8 And rather precise formalities haveto be followed to make the renunciation effective. To be sure, the consequences of adenial of the right to expatriate oneself are not drastic-one is still subject to theobligations of military service (if such there are),9 to the obligation to return home totestify if required, 10 to the duty not to commit treason 11 and to the duty to pay taxes. Incontrast, the Supreme Court has made it clear that citizenship cannot be ended withoutthe individual's voluntary action. 12

The right to emigrate, on the other hand, has considerable status as an internationalhuman right. 13 From Article 13(2) of the Universal Declaration of Human Rights toArticle 12(2) of the International Covenant on Civil and Political Rights, the right toleave a country, including one's own, has been spelled out.14 The inability to make aphysical move from one point to another is a much more drastic infringement of one'spersonal liberty than is the inability to sever one's legal ties. The right to choose adifferent country and society within which to rebuild one's life is often basic to one'sdevelopment and happiness. Professional and public opinion was first focused on thisse t of issues when the Nazis employed various means to prevent disfavored groups fromemigrating or to strip them of their possessions if they were allowed to go. The formerSoviet Union and countries within its sphere of influence, most particularly the GermanDemocratic Republic , followed rather similar tactics. Symbolic of the parallelism betweenNazi and Communist behavior was the refusal of each system to allow Nobel Prize winnersto go to Stockholm to accept their awards.

Human rights law does, however, recognize the legitimacy of certain restrictions on theright to emigrate. Thus, the International Covenant on Civil and Political Rights says:

The above-mentioned rights shall not be subject to any restrictions except thosewhich 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 areconsistent with the other rights recognized in the present Covenant. (Art. 12(3))

6 Rev. Stat. 1999, 15 Stat. 223 (1868). Fo r 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 LAW416, 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 inmunicipal 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 RIGHTTO 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 AUSREISEFREIHEIT NACH VOLKERRECHT UND STAATLICHEM RECHT (1988).

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580 THE AMERICAN JOURNAL OF INTERNATIONAL LAW [Vol. 89:578Surveys of national practice reveal a wide variety of burdens imposed by the states partiesto that convention. 15 The United States itself permits citizens to leave the country freely,subject to occasional restrictions imposed for reasons of national security16 and theadministrative requirement that they possess passports. Restrictions on emigration imposed by the Soviet Union were a focus of the Helsinki process and in 1974 became thetarget of the Jackson-Vanik Amendment to the Trade Act. That provision denied mostfavored-nation treatment with regard to products coming from non-market economycountries that denied their citizens the right or opportunity to emigrate, or imposedmore than a nominal tax on emigration or on the visas or other documents requiredfor emigration, or imposed more than a nominal tax, levy, fine, fee or other charge onany 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 1995proposal, do not seem to have a counterpart in international law. One is inclined inparticular to question the idea that there is something unfair about a tax that is morethan nominal if it has a rational connection to the relation between the emigrant andthe state. For example, a developing country with "brain drain" problems might feeljustified in imposing a fee upon an emigrant seeking high-paid employment in Europeor the United States after obtaining an expensive advanced education in his or hernative country. 18 Other countries impose controls on foreign exchange that may frustratetravel 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 proposalto broaden the act by including foreign-national residents who have been in the UnitedStates for long periods presents a different problem since their freedom to move outsidethe United States would be affected.20 In the second place, a tax that is designed toequalize long-term tax burdens as between those who keep their citizenship and thosewho surrender it does not impose such an unjust burden either on expatriation or onemigration as to render it a violation of U.S. human rights commitments. 21 I t cannotfairly be compared with the confiscatory visa tax imposed by the Soviet Union that helpedprovoke the Jackson-Vanik Amendment.

DETLEV F. VAGTS1' 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 afurther study by C. L. C. Mubanga-Chipoya in 1985 prepared for the UN Sub-Commission on Prevention ofDiscrimination 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 revocationof 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?, 8B.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, 18REv. 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 no t represent a human rights violation. I t can be retrieved electronically as 95 TNI 60-14.