Freedom to leave:

As you may recall, the Paul Craig Roberts column that I criticized argued:

Compare an American taxpayer’s situation today with that of a 19th century American slave. Not all slaves worked on cotton plantations. Some with marketable skills were leased to businesses or released to labor markets, where they worked for money wages. Just like the wages of today’s taxpayer, a portion of the slave’s money wages was withheld. In those days the private owner, not the government, received the withheld portion of the slave’s wages.

Slaves in that situation were as free as today’s American taxpayer to choose their housing from the available stock, purchase their food and clothing, and entertain themselves.

In fact, they were freer than today’s American taxpayer. By hard work and thrift, they could save enough to purchase their freedom.

No American today can purchase his freedom from the IRS.

Slaves could also run away. Today, Americans who run away are pursued to the far ends of the earth. Indeed, the IRS can assert its ownership rights for years after an American gives up his citizenship and becomes a citizen of a different country. The IRS need only claim that the former American gave up his citizenship for tax reasons.

     I condemned this comparison on various grounds, but I didn’t focus on the “No American today can purchase his freedom from the IRS” argument, because I know little about tax law. However, thanks to some help from a colleague, and a bit of research, I think I have something of an explanation.

     As best I can tell (and I should stress that I’m not as positive about this as I am about my other criticisms, because I do know little about tax law), the IRS does continue to assert some claims over people who give up citizenship for tax reasons. But these claims are quite limited, generally to already owed taxes and income that is earned within the U.S. There was apparently a proposal to also require tax-motivated expatriates to pay capital gains on property that was bought in the U.S., but that seems to have been defeated. (If you bought stock in the U.S. for $1 million, and it appreciated to $5 million, you generally don’t have to pay taxes on it until you sell it; the proposal would have treated your departure as a sales-like event, at which you would have to pay the taxes.) As best I can tell, you may have to pay capital gains on such U.S. property when you sell it, even if you’re no longer a U.S. citizen or resident when you sell it, but not at the time you leave. (This seems to be a fair summary of the law; key point: “[A]ny income earned outside the U.S. after expatriating and any income from investments held outside of the U.S. after expatriating would be free of U.S. taxes. In addition, any assets that were outside the U.S. would be free of any U.S. estate taxes.”)

     Now as I said, I am quite prepared to hear many criticisms of what the IRS does; and it may well be that these particular tax rules are wrong. But they are limited to income you earned or earn in the U.S., and to property you own in the U.S. If you do want to “purchase [your] freedom from the IRS,” you may just sever all ties to the U.S. — (1) leave the U.S., (2) give up U.S. citizenship, (3) stop making money in the U.S., and (4) make sure that you pay any back taxes you owe, or taxes on property that you own in the U.S. This should be generally quite doable for most people, except those who have indeed gotten into huge tax debt. If France will take you, move to France and become a Frenchman, and stop earning money in the U.S. or owning U.S. property. The U.S. will leave you quite free to do so.

     So let’s summarize the comparison (again, assuming that the data that I have about 26 U.S.C. 877 is basically correct):

So I ask again: What do we make of Roberts’ claim about how slaves are “freer” than the American taxpayer, even if freedom is limited solely to the ability to leave?