[Congressional Record Volume 142, Number 40 (Thursday, March 21, 1996)]
[Senate]
[Pages S2655-S2656]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. HARKIN:
  S. 1637. A bill to amend the Internal Revenue Code of 1986 to revise 
the tax rules on expatriation, and for other purposes; to the Committee 
on Finance.


                the expatriation tax reform act of 1996

 Mr. HARKIN. Mr. President, the time has come to close one of 
the most outrageous tax loopholes on our books today. In fact, it is so 
outrageous, it's hard to believe.
  But today a small number of very wealthy individuals--often 
billionaires--can renounce their U.S. citizenship in order to avoid 
paying their fair share of taxes. And under current law, those same 
individuals can still live in the U.S. for up to half a year--tax-free.
  That's right. Amazingly, the current tax code has a loophole big 
enough for the super rich to fly their private jets right through. I 
call it the Benedict Arnold loophole. You can turn your back on the 
country that made you rich--to get even richer.
  In many cases, those same people come right back to the United 
States. They spend up to 6 months here and claim to be citizens of 
another country just so they can skip out on their tax bill.
  In one case, for example, a very wealthy American acquired 
citizenship in Belize, a small country along the Caribbean coast. Soon 
thereafter, Belize tried to set up a counsel's office in Florida where 
their new citizen had his factories. That way their new ``counsel'' 
could live in the U.S. for a large part of the year without paying his 
U.S. taxes. Ultimately, this was not allowed, but these types of games 
should be stopped once and for all.
  Hard working, tax paying, middle-class Americans have every right to 
be outraged by these tax loopholes. They are costing Americans about 
$1.5 billion. And the money these wealthy tax cheats fail to pay is 
adding to our debt and to the bill that our kids will one day be forced 
to pay. That's unconscionable.
  The bill I am introducing today says enough is enough: It's time to 
close the Benedict Arnold loophole. My legislation provides that if 
these so called ``expatriates'' spend 30 days in the United States they 
must pay their full taxes as a resident alien. Essentially, they would 
be treated like a resident alien, similar to how a U.S. citizen is 
treated.
  In addition, my bill provides that--upon renouncing their 
citizenship--these individuals would pay taxes on all of their gains, 
including those not yet sold. Under current law they can effectively 
escape paying their fair share of taxes by delaying the sale of their 
assets through available loopholes. The Senate passed a provision in 
last year's Budget Reconciliation bill, but it was gutted in 
conference.

[[Page S2656]]

  Where there is a problem with a bilateral tax treaty, the Secretary 
of the Treasury may waive the provision for that individual.
  I hope that the bill I am introducing today become law this year. I 
urge the Senate to support and pass this common sense measure that will 
save taxpayer $1.5 billion.
                                 ______