[Congressional Record Volume 149, Number 17 (Thursday, January 30, 2003)]
[Senate]
[Pages S1821-S1822]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. HARKIN (for himself and Ms. Stabenow):
  S. 260. A bill to amend the Internal Revenue Code of 1986 to prevent 
the continued use of renouncing United States citizenship as a device 
for avoiding United States taxes; to the Committee on Finance.
  Mr. HARKIN. Mr. President, Senator Stabenow and I are introducing 
legislation similar to the measure we proposed in the last Congress to 
effectively prevent very rich individuals from reducing their taxes by 
renouncing the U.S. citizenship. It is a companion to a measure 
introduced by Congressman Charles Rangel in 2002. The Joint Tax 
Committee estimated that it will raise $656 million over 10 years from 
a very few people who I call Benedict Arnolds. These people turn their 
back on their country which provided so well for then, in order to 
avoid paying their fair share of U.S. taxes.
  Under current law, there are special rules that apply to these former 
citizens that appear to recover funds lost to the Treasury. However, 
they are full of holes. Under the current regime, for 10 years after a 
U.S. citizen renounces his or her citizenship with a principal purpose 
of avoiding U.S. taxes, the person is taxed at the rates that would 
have applied had he or she remained a citizen. In reality, the tax is 
nominally on a broader base of income and on more types of 
transactions. In addition, if the expatriate dies within 10 years of 
the expatriation, more types of assets are included in his or her 
estate. Unfortunately, the reality is that taxes are very often not 
paid.

[[Page S1822]]

  The reality is that once a person has expatriated and removed U.S. 
assets from U.S. jurisdiction, it is extremely difficult to enforce the 
current rules, particularly for an entire decade after the citizenship 
is renounced. The measure I introduced simply provides that the very 
act of renouncing one's citizenship triggers the recognition of tax. 
So, rather than collecting tax every time an asset is sold over the 
next decade, my bill treats all of the assets of an expatriate as 
having been sold the day prior to when the person renounces their 
citizenship. The taxes are due up front rather than over time. In 
regard to estate taxes, rather than attempting to collect the tax from 
the estate of an expatriate not in the U.S. jurisdiction, my measure 
taxes the inheritance of an heir who remain in the United States in 
such a way as to remove any tax benefit from the renouncement of 
citizenship.
  $656 million in revenue from these very few former citizens is a lot 
of revenue that must be made up by loyal Americans in the form of 
higher debt or taxes that Americans will face. Last year, the Senate 
passed the measure as a part of the Armed Services Tax Fairness Act 
but, unfortunately, the House opposed this provision. I am hopeful that 
it can become law this year. People should not be able to reduce their 
taxes by renouncing their citizenship.
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