This Thanksgiving, we were missing a family member. His wife and son were able to join us, but he decided not to travel back to the United States because of a confusing tax situation. The Highways Bill just agreed to in conference means that we may never see him on U.S. soil again.
Unnoticed by conservatives until too late and buried deep within its 1,300 pages (I thought this Congress was elected to stop such an oversupply of law), the bill contains a provision that enables the IRS, acting through the Secretary of the Treasury, to ask the Secretary of State to refuse or revoke the passport of a citizen found to be “seriously delinquent” in tax matters.
The IRS considers someone to be seriously delinquent if he or she owes over $50,000 (including fees and penalties), and the agency has filed a notice of lien or levy. The lien requirement may sound like a significant restriction on the IRS’ power, but in practice a small debt can quickly reach that level thanks to fees and penalties and liens that are filed routinely shortly after a determination is made in a case.
Given that the political impartiality of the IRS has been called into question in recent years (to put it mildly), it isn’t much of a stretch to see the potential for abuse. An unscrupulous administration could easily use it to deny passports to its political opponents the way Soviet Bloc countries once did to dissidents. That’s bad enough.
Yet it isn’t domestic tax avoiders who are the main target of Section 32101. Rather, it’s the millions of Americans living and working abroad who have been targeted by the IRS since 2010, when that year’s stimulus bill included the Foreign Account Tax Compliance Act (FATCA).
It’s well known now that America is one of only two countries—the other being Eritrea—to stake a claim over its citizens’ foreign earnings. Less well known is that this creates severe tax complications for many Americans working abroad, who as a result are especially prone to being tagged as “seriously delinquent” as defined by the IRS.
The Mayor of London, for instance, was born in the U.S., and so was hit by a massive IRS tax bill when he sold his London home. He paid up (and renounced his citizenship) but millions are not so fortunate as to be able to afford that, and will remain way behind on their payments to the IRS.
Those are the people that this policy will hurt the most. They will suddenly find themselves with passports revoked or replaced with ones that only allow them to return to the U.S. Renouncing citizenship isn’t necessarily a way out any more – the State Department just raised the fee for that by 422 percent, to nearly $2,500.
Millions of Americans, who aren’t even meaningfully represented in Congress, will suddenly find their natural liberty to travel at risk. Families will be uprooted or, like mine, divided, perhaps forever.
The travesty of FATCA can be blamed on the Democrat-controlled Congress of 2010. For a GOP-controlled Congress to demand this sort of taxation without representation is shameful.