3 ms·
Is the foreignness aspect relevant as far as the constitutionality goes? My cursory layman prior reading of this case was that they decided to reinvest revenue
by dataflow 3y ago
Is the foreignness aspect relevant as far as the constitutionality goes? My cursory layman prior reading of this case was that they decided to reinvest revenue into the business instead of taking distributions. Is that correct? Because of it is, on the face of it I would expect that to still be taxable income, because they could've chosen to do anything with it... they just happened to reinvest it in the business. But even if for some reason that's unconstitutional and/or not income (though I don't see how), I don't really understand where the foreignness comes into play. Is the situation different domestically?
- AmericanChopper 3y agoThe foreignness is an issue because if it was a US corp they would get the opportunity to tax the business income, but if it’s an offshore company then it can just sit on its cash for however long the owners want it to, without incurring any tax liability (depending on the specific foreign jurisdiction). It would only become the income of the owners (and thus taxable by the federal government) once they’ve paid a dividend (or taken drawings, or whatever…). It’s a 16th amendment issue because the law was seeking to tax this revenue before it became any persons income.
- dataflow 3y agoInteresting! Thanks. Is there a reason why they couldn't have called this a business tax in that case? The 16th amendment doesn't say anything about whom the subjects are, so it would seem like renaming it would've allowed them to tax foreign corporate income, even if they're not American entities?(!)
- AmericanChopper 3y agoWho are you going to tax though? Is the federal government going to start sending tax bills to companies in Panama (or BVI, or The Caymans, or Ireland, or wherever...)?
- dataflow 3y agoI suppose it could do those? I'm not saying it's practical or sane, I'm just saying it sounds constitutional!
- AmericanChopper 3y agoI don't know what the constitutional implications of that would be, but my point was that the US government has no jurisdiction to tax companies in other countries.
- dataflow 3y agoNo jurisdiction under international law (to the extent this exists), I can imagine, but does it not have such jurisdiction under US law either? The 16th amendment sounds broad enough to cover this, on the face of it.
- AmericanChopper 3y agoThe authority to tax is one of the most fundamental components of national sovereignty. It was one of the key factors that lead to the revolutionary war. Your proposal is basically to annex any country with a tax regime that the US doesn’t approve of.
- dataflow 3y agoPlease don't suggest I support something just because I'm discussing its legality. I'm not suggesting this is a good, sane, or practical idea. I'm just asking whether it's legal. (And note the US has violated a lot of other countries' sovereignties in the past, too. In even worse ways. They haven't run into illegality as the hurdle.)
- AmericanChopper 3y agoI don’t believe there are any constitutional restrictions that would get in the way of the war, treaty making, or expansion that would be required of a federal government aiming to annex foreign countries whose tax regime it didn’t like. Definitely some international laws that would violate, but you can choose how seriously you want to take those. There probably isn’t an authority that could force the US to comply with them at least.