United States Taxation on Worldwide Income Essay examples

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In recent years, the United States has increased enforcement of non-resident tax liability, generating debate surrounding the U.S. moving towards a territorial model of taxation. An increasing number of Americans living abroad are renouncing their citizenship. According to the U.S. Treasury, 1,781 Americans gave up citizenship in 2011. Contrast that with 742 in 2009 and 278 in 2006 (McKinnon 2012). Corporations also bear the burden. In 2008, 12 percent of all federal revenues came from corporate income taxes, of which about half was paid by multinational corporations reporting foreign income (CBO). Thus, many corporations are following suit, using tax avoidance schemes to reduce the scope of their U.S. tax burden or simply moving to other …show more content…
The Act was further enhanced in 1864 to include income from all sources, wherever derived. The motivation for such a revolutionary tax grew from the idea of taking pride in being a U.S. citizen, and accepting the opportunities with the obligations (McKinnon 2012).
Ten years later, following the conclusion of the war, the tax was repealed. In 1894 Congress enacted a flat rate Federal income tax. The tax was ruled unconstitutional the following year by the Supreme Court due to its nature as a direct tax not apportioned to the population of each state (Terrell)
The 16th amendment, passed by Congress on July 2, 1909, and ratified February 3, 1913, removed this issue. The amendment allows the Federal government to tax income without regard to the population of each State (Terrell).
However, the notion of citizenship-based taxation remains part of U.S. law today. In contrast, majority of early international agreements taxed either residence or source of income, but not both (McKinnon 2012).
Under a worldwide approach to taxation, the home country considers all of the income of its multinational corporations as taxable, regardless of where that income is earned. To avoid double taxation, the home country allows multinational corporations to claim a foreign tax credit against domestic tax liability for taxes paid elsewhere (CBO).
Thus, based on the worldwide system of taxation, a corporation headquartered in the United States

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