The Case for Residence-Based Taxation

Most of the modern states impose income tax on their residents regardless of their nationality. This policy is not self-evident. When we regard income tax of a state as legitimate because the residents benefit from the valuable services the state offers them, it would be difficult to explain the fact that the noncitizen residents usually do not have the right to vote in the state. When we consider income tax of a state as a fee to take part in the political process of the state, it would be totally impossible to justify taxing the noncitizens. In this presentation, I will propose a hypothesis that the residence-based income taxation is justifiable only if a pair of states reciprocally admit the citizens of the other state to act freely in its own territory and accordingly tax them as if they are own citizens. In such a situation, a person's voting rights in one state justify the person's tax liability as a resident in the other state.