When Americans Start Living on Mars, Will They Have to Pay U.S. Taxes?

Adam Chodorow writes at Slate:

First, the tax law. Unlike most countries, the United States currently employs a “worldwide” system of taxation, under which it taxes all income earned by U.S. citizens and residents, regardless of where it is earned. “Nonresident aliens” pay taxes only on their U.S.-sourced income.

At first blush, one might assume that a “worldwide” system would not reach income earned in space, but the term worldwide is a function of a lack of imagination, not a limitation on the tax law’s reach. It could just as easily be referred to as a pan-galactic tax system. Indeed, in 1986 Congress made clear that any income a “United States Person” derives from a space activity should be considered U.S.-sourced—and therefore taxed in the U.S. Thus, any intrepid explorers who are U.S. citizens will be subject to American taxes on any income they earn on Mars. Moreover, this holds true whether they earn U.S. dollars or not-yet-invented Martian dollars, real or virtual...

Then Chodorow considers an alternative:

It doesn’t take much imagination (or reading of science fiction) to understand that Martian settlers could quickly come to see Uncle Sam as a faraway tyrant and begin to dream up dangerous schemes to break free. Worst-case scenario: Martians chafing at paying taxes to an earthbound ruler—American or otherwise—could start hurtling asteroids at Earth.