Every year, millions of Americans living abroad suffer a profound administrative indignity: complying with a U.S. income-tax regime that treats them like miscreants and complicates the lives even of those who owe nothing.

President Donald Trump has suggested he’d like to ease their burden. It’s a great idea.

The U.S. is almost unique in the world of international taxation. Outside of Eritrea, it’s the only citizenship-based regime — meaning that all Americans, even those who live overseas and have no U.S. income, must file returns and possibly pay up.

The rules were largely unenforceable until the 2010 Foreign Account Tax Compliance Act required financial institutions to disclose U.S. taxpayers’ overseas assets. Since then, the estimated 5 million to 9 million U.S. citizens abroad — including many with only tenuous ties to the country — have faced much greater pressure to comply.

As harsh as it might seem, the system has some merit. More countries are trying to expand the concept of tax residence beyond their physical borders, requiring deep examination of financial, work and family connections.

Citizenship offers a simpler way to identify those who maintain ties to a polity. It also justifies a modicum of taxation, given the benefits citizens retain, such as the right to vote and to return freely. The U.S. government seeks only marginal compensation, designed primarily to capture high earners in low-tax jurisdictions. Americans who want to avoid paying can renounce their citizenship.

In practice, however, the setup is a disaster. Aside from the usual complexities of the U.S. tax code, overseas Americans must navigate added exclusions, credits and a phalanx of rules — including FATCA and a thing called GILTI — aimed at wealthy tax cheats and multinational corporations.

They can’t have more than $10,000 in a foreign financial account, invest in a local mutual fund or open a café without triggering prohibitive reporting requirements and risking life-changing penalties. Banks shun them. These burdens — together with the costs of the inevitable professional help — fall mostly on people who end up owing little or nothing.

Trump hasn’t elaborated on what he intends to do, beyond pledging to end “the double taxation of overseas Americans.” Just about any of the existing reform proposals, including a Republican bill introduced recently, would be an improvement.

Ideally, though, the goal would be to liberate the vast majority of Americans abroad from burdens that generate almost no income for the U.S. government while doing a better job of collecting from the minority who are actually seeking to exploit low-tax locales.

To that end, the U.S. should combine the best of the residence and citizenship regimes. If Americans live and pay tax in countries with rates broadly equal to or higher than the U.S.’s, allow them to declare non-residency, thus freeing themselves of all U.S. requirements related to their foreign income and finances (after paying U.S. taxes accrued).

For the rest, simplify and better focus demands — for example, by vastly increasing the $10,000 threshold for bank-account reporting and treating small businesses, basic mutual funds and retirement savings as they would be in the U.S. Also, reduce the cost and complexity of forfeiting citizenship, particularly for “accidental Americans” who have spent no meaningful part of their lives in the U.S.

Slash bureaucracy, make millions of Americans’ lives easier and potentially reap added tax revenue. What’s not to like?

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The Editorial Board publishes the views of the editors across a range of national and global affairs.

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