US Representative John Tierney (D-Mass) & the Tax Equity and Middle Class Fairne

http://tierney.house.gov/index.php?option=com_content&view=article&id=3041

Removal of the foreign earned income exclusion which allows U.S. citizens living overseas to avoid paying taxes ($5.4 billion in 1st year)

I'm not a tax person.  That means he wants to tax foreign income from the first dollar earned, correct?

I might have posted a message on his FB page.  Ahem.

Yep, that what it means. The barsteward.

Since many of the top 1% have foreign assets or income (and look at Obama's return), my bet is Form 1116 would still be available.

This comes up every so often. All grandstanding for the popular vote. Insane, and no gain. He couldn't be doing this on the back of Mitt's returns, could he, even if Mitt wouldn't be affected.

Gotta love American politics.

 

As for the Form 1116 FTC, I think that unless they start revoking many of the tax treaties that will remain intact (since the FTC's purpose is to alleviate paying multiple lots of tax rather than exclude it in the first place as with the FEIE). In practice most of the expats living in the UK who post on here probably won't see a new tax liability as most of the UK income tax rates are higher than the US ones anyway; it's those who live in lower- or no-income-tax countries that would be hit the hardest.

Since the Democrats tend to be more globally-minded than the Republicans, I find it ironic that they're the ones wanting to make it harder on expats (IIRC it was also the Democrats who came up with the idea of the various taxes imposed on those renouncing their citizenship).

It's not just Tierney - the co-sponsors are:

Steve Cohen [D-TN9]
Keith Ellison [D-MN5]
Raul Grijalva [D-AZ7]
Jesse Jackson [D-IL2]
Betty McCollum [D-MN4]

They don't seem to understand that we pay taxes where we live.

They don't seem to understand that we pay taxes where we live.

There are some places that don't have income tax. In that case the using the FEIE means that you'd pay no tax at all. So I can see the argument for getting rid of it. Of course all these issues are brought about by the perverse US practice of taxing on the basis of both residency and citizenship. If that stopped we'd have a far easier life.

Filing a 1116 for our earned income wouldn't really make any difference. The only two problems I see is that you would need to work out on a calender year basis how much tax was paid, to HMRC. Should HMRC get your tax code wrong, resulting in a refund, then a potential for amending your tax return. At the end of the day a 2555(EZ), is so much easier.

So what if some some expats live in places where they are required to pay no income tax?  They actually have to live and work there to be eligible.  It shouldn't be a mandatory thing that people pay income tax, and if you don't pay it to one country, another will step in and gladly take their share.  The majority of American citizens who live abroad do not live in places where there is zero income tax.  And places like the UK where a big chunk of tax revenue is collected through things like VAT, that won't count against any tax owed, right?  It's not like you can easily shed your American citizenship (and you aren't supposed to get rid of it to avoid paying tax), and there is a big population of Americans abroad who have lived none or very little of their lives in the US.

And there are people who work (example: part-time workers) who would not have to pay taxes to HMRC who could see themselves owing money to the IRS, am I right?  Not all countries have tax treaties with the US either.  Those same people cannot turn to the government to whom they are paying taxes and expect to benefit from many of the programs that their tax dollars would be funding.

And finally, people actually avoiding paying tax to the US aren't going to be effected in the least by this.

Why does the US continue to tax based on citizenship (and alien status) rather than by where the person actually lives?  

Why does the US continue to tax based on citizenship (and alien status) rather than by where the person actually lives?  

You're preaching to the choir. I'd say get rid of FEIE AND get rid of taxation on the basis of citizenship. But as with so many things American, easy and common sense never trump dogma and being different from everyone else just to be exceptional

But as with so many things American, easy and common sense never trump dogma and being different from everyone else just to be exceptional

Yes, the U.S. government is notorious for trying to be "different" and making it harder on the rest of the world. Here's another example I found (with this one it affects non-USCs though).

The Federal Government does seem to be unaware of its own policies. The US ambassador to the UN recently backed a resolution in the United Nations against Eritrea (the only other country with citizenship taxation). Two of the provisions are

10.  Condemns the use of the ‘Diaspora tax’ on Eritrean diaspora by the Eritrean Government...

11. Decides that Eritrea shall cease using extortion, threats of violence, fraud and other illicit means to collect taxes outside of Eritrea from its nationals or other individuals of Eritrean descent...

So OK for the US, but not OK for Eritrea.