The Congressional Progressive Caucus, one of the larger Democratic Party caucuses, has proposed to end the Foreign Earned Income Exclusion in their 2013 “Budget For All”, details of which were revealed yesterday following a vague press release last week. As U.S. persons abroad have already learned, when American homelanders use words like “all” and “us”, we are decidedly not included, except when they want money from us. Indeed, with this latest budget proposal, even members of the Americans Abroad Caucus have come out in support of eliminating the FEIE.
This one appears to be the brainchild of Raúl Grijalva (D-AZ), the CPC’s co-chair Correction: the “Budget For All” is the brainchild of Mike Honda (D-CA), chairman of the CPC’s Budget Taskforce and a member of the Americans Abroad Caucus. John Tierney (D-MA), whose so-called Tax Equity And Middle Class Fairness Act proposed the same thing in July 2011, is also a CPC member. Both Grijalva and the other CPC co-chair Keith Ellison (D-MN) were supporters of Tierney’s earlier bill. Details are very sketchy at this point, but in the CPC’s “executive summary” they give a one-line mention of eliminating the Foreign Earned Income Exclusion at page 3 under the heading “Individual Income Tax Policies”. Then at page 17 they repeat the tired old projection that eliminating the FEIE would raise $71 billion over 10 years, starting from $4 billion in 2013 and growing to $9 billion.
This projection ignores the obvious fact that people respond to new taxes by changing their behaviour. We U.S. persons outside of the U.S. have many options, none of which contribute to Grijalva’s goals. We may increase our use of the Foreign Tax Credit, thus incurring far greater tax preparation costs due to the higher complexity of Form 1116, leading to new Ferraris and island vacations for accountants, but little additional revenue for the Treasury. We may return home and add to the ranks of the U.S. job-seekers just like our predecessors did a generation ago, the last time Congress eliminated the Foreign Earned Income Exclusion in the 1970s before hastily restoring it three years later — though not before U.S. exports had collapsed as American businesspeople abroad abandoned emerging markets to German and Japanese competitors. Or we may renounce U.S. citizenship and get away from a government and a public which shows no understanding that we are already taxed where we live, which keeps making it more difficult for us to live normal lives abroad, and which sees us as nothing more than easy pickings for further plunder.
The CPC claims that their budget “asks those who have benefited most from our economy to pay a sensible share”. This principle makes perfect sense to me. All I ask in return is a sensible share of federal highway and educational funding given the location where I reside. The definition of “sensible” that two hundred other countries and territories in the world use would suggest both those “shares” should be zero. The CPC definition of “sensible”, on the other hand, would suggest that they’d better get busy on building me an interstate highway. I’ve always wanted to take a road trip to Hawaii.
Update: One other thing worth noting. The membership of the Congressional Progressive Caucus includes the head of the Americans Abroad Caucus along with eight other AAC members. That’s fully a third of the AAC’s membership. The list:
- Carolyn Maloney (D-NY)
- Michael Capuano (D-MA)
- Andre Carson (D-IN)
- Donna Christensen (D-VI; non-voting)
- Steven Cohen (D-TN)
- Mike Honda (D-CA) — chairman of the CPC’s Budget Taskforce which produced the “Budget For All”
- Jim McGovern (D-MA)
- Jim Moran (D-VA)
- Janice Schakowsky (D-IL) — spoke out in support of the “Budget For All” in a YouTube video