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.
Honda’s contact details can be found here if you would like to tell him what you think of his plan. He is also on Twitter: @RepMikeHonda
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
We are like pin cushions for these politicians. They can say anything they want to to look good because we can say nothing back.
@eric- too bad this isn’t a court case because then at least clients could pead that a new trial be granted under the claim of “ineffective representation”.
It is indeed obvious that they are not interested in or capable of giving their constituents the most effective representation possible. Bascially they are entering a plea of guilty.
We need some sort of tax protest that will catch the eye of the US media. The FBAR protest has been mentioned in other blogs.
Unless we find people who are immune from the IRS to start, what all these blogs are doing is p*ssi*ng in the wind. That’s what the IRS thinks.
Dual citizens should try to put political and legal roadblocks in the way where possible. The US Congress is certainly not going to listen.
Reblogged this on Renounce U.S. Citizenship – Be Free.
I guess since I am not working overseas, and considered retired, then from a self centered stand point I don’t care if they eliminate the Foreign Earned Income Exclusion. I think, there are many retirees in Latin America, like Mexico and Costa Rica that pay no attention to these issues, as they think it doesn’t affect them. Some are about to be woke up with the form 8938 when they only raised a siesta eye towards the FBAR and yawned.
So, in some ways I hope the Democrats they are stupid enough to eliminate it, as it might focus some attention on how destructive this entire subject of Citizenship taxation is.
The point of this proposed change, is like so many tax related issues, is that Congress is constantly changing the rules, and what you are relying today, might be entirely different tomorrow. Maybe it will take elimination of sending Social Security checks to people residing outside of America (as that is not fair, is it?) to get those with their heads out of the sand to wake up to the issues and how America continues to engage in self mutilation when it comes to fiscal and trade deficit issues.
@Roger
Your comment:
“Total elimination of the FEIE exclusion will nearly totally destroy the ability of US citizens to live in work in those countries of the world which do not raise their rvenues through an income tax, or where their tax rates are signficantly below those of the US.”
is very astute.
Furthermore, this comment of yours is worth a second read by all:
http://isaacbrocksociety.com/2012/03/27/congressional-progressive-caucus-budget-for-all-would-end-foreign-earned-income-exclusion/#comment-11065
__________________________________
Part of the problem is that most countries use consumption taxes in a big way. From time to time Petros has suggested that the Foreign Tax Credit (since it is restricted to income taxes) is not a very fair way to design a tax credit. It doesn’t adequately provide for a credit for taxes actually paid in Canada. U.S. citizens are seriously disadvantaged in any country that raises tax revenue in ways other than the income tax.
I don’t think that (other than the paperwork) that elimination of the FEIE will make much difference to people living in Canada who have the benefit of the tax treaty. U.S. persons living in countries that don’t have tax treaty are finished – plain and simple. Just plain finished. That aside, elimination of the FEIE is one more stupid proposal. In fact, the Isaac Brock Society should write a play about “American Exceptionalism”. This proposal is of “exceptional calibre”.
Somebody should pick up the phone and say:
Hi, we see that you are desperate to eliminate something. Do yourselves a favor and eliminate citizenship-based taxation! You would be surprised how much good it will do you.
So if I understand this correctly, the Americans Abroad Caucus:
http://aaro.org/lobbying/americans-abroad-caucus
is proposing to repeal the only piece of legislation, the FEIE, that provides at least a token amount of relief for Americans living and working abroad.
Who elected these people and what is their purpose?
From what is written on the AARO website, they seem to be self-appointed and not accountable in any way to the people they claim to represent.
So what is in it for these AAC people besides justifying some all-expense paid pleasure trips abroad?
The only thing they seem to be accomplishing is selling out the people they are pretending to represent.
The only thing worse than taxation without representation is taxation with make-believe representation—and still no benefits in return.
The psychosis of these people is incomprehensible.
@John “We need some sort of tax protest that will catch the eye of the US media. The FBAR protest has been mentioned in other blogs. ”
The US wants you to play their game exactly or renounce. No fudging or cheating, or anything in between. The SAFEST route for anyone NOT living in the US is to renounce, unfortunately.
Renouncing is unfortunate, but options are scarce, just two! And to be 100% compliant is next-to-impossible, given that accounting standards and actual taxation differs between countries.
If you want the media to catch onto our “plight” – you might as well sit down because you’ll be waiting for a long time. Doesn’t anyone ever think it ODD that stuff like this never appears in the media?? It’s almost as if things that don’t copy the government line to the T are excluded.
Yes, I wonder if the media have been gagged.
@all- have any of you ever heard of a Congressman or Senator who ever proposed a bill that asked the federal government to raise the taxes on his/her constituents? This just shows of how little importance an expat is to the political process.
Israel has more representation in Washington than does an expat and Israel isn’t even a State.
@recalcitrantexpat
I hate to point out the obvious, but Israel has ALWAYs had more representation in Congress than ANYONE else. I don’t know why we don’t just annex them make them the 51st State. They are truly the tail that wags the dog, so maybe they have annexed us. It is what it is.
Well said “Just Me.” Bravo!
@JustMe
To be fair though I don’t think Israel or Dual Israeli-American citizens have any more influence on US tax policy than anyone else
@tim- my comment was not made with reference to Israel’s influence on American tax policy but in relationship to Israel’s very powerful Washington lobby and the fact that politicians in Washington covet being seen as supporters of Israel.
This is in total contrast to their deafening silence and outright hostility when it comes to expat Americans and what would be best for them.
@Tim
I think I read somewhere that Israeli banks started closing the larger accounts of any possible Dual Israeli-American citizens in the very early days of FATCA. Maybe the Israeli banks are just smarter than the rest of us.
Those dual citizens may have just moved their money into hard assets instead of keeping money in a bank account. If you don’t consider yourself a dual citizen which alot of Israelis might not, then they wouldn’t be reporting their assets to the IRS.
Because of how Israeli citizenship works, renouncing US citizenship even back when it was automatic upon taking the oath of another country wouldn’t work for them. Remember they don’t have to apply for Israeli citizenship, it’s automatically given to them.
@all, You can see how important expats are to the Democratic Progressive Council. Eliminating the FEIE willl mean” just a little” increase in taxes for those living abroad – only $19,627, which is the tax on $92.500 of income.
What these guys assume is that changes in taxation do not have the effect of changing their behavior. The Joint Tax Commission of the House and Senate, which determines the reveue effect of tax changes, assume that there will be no behavioral change by those affected. Why? Since they don’t know what or how much that change would be, for their tax revenue calculations they always assume there would be no change, and that those affected will just shell out the additonal tax as if they have endless resoureces Particulary in countries where there is a low income tax rate, or no income tax at all, what will really happen is a good many will throw in the towel and come home. Those with dual citizenship will, beyond a shadow of a doubt, give serious consideration to renouning their US citizenship; painful as that may be. .
It won’t affect retires though, because retirement income is not classed as Earned Income It is passive income and already fully subject to US income tax.
@omghesstillanamerican, as a possible point of interest , the Treasury Department’s official figures for 2006, which are the most recent available, disclose that 8,966 Form 2555 “Foreign Earned Income Excluson” tax forms were filed showing addresses in Israel for those filing the forms.
That compres with 30,087 in Canada.and 6,112 in Mexico. With these low numbers it is easy to understand why the minnows as well as the whales are targets of FATCA, FBAR and everything else.
@Tim,
I have often wondered with as many dual citizens as there must be in Israel, and many of them with positions of influence in Israel and in the US, how many of them are effected by all these Citizenship Tax related issues? How many entered the OVDP/OVDI? How many have filed FBARS? How many will FATCA affect? How many are non compliant with their US tax obligations, or as @omghesstillanamerican says, how many have moved money into hard assets somewhere else already. Wonder what if any lobbying is being done to crave out exceptions, exclusions, special considerations, etc. With the lobby influence that AIPAC asserts, which is not inconsiderable when you see the line up of US politicians at their yearly conference, I can’t help but think that it must be an agenda item on the table somewhere. Would love to know.
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@all, I haven’t read all the posts, but did anyone mention that Congressman Tierney’s wife was convicted of felony tax fraud in 2010? At least according to the Wikipedians:
http://en.wikipedia.org/wiki/John_F._Tierney
This is thread is about the Progressive Caucus…, I wonder if someone would want to sponsor a petition on the Progressive Web site http://front.moveon.org/ ???
It might shake them up a bit, if a bunch of progressives made this an issue on their own petition program they have started.
I reference this information that was sent to me. Read it over, and see what you think…
“Have you ever heard the story of how MoveOn started? In 1998, when Newt Gingrich and the Republicans in Congress were focusing all of their efforts on impeaching President Clinton over a sex scandal, we started a simple online petition: “Censure President Clinton and Move On to Pressing Issues Facing the Nation.”
We had no past political experience, but we felt passionately about our message and shared the petition with as many of our friends as we could think of. Within days, the petition went viral, and we had hundreds of thousands of signatures. And from the list of people who signed that original petition grew MoveOn.org—an organization of well over 5 million members and a powerful progressive force in American politics.
Because we’ve seen firsthand how regular people can make a difference, we’re thrilled that MoveOn has launched a new website called SignOn.org where anyone can start their own online petitions. MoveOn will even email out the most popular petitions to help build support for your cause—and as always we’ll never ever sell your personal information to anyone.”
Here is the link:
http://www.signon.org/create_start.html?add_id=1&id=39851-12778461-SFEE7qx
As always, thanks for all you do.
–Wes Boyd & Joan Blades
Founders of MoveOn.org
QUESTION: Does anyone want to discuss this idea, and come up with a petition wording that represents as broad a spectrum of Americans Abroad as we can get, and then one of us put it up under our name, rather than have many of these circulating? (or maybe none circulating.)
The subject would relate to petitioning to end Citizenship Taxation and replace with a Territorial one.
What does anyone think, whether you are Left, Right or Center?! Doesn’t matter.
It won’t offend me if no one is interested. I don’t have any passionate feelings one way. I am not sure that any of these internet petitions could or would have one iota of impact. Just thrashing around and willing to try anything for attention.
Input requested. Thnx
@Just me
Brainstorming is always welcome, especially from you.
I don’t think it will be possible to obtain a significant amount of signatures for a petition because many of the expats will probably just try to drop off the radar screen, which is easy to do for anyone with a place of birth outside the US.
Four things are already happening:
1. I think continuing to bring the issue to the attention of journalists, particularly expat journalists, will have an effect provided they are able to get the story straight. Atossa’s story was a great start.
2. The continuous rise in expatriations (FATCA and other coercive measures are provoking) will also keep the issue interesting as time progresses because it exposes the American dream for what it really is, only a dream. I would not underestimate the effect of mass renunciations.
3. ACA is already doing a great job (the best it can) lobbying through the channels of US officialdom.
4. ACA, ARRO, Isaac Brock Society and others that we are not aware of should try to communicate more between one another and coordinate activities, to include lobbying the governments where expats have permanent residency or citizenship and giving interviews to journalists.
All four of these approaches are happening by themselves. It is just a matter of coordination to increase their effectiveness.
American expats will eventually be free, its just a matter of how and when.
If the USG has any brains (which I am not optimistic about), they will change policy before too many good people cut their ties entirely and forever.
The paradox of imperialism is that it brings upon itself isolationism.
I should have also included some sort of class action lawsuit via the Institute for Justice or any other organization. I think it is a really good idea and a major headline grabber. But it will take a lot of energy and commitment. In addition, going to the European Court of Justice or some other supranational body could also be great.
I think we have one heck of a good case for any human rights lawyers that want to make an international name for themselves.
@Ben Franklin, you make a good point for indeed it is a human rights issue. If it is a Human Rights issue that Eritrea taxes its diaspora, as was confirmed by the UN Security Concil’s resolution condemning this policy of that country in December 2011, I do not see why the fact that the US does exactrly the same thing is not also a human rights issue. It certainly limits the right of US citizens to freely leave there own country, and that is the litmus test of the UN’s Universal Declaration of Human Rights.
@Roger
I think expats have a lot of legitimate grievances on the international human rights front.
It is just a matter of finding the right lawyers to work on it. Something perhaps ACA would consider taking on since they are well organized and located in Geneva.