GAO begins doublespeak already in the title “Economic Benefits of Income Exclusion for U.S. Citizens Working Abroad Are Uncertain ” The entire report –investigating removal of the FEIE “tax expenditure” reads like the script of 1980′s shortwave Radio Moscow—full of “some experts say” and “it can’t be shown” doublespeak. Already on the 1st page “GAO made no recommendations in this report.” . GAO doublespeak already says that “uncertain” in its title means it has “No recommendations.” The table of contents itself is full of doublespeak conclusions.
In order to fully understand what the 74 page General Accounting Office (GAO) report is saying, one really needs to have fluency in doublespeak—-to grasp the real meaning. For those who can read doublespeak, this report might best be read alone in that quiet place after having your morning coffee. Otherwise, I will attempt to provide a translation.
May 20, 2014, The Honorable Jim McDermott, The Honorable Michael Honda. The Honorable Carolyn Maloney, House of Representatives
Apparently the report was commissioned by the well-meaning, yet passively-aggressively naive Abroad Caucus, in response to repeated visits by ACA/AARO.
The immediate cause of the caucus naive error is in commissioning the study to G.A.O. –the General Accounting Office. This band of merry men has a self-interest in making as much form filing work as possible, even though its extra-territorial taxation method might never create any tax revenues.
GAO then went on to interview the normal lackeys “government officials, experts, and stakeholders, including groups representing citizens working abroad and employers”. The list (described in Appendix 1) is stacked with “experts” in creating complicated compliance law in their own interest. The last on the list is American Citizens Abroad who has been profiling itself as “THE Voice of Americans Overseas” . AARO with a similar approach. As we know, there are still no other expat organizations than these two 40-yr-old organization
As the biases are built into the report by its authors and experts, it understandably comes up with a list of options in Appendix 1, Table 7, which range from worse to bad:
-Repeal the FEIE & tax all foreign earned income.
-Reduce the maximum exclusion
-Increase the maximum exclusion
-indexed for the cost of living.
- convert the exclusion to a credit
-targeted to employees of selected industries. —(oil & gas, construction, engineering, UN work)
-Uncap the exclusion and exclude all foreign earned income from taxation (but not enact RBT).
-Impose an exit fee on U.S. citizens and U.S. resident aliens living in a foreign country & exclude all foreign income for eligible individuals living overseas (ACA proposal).
Note that well-meaning-but-submissive RBT-ish ACA proposal created some GAO interest–mostly the GAO was excited about an expat proposal for an exit tax upon its own (read closely–GAO empasis is on exit tax)
The title page already clearly states Treasury’s (GAO’s) incoming CBT given-assumption : “Because section 911 reduces income tax liability through special tax provisions, both the Department of the Treasury (Treasury) and the Joint Committee on Taxation (JCT) identify section 911 (FEIE) as a TAX EXPENDITURE. The costs and benefits of this tax expenditure have been the subject of policy and economic discussion. Some have defended the tax expenditure on the grounds that it enables U.S. workers overseas to better compete for jobs with non-U.S. foreign nationals (who typically pay no taxes on overseas earned income) and that it thereby encourages the overseas employment of Americans, who play an important role in promoting exports. However, others have highlighted that some of these claims lack evidence, or are based on outdated assumptions, given changes in the global economy over the past several decades. From a tax policy perspective, some have debated whether or not the tax expenditure provides economic and other benefits to the United States when compared to its costs.”
If the writer (GAO) already comes in with that given-assumption (that FEIE is an expenditure), it would be quite pointless commissioning that writer to produce a 78-page document which questions GAO’s own fast-held principle. Basically, it commissioned a confirmation of GAO’s previous beliefs.
I have translated some of the GAO doublespeak (in italics)
On the title page: “While about half of those GAO interviewed said that employers make overseas hiring decisions based first on the candidates’ qualifications, or that the cost of prospective employees was not a primary consideration, about half also told us the added tax costs of employing U.S. citizens could influence some employment decisions.” (We present this information at the end of a sentence to discount its importance, and early in the document so as to be able to discount its importance and validity with the rest of the document)
…”However, uncapping the exclusion could compound the challenge that IRS has in administering the tax expenditure, given the
misconception that those with excluded income do not have to file and report income to IRS. (GAO doesn’t want people to just experience RBT, it demands the right to continue demanding their tax-form slavery)
…”uncapping the exclusion could create incentives for higher-income professionals to move abroad to deliver their services” (the rats are leaving the ship!) “and to shift some investment income to be paid as earned income.”(gibberish)
…..”It would also reduce federal tax revenue (we need your money), and any perceived unfairness could erode voluntary compliance for domestic taxpayers (Homelanders are jealous over those who’ve left the plantation).
“In terms of good tax policy, there is room for debate regarding how potential revisions to the current tax expenditure may affect choices about where to work and who to hire. (Don’t forget that it is the U.S. government who shall decide where you should live). The current tax expenditure (just slipping it in that FEIE costs us money) may have positive and negative effects on both the efficient allocation of labor resources and on equity. The magnitude of these effects is unknown, making it unclear whether the tax expenditure provides any net economic benefits. (our “experts can’t prove that their FEIE gift is beneficial). These uncertainties also make it difficult to draw definite conclusions about certain policy alternatives. Repealing the tax expenditure (eliminating FEIE) would reduce the tax inducement for U.S. citizens to relocate to lower tax countries (leaving the plantation), but would also make U.S. citizens more costly for any employer to hire than citizens of most other countries, which do not tax foreign earned income. Removing the maximum limit ($99,200 for 2014) for the exclusion would eliminate the tax cost differential with other countries, but would allow high-income individuals to avoid U.S. taxes on foreign earned income (the entire expat policy is driven by the progressive chase after the 1%’ers). Targeted tax relief may be justified for extreme cost of living areas, and the design of any alternative would affect the complexity for taxpayers and the Internal Revenue Service (IRS), as well as the federal tax cost.” (we could try to recognize that some low-tax countries are also high-cost of living, but that would be too much work for us)
Regarding the GAO desire to unfairly tax citizens abroad, which begins on p 67: Is the Tax Expenditure Fair and Equitable?
……….. “In order to apply any of these equity principles, it is necessary to identify individuals who benefit from the exclusion. This identification is complicated by the fact that the individual or business that is legally obligated to pay a tax—or that receives a tax benefit—is not always the one (or, at least, not the only one) that bears the ultimate burden of the tax or receives the ultimate benefit. The ultimate burden or benefit is known as the incidence of the tax policy, and it depends on how various individuals and businesses respond to the policy. For example, in the case of the tax expenditure, even though individual employees claim the exclusion on their own tax returns, the resulting reduction in their total taxes may make them willing to work abroad for a lower pretax income than they would have accepted without the tax expenditure. As a result, the foreign employers may share in at least some of the benefit by being able to pay lower salaries than would otherwise have been needed to hire U.S. citizens.” (This isn’t really hurting you, this is hurting your corporation)
….”In terms of the benefits principle, some of the experts we interviewed noted that U.S. citizens working abroad for the long term receive significantly smaller benefits from U.S. government services than those living in the United States, and that this difference may justify some tax relief for the former. Other experts noted that a large portion of federal revenues pay for services—such as national defense, foreign affairs, income maintenance, and basic research—that produce social or humanitarian benefits that are not directly apportioned to specific individuals. U.S. citizens living abroad likely benefit from some of these services. Many of those citizens also benefitted from years of public investment, for example, in their education, the cost of which is typically recaptured from citizens over their lifetimes. (your American education makes you an indentured servant.) Moreover, some observers note that the choice to retain U.S. citizenship while living abroad provides some insurance with respect to being able to return and live within the United States whenever one wants. They maintain that citizens abroad should be willing to pay some tax for this insurance.” (“Some of the experts” say that homeland research and the wars in Syria Ukraine, Somalia, Yemen, and Libya are for your benefit)
….”Citizens living abroad benefit from services provided by their hostcountries’ governments to which they pay taxes. Given that credits for
foreign income taxes paid reduce the amount of tax that these citizens pay to the U.S federal government, any attempt to quantify discrepancies between federal benefits received and federal taxes paid should account for the foreign tax credit.” (You got the foreign tax credit crumb, now go eat it and be happy)
Appendix 3 analyzes 3 different tax situations — implying that each situation represents 33% of the situation. But, the 0% tax example only represents 2.2% of the expat population. And the 10% example represents less than 2.2% of the expat situation. (we “analyze” by looking at 4% of the population and make it look like it is 2/3rds of the population)
We could go on and on.
What to learn from all this? Recognize that GAO and other lackeys will always respond in its interest and against ours (we already know that) Recognize that the GAO stacks the cards against us. Recognize that other small groups have tried but with little success. More resistance, stronger resistance organization, litigation, flight, and voices louder than the big machine are needed.
I ran across this work of fiction while searching for something else. Hope that it hadn’t been posted by someone else when it was first fabricated. Or not. Sometimes you read a fiction one year, forget it, and need to read it over again later.