Posted by Barbara on the Media thread. Cross-posted from there.
UPDATE: Emailed letters will be delivered to the White House on OCTOBER 2. Deadline for sending emails is SEPTEMBER 30!!!
Write your letters, people!!
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YOU MUST ACT NOW!! NO EXCUSES!! PLEASE SHARE WITH ALL FELLOW AMERICANS OVERSEAS (regardless of party affiliation or non-affiliation) & ACCIDENTAL AMERICANS!! If you do nothing, nothing will change!!
We need your help. The Senate Finance Committee and the House Ways and Means Committee are working on tax reform, and we need to get overseas Americans’ voices heard. We have not had tax reform for 31 years, and if we miss our window now, we will not see another chance for 20 more years.
At the initiative of Republicans Overseas, the RNC recently adopted a White House approved resolution supporting the change from citizenship based taxation (CBT) to residence based taxation via RO’s proposed Territorial Taxation for Individuals (TTFI). We have champions and sponsors in both the House and the Senate. We have found tax loopholes that TTFI would close, thereby making TTFI revenue positive. The ingredients for success are lined up–but we’re missing one: the massed voices of ordinary overseas Americans.
What we need now is for our representatives to hear from as many overseas Americans as we can gather. We believe that the vast majority of overseas Americans support the inclusion of TTFI to the tax reform package, and we need to hear from thousands of them. We want to collect as many letters supporting TTFI and tax reform as we possibly can, which Solomon Yue will then present to the White House.
Can you please support our initiative by writing a letter to President Trump and copying your Congressman and Senator.
Here’s how it will work:
1) RO is providing a letter template along with an example which can be found here:
https://republicansoverseas.com/territorial-taxation-individuals/#sample-letters
We urge letter writers to share their own short stories, but also to link their letters to the themes outlined by the White House in their press release on tax reform by focusing on two points: \
(a) TTFI reduces the cost of hiring Americans working overseas, increases U.S. exports, and creates more American jobs within the U.S., and (b) it reduces tax preparation costs for overseas Americans. The sample letter already does this, but it is important to reiterate that we need to reinforce the White House’s points and link those points to individual situations.
2) The letters should be emailed to taxreform@republicansoverseas.com and copied to their local representative and Senators. Links to government databases providing this information can be found at
https://republicansoverseas.com/territorial-taxation-individuals/#contact-congress
3) Solomon Yue will print out the letters and take the physical package to the White House. Clearly, the more the better!
Thank you for your support! If you have any questions or suggestions, please contact Kym Kettler-Paddock at kym.kettler-paddock@republicansoverseas.com.
Regards,
Michael DeSombre
Worldwide President, Republicans Overseas
“In terms of RBT vs. TTFI, we moved to TTFI to align it more closely with what is being proposed for corporations. We believed that it would be easier to explain the change to the Senate Finance Committee and the House Ways and Means Committee if it aligned with language already being used. If the US has TTFI for corporations, why not for individuals?”
It’s all about finding revenue isn’t it? If the US gave up trying to tax corporations on a worldwide basis, and lowered the corporation rate, the hope is that Apple et al would repatriate some of their billions, thus financing tax cuts, infrastructure boosts, etc. And making it much much easier to get a tax package through Congress.
The typical US citizen living outside the US doesn’t have any billions to tempt America into offering the equivalent deal. Giving up extraterritorial penalties would be expensive, and would make it harder to get a tax package through Congress.
@plaxy and Kym
As always it’s the little people, the citizens and now too many ex citizens who are the last to be considered here.
And Kym, yes RO do ask for a US post code. Tell me how that works for deemed taxable US citizens who have never lived in the USA? !
@plaxy – There is a price for good will. Currently there are 20,000 people who have given up US citizenship. Making a few assumptions lets say previously they would have returned to the US for a vacation/visit family etc and spent $10,000 (not unheard of if you factor non citizen spouse / meals/hotels/sightseeing)- but now because of the anger being generated do not – that is $200,million taken out of the economy . Money that would have fuelled the US economy-jobs etc. How many more people are now too angry or too frightened and will not return? What if it is 200,000 who may have spent $10,000- that is 2 billion taken out of the economy- Is that not the same as what is happening with corporations – they are not returning the profits from overseas because of the tax- we are not returning (even briefly) because of the unjust treatment of American citizens abroad? A restaurant serves one bad meal – word gets around – no one goes back – they go out of business.
@Kym: “If the US has TTFI for corporations, why not for individuals?”
Because individuals and corporations are not the same thing. There is no compulsion, nor even any necessary benefit, in a country operating the same system for both corporations and individuals. Many countries operate different systems in this respect. Dumbing down for Congress is a poor excuse for having produced an entirely unworkable proposition here.
As @Plaxy notes, this proposal appears to be far more about trying to raise revenue from non-voters than it is about protecting the rights of US citizens abroad. You could at least be honest about it in press releases and public statements, and let people make up their own minds, rather than perpetually conflating RBT and TTFI in the hope that nobody else bothers to try and sort out what you actually meant here.
The US relies extremely heavily on inward investment from other countries. As it stands, RO’s TTFI proposal raises taxes enormously on those investors, to the point where it is virtually certain to destroy entirely the source of revenue it is designed to tap. Congress may be stupid, but it is not so stupid as to miss that, ensuring that this proposal has essentially no chance of succeeding. To glibly dismiss that as merely a ‘potential issue’ with TTFI is disingenuous at best, and probably closer to reckless.
unamerican – no it’s not at all comparable to the billions US corporations have stashed offshore. Who spends $10,000 on a holiday in the US? I suspect most Americans who visit America go either for work or to stay with family, and save their holiday spending money for nicer places.
@Watcher – Do countries then operate two philosophically different tax systems at the same time? I understood that boiled down it becomes how do you tax?- do you believe you pay taxes where you reside for the goods and services you receive or you pay tax simply because you happen to be a member of that group? So does any other country in the world tax its corporations as if they are “citizens ” of that country no matter where they are located but taxes the individual only on their “residence”- ie two totally different methods of taxing . I understand different rules applying to corporations and individuals under the same tax regime. Maybe the answer would be to turn myself into a corporation if US only adopts territorial taxation.
@ plaxy – as I had made an assumption- so have you – it is hard to believe that all of the people who have visited Disney that there was not a least one American who resided abroad who brought their family there- or visited the Grand Canyon or brought their family to visit relatives and added on sights or ate in a restaurant. And if the travel industry does not generate wealth then why the worry every time the dollar changes and hurts the industry. And the point is to good will in general – hurting their expat community has many repercussions – that is only one of them.
@watcher
Very well said.
@unamerican.
Exactly, I wouldn’t return there if you paid me.
My German banker nephew and many others have stated that blue passport is the most toxic in the world.
Does RO and DA not hear or care what the rest of the world is saying about them?
Watcher – I agree that there is no reason to use the same system (Territorial) for both individuals and corporations. AFAIK, the countries that use territorial taxation for individuals generally do not tax investment income. As I said in my original critique of the RO TTFI proposal, this proposal has a lot of problems, not the least of which is the effect you mention on inward investment.
“…hurting their expat community has many repercussions – that is only one of them.”
Driving their most profitable corporations to keep their profit offshore certainly has far worse repercussions, yet one administration after another fails to make the needed reforms.
I don’t think Congress cares in the least what USCs living in other countries think or feel towards America. They do care about getting that corporate money back within taxing range, but they can’t manage to do it.
Put not thy faith in the US Congress. They don’t even know you’re there.
@Karen
Ah! Yes! Thank you for reminding me of your own TTFI feedback. I had forgotten that alongside Shadow Raider, you too had provided an excellent set of reasons why it is fatally flawed as drafted. Mea culpa.
Such a pity that nobody from RO took any notice of all of this back in January, rather than now when it is arguably far, far too late to fix this in a way that would give this proposal a better chance of succeeding. Because as it stands, it seems doomed to fail.
KYM from RO states
“First of all, I don’t believe that Republicans Overseas is asking for a zip code: that is the Senator’s or Congressperson’s site. Unfortunately, they seem to do it to limit contact to genuine constituents, and this is a bit of a hassle for genuine constituents who currently live outside the US. Please use the zip code of your voting address, and if you genuinely don’t have one, then please just contact your Senator.”
The statement “they seem to do it to limit contact to genuine constituents” proves that they are not interested in the input of genuine concern/flaws from all Americans and ex Americans overseas but just in those willing to sign up and vote Republican.
I am a retired physician and in no way an economist but even I could see the flaws in the territorial taxation proposed. Who are these idiots?
A Forbes contributor has a go, and manages to draw up a tax reform plan that “grows the economy, creates jobs, is revenue neutral, and benefits the lower and middle class. GOP tax writers: you know where to find me.”
https://www.forbes.com/sites/anthonynitti/2017/09/15/fun-with-math-one-mans-attempt-to-craft-revenue-neutral-tax-reform/
CBT isn’t mentioned, but this is a fantasy plan so it doesn’t actually matter. The simplicity of the result seems to show that back in the real world, it’s not the deficit that makes tax reform so hard to achieve; it’s the politics.
“I see the US may now have a competitor to it’s tax haven status. Mr Boris Johnson has declared his intention of making the post Brexit Britain a ‘low tax’ juristriction.”
But the UK won’t have the kind of banking secrecy that the US has.
@Norman
True, but if TBT ever passes congress, then the US will have to give up that secrecy. The UK will be offering a lot less than a 30% withold on investments after Brexit, they will have limited options to stay solvent.
That’s why TBT is doomed.
Just catching up on comments here and Karen’s and Shadow Raider’s excellent critiques of the territorial system certainly helped me see the flaws better.
The US has no morals and it is always about revenue and they always try to raise revenue from those that are not represented, and don’t have a real voice or vote and those least likely to make a voting difference,
Now they intend to target non resident aliens under this proposal another group of non voters and with absolutely no justification for it. Except this group has options and can choose not to deal with the USA. Every day I feel thankful to have renounced and not to have to deal with the USA and their lack of morals. The fact that congress needs a dumb downed version of a tax plan says it all.
The plan suggested by Republicans Overseas doesn’t appear to be particularly immoral – just unrealistic, and going nowhere.
@plaxy yes maybe true that the plan itself is not immoral but the USA is bankrupt and lacks morals and will try to raise revenue where it least harms their votes. The Republicans Overseas are just giving them a plan that fits this mentality. Notice how rich foreigners are mentioned, haven’t we hard this before when expats were accused of being rich expats overseas. The plan is not practical or realistic for sure.
They’re not so much bankrupt as hamstrung by the dilemma of not wanting to give the Democrats in the Senate a chance to filibuster a tax reform bill out of existence. That means coming up with a plan that’s at least revenue-neutral. Getting rid of CBT would cost money and do nothing for the economy and please few Congressmen/women, so it’s not likely even to be discussed.
The legal case is still active, and may have a better chance of success than attempts at legislation.
Some of the RO language was that global income would only be taxed once. This sounds like Residence Based Taxation.
Details. It sounds like the proposal will be announce by 25 September.
Yes, the Republicans Overseas proposal has flaws. All proposals have flaws.
It seems to me that by using the language of “territorial taxation” for individuals, RO is at least opening the door to a discussion in the language that is already being used. It seems very likely that “territorial taxation” for corporations will happen. Commenters are finding fault with the precise proposal for individuals. Fair enough.
The real question is “what would territorial taxation” mean for individuals? In this regard, ACA may have “threaded the needle”. On July 17 ACA released a proposal that describes what “territorial taxation” should mean FOR INDIVIDUALS. You will find it here:
https://www.americansabroad.org/media/files/files/b88c9ece/Senate_Finance_Committee_July_17_2017_Tax_Reform_Hearing_-_ACA_ACAGF_Statement_1530.pdf
This is well worth the read (although I am sure that there is room to criticize it). The proposal seems to agree with “territorial” as a general principle, but then explains why the concept of “territorial” really means “residency based taxation” for individuals. For example:
Re one country using different kinds of tax systems.
The Internal Revenue Code gives many Americans abroad a choice of “territorial taxation” or “worldwide taxation” on business or employment income. Look at it this way:
Choice 1: The Foreign Earned Income Exclusion is “territorial taxation”. The U.S. is NOT treating income earned in the foreign country as part of its tax based.
Choice 2: The Foreign Tax Credit regimes is to participate under a system of “worldwide taxation”.
The problems for individuals arise mainly with respect to passive income, the treatment of entities or passive income earned through entities.
Corporations under the current law are subject to “worldwide taxation”. It’s just that they don’t pay the tax until the earnings are returned to the Homeland.
“It seems to me that by using the language of “territorial taxation” for individuals, RO is at least opening the door to a discussion in the language that is already being used. It seems very likely that “territorial taxation” for corporations will happen. ”
When it comes to agreeing on a tax reform plan that is revenue neutral, acceptable to all the different flavours of Republican power-brokers, and not at risk of being suddenly tweeted down by Trump, it’s numbers that count, not names.
It doesn’t matter what it’s called, switching to RBT/TBT for individuals would not have the same effect on the numbers as switching to territorial taxation for corporations, because the switch to territorial taxation for corporations is part of a plan to persuade corporations to “repatriate” their billions. Thus the plan, taken as a whole, becomes spectacularly revenue-positive and might even pass. Switching to RBT/TBT for individuals would be revenue-negative.
Congressional Research Services discussion of territorial taxation of corporations:
“Reform of U.S. International Taxation: Alternatives”
https://fas.org/sgp/crs/misc/RL34115.pdf
USCitizenAbroad – I don’t think I’d seen that particular piece by ACA before, thanks for the link.
While I have problems with the RO proposal, something is better than nothing. Furthermore, any proposed legislation will probably change several times before it finally becomes law. Getting any relief from citizenship based taxation into draft legislation would be a big win.
Karen: I SO agree with your latest comment. At this 11th Hour this particular “something” is definitely better than nothing and we can all bet that no package, however skillfully presented, is going to pass without being picked apart by the elected bean-counters. My hope is that NO US citizen living outside the US will be left holding the bag when the legislation is completed. It is possible that (to cover all the bases) some “exemptive” language will need to be inserted in the final wording. The words “except” and “exempt” are words prominently in absence in the FATCA IGAs. Had they been included with reference to the citizens and permanent residents of other nations we might not be participating here today.
Evidenced by Kym’s presence here in the past day or so it seems that RO is aware of the problem that has raised concern. Maybe the drafters of the proposal can put their heads together one last time and tweak the wording before they present it. There’s still time.