With the 113th Congress in full swing, Dennis Ross (R-FL) has introduced H.R. 243, the so-called “Bowles-Simpson Plan of Lowering America’s Debt Act”. This is basically the same as the bill he introduced last year, and features the same ridiculous proposal to raise taxes on U.S. persons abroad to pay for tax cuts for Homeland corporations. For more details, see this previous post of ours.
What’s mildly interesting here is that just days after Ross introduced his bill, the Joint Committee on Taxation published its “Estimate of Federal Tax Expenditures for Fiscal Years 2012–2017” (hat tip: TaxProf Blog). Their estimate of the “cost” of the Foreign Earned Income Exclusion has fallen significantly compared to last year: US$5.9 billion for 2012, down by more than 20% against their US$7.4 billion estimate for 2011. So where does that leave Ross’ bill and the revenue projections he used to justify all his tax goodies for Homelanders and their corporations?
The JCT seems to assume that the “cost” of the Foreign Earned Income Exclusion is equal to the hypothetical U.S. tax on the full amount of the excluded income of the four hundred thousand-odd people who took the FEIE in the most recent year for which data is available. The JCT’s estimates of the “cost” of the FEIE thus have a tendency to jump around wildly in line with the number of Form 2555 filers, without any evidence of a proportionate change in the actual number of U.S. persons abroad from whom the IRS demands tax paperwork. Apparently no one at the JCT realises the farcical incorrectness of their methodology.
What’s more, even if the FEIE were to be eliminated, most U.S. persons abroad would simply switch to using the more complex foreign tax credit to protect their wage income from U.S. extraterritorial taxation — resulting in an increase in tax preparation costs but little or no benefit to the U.S. Treasury. Some of these people might even be overpaying their taxes on non-wage income by taking the FEIE — thanks to the “stacking” provision that Chuck Grassley snuck into the “Tax Increase Prevention and Reconciliation Act” of 2005 — and would be better off taking the FTC, but have never bothered to do the necessary math because of the complexity of Form 1116. If they were forced to hire an accountant, the accountant would figure this out for them, again taking a bite out of the IRS’ cut.
And finally, out of the sizable minority who would see increase in double taxation because the taxes imposed by the countries they actually live in are not creditable for US purposes (such as VAT, wealth taxes, and social insurance payments), many will either repatriate to the U.S. in frustration or renounce citizenship to free themselves from the whole mess, again resulting in increased costs or decreased revenue for Washington.
Art 261bis CPS http://www.admin.ch/ch/f/rs/311_0/a261bis.html
Here’s a scary (long) article on the new health care “reform” bill kicking in in 2014. Lots of tax reporting requirements for all US citizens, both inside and outside the US. Do the accidental Americans need to fear yet another odious IRS requirement? Opinions welcome. Maybe even a new thread is needed.
Victoria writes: “Don’t crucify me for this but sometimes I wish they would just go ahead and do it.”
I’m coming to feel the same. Do it, fools, do your worst. It would certainly bring “clarity” to the situation.
And now we know that in 2011, while the IRS was demanding ‘foreign banking’ and US extraterritorial ‘compliance’ from all of us ‘abroad’, and while Geithner was threatening and accusing all individual ‘US persons’ who already pay a full set of taxes to the non-US countries where they live, and where many were born dual – of ‘not paying their fair share’ – he was simultaneously making a private deal to tax US corporations on a territorial only basis:
…..”The chief of a group
of more than 200 CEOs said on Thursday that President Barack Obama had
told the business community last month he might back a territorial tax
system, a regime that would exempt offshore corporate profits from U.S.
Corporate America is pushing for the United
States to move to such a regime to make businesses more competitive
against foreign rivals that pay no taxes on overseas earnings. The United States currently taxes corporate profits earned abroad only when they are brought into the country.
2011, then Treasury Secretary Timothy Geithner privately agreed to move
to such a regime in failed talks with Republicans to secure a major
budget deal, according to aides present.”……
We already pay taxes in full, to the countries where we live outside the US. We bank locally – where we live – outside the US. We are not living or based in the US, but stashing money ‘offshore’ like the US corporations. Yet, Geithner makes a private deal with corporations physically headquartered and present in the US, and who receive direct US benefits, but for individuals living entirely outside the US, being US persons only indirectly, inherited via parentage or accident of birthplace, we are threatened yet again with the spectre of FULL double US EXTRATERRITORIAL taxation and plans to get rid of the FEIE.
Obama is willing to move towards territorial taxation for corporations, but not for individuals.
What a sad and farcical hypocrisy.