Good news on passport revocation: the House rejected the Senate version of H.R. 644 (Trade Facilitation & Trade Enforcement Act, a.k.a. the “customs bill”) and substituted it with their own version, which passed in a largely party-lines vote. The House version of the bill does not include Senator Orrin Hatch’s provision to deny new U.S. passports and revoke existing passports of people who have outstanding unpaid taxes or form crime fines, or who do not provide SSNs (it is not clear whether this would deny passports to passport applicants who never had SSNs in the first place).
Also, as Tim alerts us in a comment, Section 603 of the Senate version of the Trade Preferences Extension Act (H.R. 1295) — which would have required U.S. banks to report accounts with zero or de minimis interest to the Treasury, in what could have been another step towards the alleged reciprocity that Treasury mendaciously promised it would offer FATCA “partner jurisdictions” — was removed from the House version of the bill before its overwhelming passage.
This does not mean that these provisions are dead yet. Both bills will now go to conference, where the Senate conferees will have the opportunity to pressure the House to reinsert the sections that they dropped. Separately, H.R. 1314 (the Trade Act, or colloquially the “trade promotion authority & trade adjustment assistance bill”), which contained a provision to deny the refundable portion of the child tax credit to filers who take the Foreign Earned Income Exclusion, failed to pass; it may be scheduled for another vote in a few weeks.
Via TaxProf Blog, we learn that the IRS has released its annual report on Individual Income Tax Returns, 2012. Page 9 has statistics on Foreign Earned Income Exclusion usage, from which we can calculate the average amount of the FEIE per return:
|Number of returns w/FEIE||371,885||396,405||415,519||445,276||475,386|
|Total amount of excluded income
(constant 1990 US$ million)
|Average FEIE per return
(constant 1990 US$)
Here’s another way of looking at these numbers. Assume that all of the FEIE users in 2008 continued to be FEIE users in 2012 (or equivalently, that they were replaced by similar filers or married-filing-jointly couples), and that over that period they suffered the same drop of 0.96% in earned income (in constant 1990 US$) that all U.S. returns demonstrated on average during that period. What would the average FEIE for each of the one hundred thousand marginal new filers have to be in order to fit with the above figures?
Answer (again, in constant 1990 US$): US$29,709, almost exactly the same as the average earned income across all U.S tax returns.
As part of their newly-published paper on “Options for Reducing the Deficit“, the Congressional Budget Office has suggested, as Option 12 (at page 130), to “Include All Income That U.S. Citizens Earn Abroad in Taxable Income” — in other words, to eliminate the Foreign Earned Income Exclusion and Foreign Housing Deduction. They estimate that this would bring in US$33.3 billion over the next five years, and US$88.5 billion by 2023 — roughly an order of magnitude more than the US$8.7 billion that FATCA is expected to reap in the course of a decade.
This is the third proposal this year to eliminate the FEIE. Eight months ago, the Congressional Progressive Caucus derided the FEIE as the “Foreign Earned Income Loophole” and claimed that eliminating it would raise US$71 billion over ten years (not clear whether they include the FHD in that number). Days before that, when Dennis Ross (R-FL) presented his own hilariously hypocritical plan to kill the FEIE so that corporations could enjoy territorial taxation, the Joint Committee on Taxation estimated that cutting both the FEIE and the FHD would raise US$36.3 billion over five years. CBO states that they are are using the JCT’s new estimates as updated for 2014.
The Government Printing Office has finally published the 284 pages of the Congressional Progressive Caucus’ bill we discussed earlier this month. For those who don’t recall, this bill includes provisions, as the CPC put it, to “Close Exclusion of Foreign-Earned Income Loophole”. I won’t bother quoting this bill at length since there’s nothing surprising in its the contents (aside from the hilariously non sequitur title: “Smarter Approach to Nuclear Expenditures Act”), but the list of sponsors is rather interesting in one regard: a third of them are children or grandchildren of immigrants.
Joining Dennis Ross (R-FL) and his recycled plan to raise taxes and pile paperwork on U.S. Persons abroad to pay for tax cuts for Homeland corporations, the Congressional Progressive Caucus has reintroduced their own plan from last year to raise taxes and pile paperwork on U.S. Persons abroad to pay for services for Homelanders that we can’t use. The Government Printing Office doesn’t have the full text of their bill yet (they didn’t even manage to get today’s edition of the Federal Register up on time), but the Washington Post has a copy of their press release.
Apparently, harassing and vilifying emigrants while posturing that you’re standing up to Big Oil is what passes for “progressivism” in the United States these days.
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?
As reported by the Wall Street Journal, Jim DeMint will step down from his position as junior senator from South Carolina to become the head of the Heritage Foundation, a conservative think tank.
For those of you not familiar with his name, DeMint deserves credit as one of a small number of Republicans who fought back against Chuck Grassley (R-IA)’s midnight sneak attack on U.S. persons abroad in the Tax Increase Prevention and Reconciliation Act of 2005. In the aftermath of that bill, DeMint realised the contents of the so-called “Tax Increase Prevention” he had voted for, and sponsored two bills to undo Grassley’s obsessive handiwork and make the Foreign Earned Income Exclusion unlimited: S.3496 in 2006 and S.1140 in 2007. Unfortunately, those both went to the Senate Committee on Finance, where they were left to die by the Committee’s chairman … Chuck Grassley.
At the Heritage Foundation, DeMint will replace Edwin Feulner, who has also on occasion spoken out against taxation of U.S. Persons abroad.
In case you hadn’t already figured it out, this is the shape of things to come for U.S. Persons abroad: relentless bipartisan attacks on the Foreign Earned Income Exclusion in the name of “simplifying the tax code” and “cutting subsidies to favoured groups”, because the “non-partisan” Joint Committee on Taxation (which is composed entirely of Homelanders) classifies it as a “tax expenditure”. The latest effort in this direction: Dennis Ross (R-FL)’s HR 6474, which purports to implement the recommendations of the Simpson-Bowles Commission regarding territorial taxation. It contains provisions to phase out 20% of the FEIE every year until it is fully eliminated in 2017:
SEC. 271. FIVE-YEAR PHASEOUT OF CERTAIN TAX EXPENDITURES.
(a) In General- Effective for taxable years beginning after December 31, 2012, the amount allowable as a credit, exclusion from gross income, exemption from taxation, or deduction for the taxable year under the tax provisions specified in subsection (c) (determined without regard to this section) shall be reduced by the applicable percentage of the amount so allowable …
(c) Specified Provisions-For purposes of this section, the tax provisions specified in this subsection are as follows:
(1) Section 911 of the Internal Revenue Code of 1986 (relating to citizens or residents of the United States living abroad).
Boom! Right there on top in pole position, the very first “tax expenditure” they propose to cut. That in itself should tell you volumes about Congress’ attitude towards U.S. Persons abroad.
Despite half-hearted calls for tax reform which might fix the increasingly ridiculous consequences of the U.S.’ drive to tax its Persons and make them file forms wherever they go on the planet, Congresscritters clearly prefer instead to introduce more and more stupid complexity-increasing loopholes to cut tax rates on their favoured groups and locales outside of the fifty states. Puerto Ricans and Guamanians have got their loopholes already, companies which fire Americans abroad and give their jobs to Americans in the Homeland have got John Duncan (R-TN) fighting on their behalf, and Marco Rubio (R-FL) was pounding the nationalistic drums earlier this month to let Olympic medal winners have some too.
Now, two (un)Representatives from opposite sides of the aisle have introduced competing sops for Department of Defense contractors and civilian employees. Of course, in the process, they have to make sure not to give any benefit to all those other whiners who have no good reason to be living outside the Greatest Country on Earth™ — a group of taxpayers known as Escaped Unpatriotic Renegades Opposed to Paying Equal Amounts, Now Living Overseas as Useless Tax-evaders (“EUROPEAN LOUTs”). That means more pages in the tax code and longer forms to go along with it. Are you excited yet?