Organization of Americans Abroad Objects to Committee Statistics and Proposed Elimination of Foreign Earned Income Exclusion for Americans Living Overseas

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Geneva-based organization American Citizens Abroad (ACA) has written a strongly worded letter to the Commission for Responsible Federal Budgets, protesting the use of impossible statistics in the document "Let's Get Specific: Tax Expenditures" published in October 2010. The Committee estimates that eliminating the Foreign Earned Income Exclusion (FEIE) would bring in 6 billion dollars in additional tax revenues, while ACA calculates that this would not only bring in far less, well under one billion dollars, but it would also be a disaster from the point of view of jobs for Americans.

American Citizens Abroad (http://www.americansabroad.org ), an advocacy group working on behalf of U.S. citizens living abroad, has written to the Committee for a Responsible Federal Budget to point out that certain statistics in the Committee's recent tax reform publication are simply not realistic.

In October 2010, this Committee published a document entitled "Let's Get Specific: Tax Expenditures", intended to "help focus the national discussion on specific policies that could help reduce the deficit." One of the proposals that the Committee makes in this document is to end the tax exclusion of an individual's income earned abroad, dubbed the Foreign Earned Income Exclusion, or FEIE. The Committee estimated that, if enacted immediately, this measure would bring in an additional $6 billion in tax revenues in 2011.

ACA's letter, sent on November 10th, objected strongly to this number. As ACA Director Jackie Bugnion pointed out, "the vast majority of Americans residing overseas live in countries with tax rates higher than the United States." Therefore these Americans, if the FEIE were eliminated, would simply apply foreign tax credits against their U.S. tax liability, instead of using the FEIE to reduce their taxable income. Ms Bugnion concluded "so there would be no additional tax revenue for the United States coming from most Americans living abroad".

American Citizens Abroad estimates that eliminating the FEIE would in fact bring in perhaps 700 million dollars in additional tax revenue in 2011 from Americans working in countries with tax rates lower than the United States. This is a far cry from the Committee's calculation of six billion dollars.

In addition, the ACA letter reminded the Committee that the FEIE was temporarily eliminated in the late 1970s, to disastrous effect. Tens of thousands of overseas jobs for Americans were eliminated in the construction and engineering industries. In the face of this major collapse in jobs for American citizens, Congress quickly reintroduced the FEIE. ACA is convinced that the same phenomenon would occur again and that eliminating the FEIE is a job-killing measure for American citizens, not a long-term source of tax revenue for the United States.

ACA sent its letter to the Chairmen of the Committee, Bill Frenzel, Tim Penny and Charlie Stenholm, and the Committee's President, Maya MacGuineas.

American Citizens Abroad (ACA) is a non-profit non-partisan volunteer organization working on behalf of U.S. citizens living outside of the United States. Besides taxation, ACA works on issues such as citizenship, Medicare, social security and many others.

American Citizens Abroad, the Voice of Americans Overseas

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Jackie Bugnion
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