American Citizens Abroad (ACA) Writes to Congress to Call for Preserving Foreign Earned Income Exclusion (FEIE)

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American Citizens Abroad (ACA), a non-profit non-partisan organization of U.S. citizens living outside of the United States, has just written a strongly worded letter to Rep. John Tierney (D-MA), to protest his legislative proposal, H.R. 2495 “Tax Equity and Middle Class Fairness Act of 2011”, which would eliminate the Foreign Earned Income Exclusion (FEIE). ACA points out in its letter that Americans living overseas pay full taxes to their country of residence, and most often pay higher taxes abroad than they would if they were living in the United States. In its letter, ACA points out that the FEIE was eliminated by Congress once before, in the 1970s, and the immediate consequences on Americans overseas and on the United States economy overall were so severe that Congress hastily reinstated it. ACA calls for Rep. Tierney to remove this clause from his legislative proposal.

"The United States is the only country, with the exception of Eritrea, to tax individuals on the basis of citizenship rather than residence."

In a strongly worded letter, American Citizens Abroad (ACA) has written to Rep. John Tierney (D-MA), to protest a bill he introduced in 2011, with five co-sponsors. The bill, HR 2459 “Tax Equity and Middle Class Fairness Act of 2011”, includes a suggestion to eliminate the Foreign Earned Income Exclusion, which according to Rep Tierney “allows U.S. citizens living overseas to avoid paying taxes.” In its letter, ACA calls this statement misleading and misinformed, and asks for it to be corrected. ACA points out that Americans residing abroad pay taxes first to their country of residence, and the vast majority of Americans abroad live in countries with tax rates and overall total taxes much higher than those paid by their fellow citizens residing in the United States.

MaryLouise Serrato, Executive Director of ACA, explained: “Rep Tierney seems to be unaware that the United States is the only country, with the exception of Eritrea, to tax individuals on the basis of citizenship rather than residence.” She added: “Even with the existence of the FEIE, Americans living abroad are taxed twice in numerous ways, once by their country of residence, and a second time by the United States. The FEIE was originally written into the U.S. tax code specifically to avoid this double taxation for Americans working abroad, so they can compete on a level playing field with citizens from other countries.”

Jackie Bugnion, one of ACA’s Directors, said ACA’s letter reminds Rep Tierney that the FEIE was eliminated by Congress once before, in 1976, and the result was disastrous for the United States economy. Bugnion said that at the time, tens of thousands of Americans were forced to return to the United States from their overseas jobs, and the damage to the U.S. economy, in falling exports and increased joblessness, was so great that Congress rapidly reversed itself and reintroduced the FEIE. Bugnion has just returned from Washington DC where she presented members of Congress with ACA’s proposal to move to a residence-based system of taxation, like every other country in the world.

In the letter, ACA urges Rep Tierney and the five co-sponsors of the bill to review their position, and to withdraw immediately the proposal to eliminate the FEIE. The co-sponsors of the bill are Rep. Steve Cohen (D-TN), Keith Ellison (D-MN), Raul Grijalva (D-AZ), Jesse Jackson (D-IL) and Betty McCollum (D-MN).

American Citizens Abroad, the Voice of Americans Overseas

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MaryLouise Serrato
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