NCPA - National Center for Policy Analysis

DOUBLE-TAXING AMERICANS WORKING ABROAD

January 22, 1996

President Clinton wants to repeal Section 911 of the tax code, which allows Americans working and living abroad to deduct the first $70,000 of their earnings from their income subject to U.S. taxes.

Many tax specialists believe repealing Section 911 would be unfair and would hurt all Americans.

  • Americans working and living abroad deserve the deduction because they must also pay taxes to their host country.
  • Among all nations, only the U.S. taxes its citizens working in foreign countries. Were the present $70,000 deduction to be denied, it would negatively impact U.S. exports and, thus, reduce jobs in the U.S.

Many of those working abroad work for U.S. companies promote their products overseas. Because of double taxation, it costs U.S. companies more to staff foreign operations with American citizens than with foreigners. Nevertheless, U.S. companies prefer to send Americans abroad because they are familiar with U.S. product lines and tend to be more highly qualified.

Repealing Section 911 would also harm U.S. trade.

  • About 18 percent of all U.S. exports go from U.S. companies to their foreign affiliates.
  • In 1993, U.S. firms exported $138.4 billion in goods and services to their foreign affiliates.
  • A recent study revealed that repeal of Section 911 would reduce U.S. merchandise exports by at least $9 billion per year and eliminate 143,000 U.S. jobs.

Source: Bruce Bartlett (National Center for Policy Analysis), "The Myth of Corporate Welfare," Washington Times, January 22, 1996.

 

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