Revenue Estimates under Various Methods of Taxing Americans Abroad

In a supplement to a report, "Impact on Trade of Changes in Taxation of U.S. Citizens Employed Overseas," estimates were provided of U.S. tax liabilities of Americans overseas under a variety of optional taxing methods and of revenue that would be lost to the Treasury as a result of relief to taxpayers under each of the methods. For more than 50 years, the United States provided a special tax incentive to citizens employed abroad to promote U.S. exports and commercial competitiveness. In 1976, Congress enacted amendments which substantially reduced the incentive, but the effective date of the reduction was postponed.

Congress is presently considering several proposals for tax relief, each involving a different cost in lost revenue. The methods of taxation involve flat exclusions, variable exclusions, administration deductions, and exclusions with an option of deductions. Calculations were made for each of these methods under conditions in which foreign taxes paid are fully credited and in which they are partially credited. The methods range in the degree of tax incentive or relief which would be provided from $551 million ($3,700 per tax return), or 82 percent of the total tax liability, to $161 million ($1,081 per return), or 25 percent of the total. As recommended previously, serious consideration should be given to providing an incentive for overseas employment, at least until more effective means for promoting U.S. exports and commercial competitiveness abroad are implemented.