It’s Time To End Double Taxation for Americans Living Abroad
The new year will bring a new administration, and I’ll be watching to see if President-elect Donald Trump’s team finally puts an end to the worldwide taxation of individual Americans’ income. Fixing this is imperative. It would not only be sound fiscal policy but could keep millions of law-abiding Americans living overseas from being treated like financial pariahs.
Trump seems to agree. “I support ending the double taxation of overseas Americans,” he promised in a campaign statement. This problem is rooted in America’s bizarre worldwide tax system.
Most people don’t realize it, but if you’re a U.S. citizen, the Internal Revenue Service (IRS) wants to know about all the dollars or euros you earn, no matter where in the world you earn them. This isn’t about jet-setters or Americans hiding money in offshore accounts. It’s a tax grab that applies even if you haven’t lived here for decades and pay your fair share in another country. It’s like having the IRS follow you around the globe, demanding an account of every paycheck, bank account, or investment.
Here is how it works: If you live and work exclusively outside of the United States, you must file a U.S. tax return reporting your income, foreign bank accounts containing over $10,000, retirement accounts, investments, and other financial details. You’re responsible for paying U.S. taxes on income above certain thresholds and navigating complex forms and rules to avoid or minimize double taxation.
This is not only unfair but uniquely so. The United States is the only developed nation that taxes based on citizenship rather than residency. We are in terrible company. As the Cato Institute’s Adam Michel writes, “Eritrea’s brutal dictatorship is the only other country to come close, imposing a 2 percent levy on all expatriates.”
Double taxation most commonly sets in when you live in one of the many countries not covered by a tax treaty, or for foreign-
Article from Reason.com
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