Three members of the U.S. Congress have asked for a close look at the earned income tax exclusion and a second exclusion for housing costs that benefit overseas Americans.
The request was in a letter sent to Gene L. Dodaro, comptroller general. The three members of Congress, all Democrats, said they wanted a clear summary of the effects of these tax exemptions. Such an assessment by the General Accounting Office, in the light of the extensive changes to the global economy that have occurred in recent years, will provide lawmakers with better information about these provisions as we contemplate changes to the U.S. tax code, they said.
The three members of Congress support the tax exemptions for overseas Americans because they see the tax rules as being related to the competitiveness of the United States in overseas markets, they said.
They are Carolyn B. Maloney of New York, Jim McDermott of Washington State and Michael Makoto Honda of California.
They also asked that the study consider the impact of removing the income exemption. Other members of Congress have questioned the exclusions and the concept may face stiff questioning in the coming months.
The three U.S. lawmakers noted that although estimates vary, most show that around 6 million American citizens live aboard in almost 200 countries around the world, a population larger than that of most U.S. states.
The United States requires its citizens to pay taxes on any money they earn anywhere. This is a controversial policy. The tax laws allow overseas Americans to exclude more than $90,000 in earned income a year. For those who earn more than that, the household provision allows them to exclude about 16 percent of their income for housing and some living expenses.
The expat advocacy group, American Citizens Abroad, said that the foreign earned income tax exclusion is an essential part of the U.S. tax code that helps keep Americans overseas competitive economically, particularly against emerging economies such as China that actively promote their citizens living and working overseas.
By providing a timely and accurate report on the foreign earned income tax exclusion’s impact on Americans living overseas and its importance to the U.S. economy, the General Accounting Office report will go a long way towards ensuring that other members of Congress recognize the need to protect and expand the exclusions, said the advocacy group.
Ms. Maloney and Honda also are sponsors of legislation to create a federal commission to study the impact of government policies upon Americans living overseas, she noted in a press release.
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