American Citizens Abroad, the expat advocacy group, has come out with a video promoting residency-based taxation.
The three-minute video maintains that the United States could save money and paperwork plus earn more taxes by converting to this form of taxation.
The United States now has citizenship-based taxation, and U.S. expats are subject to their country’s tax laws regardless of where they earn their money. The video says that many are faced with double taxation, first from the country in which they live and then by the U.S. Internal Revenue Service.
American Citizens Abroad has been pushing this concept aggressively for 18 months and has sent representatives to meet with key legislators in Washington.
Residence-based taxation is the only way to keep America and Americans abroad competitive in a global economy, the video maintains.
The organization is hopeful because Congress is considering a major rewrite of the U.S. tax laws. Citizenship-based taxation has generated a number of rules that require Americans to file various forms and become subject to possible drastic action if they do not.
In the 2012 tax year, U.S. citizens were eligible for up to a $95,100 exemption from federal taxes on earned income. But they still have to pay taxes to the United States on unearned income like interest and rents as well as capital gains. Those who do not have legal residency and style themselves as tourists may not be eligible for the exemption. There are certain provisions for deductions for taxes paid to Costa Rica. The video is available on the organization’s Web site.