Tax-grab idea to fix budget alarms expat Americans
Ending the exclusion of US$92,900 from taxable income will put people off work abroad, critic says
John Carney
Jul 31, 2011
scmp.com

Americans working in Hong Kong are alarmed about a proposed change in US tax legislation that would leave them substantially out of pocket.

Amid growing divisions over the size of the US government budget and of its budget deficit, Oklahoma Republican Senator Tom Coburn this month released a proposal that he claimed would produce US$9 trillion in savings over the next decade. Among its measures is the elimination of the foreign earned income tax credit from which expatriate Americans benefit.

The US taxes citizens and residents on their worldwide income, but those living and working outside the US are entitled to claim the exclusion, which reduces taxable income. For 2010, the maximum exclusion was US$91,500 per taxpayer, while for 2011 the maximum is US$92,900. The taxpayer may also exclude housing expenses in excess of 16 per cent of this maximum.

Republicans Abroad Hong Kong held a lively discussion at the American Club, where Americans of all political leanings who are working in the city voiced their disgust at the proposed tax scheme.

"It will affect more than just our personal incomes," Republicans Abroad Hong Kong chairman Chris Exline said.

"This compels companies to reconsider sending Americans to work overseas. We understand the quest for additional revenue, but we also think it has to be balanced by meaningful reduction."

Exline hoped that it was not too late to make a stand against the legislation, as he had been told by a US government relations firm that it was "almost a done deal".

"Washington can be frighteningly swift when making things retroactive. In the current climate, there's such a voracious appetite for revenue it could get passed by Congress this weekend," he said.

"This overarching need for revenue would see this legislation enacted sooner rather than later. That's why we have to discuss strategies now on how to make members of Congress aware that expatriates oppose this proposal."

Tax expert Kurt Rademacher, international tax practice director at Butler Snow, also gave the initiative the thumbs down. He said the elimination of the exclusion had been proposed numerous times, but it had "never really gotten any legislative legs in the past". Rademacher felt the tax exclusion made sense for a variety of policy reasons.

"Non-US resident Americans do not use or benefit from the same government-provided services that US resident Americans do, such as federally subsidised infrastructure, Medicaid, social security, or federal domestic law enforcement," he said. "Accordingly, it is patently unfair that non-US resident Americans should pay the same taxes as Americans who live within the borders of the US."

Time to get your Hong Kong SAR passport if you've been here 7 years/have the right of abode in Hong Kong???!!!

LOL
SEAJ

I don't think that will help them.  I think that uncle sam can still come after them for years even if they renounce citizenship.  Then they are taxed as if they have disposed of everything that they own.  

Article here

[ Last edited by  yazoo at 2-8-2011 20:46 ]