Dear Member of Congress:
On behalf of our respectiveorganizations’ members nationwide, we urge you to support the American TaxFairness Act of 2011. This legislation effectively eliminates one of the mostpunitive examples of double-taxation on American economic activity abroad, thusmaking it easier for domestic companies to promote exports overseas and forforeign companies to hire U.S. workers. One key objective to ensure the future strengthof the U.S. economy should be a competitive tax system that doesn’t impede ourability to produce and promote exports in other countries. The introduction ofthis bill will make much-needed progress toward this goal.
As organizations dedicatedto lowering overall tax burdens and eliminating harmful cases of double-taxation,we believe it is vital for the U.S. government to stop levying domestic taxeson expatriate Americans who pay taxes to their host country. Mostindustrialized nations tax only the labor carried out within national borders,regardless of citizenship. This “territorial taxation” system is both fair andeffective, as individuals living and working abroad will mainly use governmentservices in their country of residency. However, the U.S., virtually aloneamong major developed nations, continues to tax labor carried out abroad byexpatriates. This outmoded and harmful policy (which extends to corporateprofits as well) adversely impacts both American companies and citizens abroad,hindering the creation of domestic jobs required to produce exports.
At issue is Section 911 ofthe U.S. Tax Code, which only protects a limited amount of worldwide incomebefore U.S. taxes are piled on to the foreign tax burden. Specifically,Americans working abroad can shield $92,900 of certain earnings from U.S.income taxes – not as equitable an amount as it may seem. For one, theseworkers can be located in areas with high costs of living, in many casesexceeding those found in the largest U.S. cities. Additionally, Congress hasworsened this discriminatory situation in recent years by stipulating thathousing benefits and residual income must be considered when calculating thecap for income excluded from double-taxation. As such, current policy hasmade it too expensive for many American companies to station theirmost-talented employees worldwide and pursue business opportunities that payoff here at home. Moreover, there are additional restrictions on Americansliving abroad – including substantially higher penalties on errors or omissionson tax filings than those residing on U.S. territory. The American Tax FairnessAct abolishes the arbitrary income cap.
The detrimental effect ofSection 911 cannot be ignored by Members on either side of the aisle. Recentlythe Obama Administration launched a new export initiative, noting that marketsoverseas are critical to the ability of U.S. businesses to employ moreindividuals within our own borders and enhance our trade position. This isespecially imperative for emerging markets in Asia and the Middle East, wherethe U.S. is losing competitiveness daily to foreign counterparts. The American Tax Fairness Act would go beyondrhetoric about improving economic growth by removing a major impediment to investmentin American workers.
All Members who are concerned about our position inthe global economy should cosponsor this important pro-taxpayer bill. To do so,please contact Andrew Shaw in the officeof Representative Scott Garrett at 5-4465 or andrew.shaw@mail.house.gov. Both our organizations supportpassage of the American Tax Fairness Act; roll call votes on the bill will besignificantly weighted in National Taxpayers Union’s Rating of Congress.
Sincerely,
PeteSepp GroverNorquistExecutiveVice President PresidentNational Taxpayers Union Americans for TaxReform