If you're a U.S. citizen or Green Card holder working overseas, then you need to read this article from the May 26, 2006 issue of the International Herald Tribune titled U.S. Tax Law Sends Expatriates Reeling. Then, read this one called Americans Abroad See Tough Fight Over Taxes from the June 22, 2006 I.H.T. According to The Economist (June 22, 2006): "Under the new tax law, a married American expatriate with children who pays income tax at a marginal rate of 33% and has company-subsidised housing could see his gross tax burden increase by $40,000, estimates Michael Abdalian, a partner at Ernst & Young. The situation will be especially painful for Americans working in low-tax countries where housing is pricey, such as Hong Kong and Singapore."
I find it ironic that Grassley, the "...powerful chairman of the Senate Finance Committee" who has "...long advocated raising the tax obligations of Americans abroad" ended up adding these new tax rules "...at the last minute to a $69 billion tax-cut package signed into law in May". According, once again, to the June 22, 2006 issue of The Economist: "...the tax code was buried in the broader tax-cut legislation at the last moment, and thus circumvented debate in Congress. It is only now becoming widely known." The worst part about this tax code, in my opinion, is that the changes have been backdated to the start of this year. Thanks Chuck....FOR NOTHING!!! It's good to see that you're responsible for "...the Republican Congress's first renunciation of its widely trumpeted vow to block any increase in personal income taxes. Workers on foreign assignments [it is estimated that the higher taxes will affect a minimum of 300,000 people] are apparently not thought to be a particularly threatening lot.
According to another Chuck...Senator Chuck Hagel, Republican of Nebraska:
"[American expatriates] are an easy target quite frankly. You don't have lobbyists here, you don't have any law firms to protect your interests. It's not your fault, but that's the way it is."
The good Chuck (Hagel, that is) has lent his support to a proposal by Senator Jim DeMint, Republican of South Carolina, that would "...eliminate taxes earned by Americans working overseas".
I say, it's about time!!! Also in the June 22, 2006 issue of The Economist, in an article titled "The Tithes That Bind", a strong case is made that "...America should scrap its distorted system of taxing those who work abroad...Unlike every other big country in the world (and plenty of small ones), America runs an 'extraterritorial' tax system. In other words, Americans pay American tax on their global income, wherever they live or work, as well as local tax. By contrast, British citizens pay British tax when they are resident in Britain, but need pay only local tax when working abroad. Treaties and numerous complicated credits are meant to ease Americans' pain [and I say, make accounting firms rich!], but the extra cost of sending Americans abroad means that fewer of them will accept, or be offered, a chance to go...America should recognize that encouraging individuals to gain international experience is a boon to the whole economy."
So, here's what you can do...
Go to the American Citizens Abroad website, and click on "Call to repeal new tax law..." Here, you can download a pdf file with the names, phone numbers, and fax numbers of all the senators who voted to raise your taxes. Did your senator vote to raise your taxes? If so, how about sending/faxing him/her a letter (a model letter is provided) which expresses your disappointment.
Or, you can just sit there, do nothing, hope somebody else goes to the trouble of doing something, and then just send off a big, fat check (bigger than last year) to the U.S. Treasury next year.