Helping America Compete Overseas

Now, more than ever, American economic security depends on U.S. companies exporting their goods and services overseas. With America's growing trade deficit with the rest of the world, especially with China, the United States needs to do everything in its power to help U.S. companies and workers compete. This includes eliminating the double taxation of American workers abroad.

 

The U.S. Chamber of Commerce recently commissioned a study (PDF) demonstrating that more Americans working abroad mean more business for U.S. companies. And more U.S. exports mean more jobs at home.

 

Under current policy, U.S. citizens are taxed on income earned overseas in addition to the taxes they pay in the country where they work—the only other country that allows double taxation of its citizens is Zambia. Double taxation makes it more expensive for U.S. companies to hire Americans because they must compensate for the extra taxation through higher salaries. 

 

Further, the compensation packages that U.S. companies need to provide for quality-of-life items, such as schooling, cost-of-living allowances, home leave, emergency travel, and other necessary and often expensive aspects of living overseas, are taxed as income. As a result, it can be significantly cheaper to hire foreign nationals instead of Americans.

 

One of the few policies that helps to level the playing field for American workers is the Foreign Income Exclusion or Section 911. Section 911 provides for the exclusion of the first $82,400 of foreign-earned income. However, due to the high cost of nonsalary compensation, Section 911 does not go far enough.  Yet, despite this, Congress made substantial changes in 2006 to Section 911 that negatively impact many Americans working abroad.

 

The U.S. Chamber is committed to protecting the exclusion and working toward the restoration of a more productive policy, similar to that of our economic competitors. The Chamber's study and other similar studies reveal a relatively simple equation: More Americans working in other countries mean more exports to that country, which, in turn, creates jobs America.