Good news. Bad news.

[Taro Toporific]

Uncle Sam takes a bite out of expatriate incomes
International Herald Tribune
FRIDAY, MAY 26, 2006
....the document that President George W. Bush signed into law on May 17 will mean an extra tax bite for many Americans who live abroad.
....The new law, however, does contain some good news. The foreign earned- income exclusion, which was under threat of extinction just three years ago, was maintained and will be indexed to U.S. inflation as of the 2006 tax year. That means U.S. taxpayers will owe no tax on their first $82,400 of income earned abroad this year, up from $80,000 in 2005. Indexing had been scheduled to start in the 2008 tax year.
On the negative side, the new law caps the exclusion for housing allowances - rent, utilities other than telephone, property insurance, occupancy taxes, maintenance and furniture rental - that U.S. corporations often provide to executives sent overseas. The cap is calculated as 30 percent of the foreign earned-income exclusion, minus the 16 percent that it is assumed would be paid in the United States. For 2006, it is set at $11,586; under the old law, the exclusion was virtually unlimited.
..."The philosophy behind the foreign earned-income provisions is they are supposed to support people working overseas, not people clipping bond coupons and sitting in overseas cafs."
....Professional staff in demand, like petroleum engineers, are likely to "have enough leverage with their employers" to negotiate a raise or bonus to cover the additional tax, Hudson said. The losers in no-tax and low-tax countries will be self-employed workers, like art dealers or computer consultants, who have no corporate subsidies to rely on.
... some wags have nicknamed the legislation "No Millionaire Left Behind."
...more...