Those damn Republican senators...

[cstaylor]

GOP Senators Endorse Tax Hikes

Finance Committee Chairman Charles E. Grassley (Iowa) and fellow committee Republicans broke from their no-new-taxes orthodoxy to propose tax increases on Americans living abroad, companies sheltering income overseas and others. All told, committee members approved more than 30 tax increases or other revenue raisers to help fund their tax cuts in other areas, including dividends.

[Taro Toporific]

GOP Senators Endorse Tax Hikes

Finance Committee Chairman Charles E. Grassley (Iowa) and fellow committee Republicans broke from their no-new-taxes orthodoxy to propose tax increases on Americans living abroad, companies sheltering income overseas and others.

.

Americans working overseas would be hit the hardest: the bill would no longer allow them to exclude $80,000 in income from federal taxes.

Bye, bye. I'm out of here if I have to pay double taxes.

[ramchop]

Bloody tax departments. I skipped the country without telling them.. hoping to avoid the issue of residency status, overseas earnings... Keep your head down and you won't get spotted by the radar was my philosophy.

Now the bastards have noticed my sudden drop in domestic earnings, and are paying me a benefit to support my disadvantaged children obviously living now in poverty. I don't know whether to smile or be very worried.

[Taro Toporific]

Bloody tax departments. I skipped the country without telling them.. hoping to avoid the issue of residency status, overseas earnings... the bastards have noticed my sudden drop in domestic earnings, and are paying me a benefit to support my disadvantaged children obviously living now in poverty. I don't know whether to smile or be very worried.

The rule of thumb in the States and Japan is that it takes tax departments two and half years to move on anything. If you're only gonna be here for less than two years, hell, ignore 'em. The only catch is that the "support for disadvantaged children " my require a visit to Welfare Office every now and then. In the States it can be a visit every two weeks but in Japan it's only every six months (making a jetset welfare Cadillac very feasible).

[GomiGirl]

Now the bastards have noticed my sudden drop in domestic earnings, and are paying me a benefit to support my disadvantaged children obviously living now in poverty. I don't know whether to smile or be very worried.

Aren't all NZ'ers on the dole.. (jokes jokes jokes)

[ramchop]

Aren't all NZ'ers on the dole.. (jokes jokes jokes)

Only the ones that aren't in prison.

If it was the dole I was getting I'd have quite a tidy nest egg bundled away on my return. I still haven't figured out exactly what it is. It's from the IRD not Social Welfare. I think it's a small sprog tax credit for those on low income, and my income is currently officially zero. It's not much but it's an indication that the IRD have noticed a change in me, which can't be a good thing.

[cstaylor]

[Taro Toporific]

Here is the op-ed piece I just submitted to the New York Times (I highly doubt they'll run it):
The New Isolationism through Taxation

BOTTOM LINE: If this Dick-head and Chimp law goes through, even NOVA English teachers will be close to the 50% tax bracket-----> That is, 20-25% Japanese tax plus 25-30% US income tax.

[GomiGirl]

Here is the op-ed piece I just submitted to the New York Times (I highly doubt they'll run it):

The New Isolationism through Taxation

snipped

Great article - perhaps you should be applying for a job at Mainichi - I hear they may have an opening soon.

[cstaylor]

No offense to our resident MDN reporter, but I wouldn't want the pay cut involved.

[ramchop]

What does this change mean for honest taxpaying Americans living abroad? It means that any money earned and not taxed by host countries is subject to U.S. Federal Income taxes.

BOTTOM LINE: If this Dick-head and Chimp law goes through, even NOVA English teachers will be close to the 50% tax bracket-----> That is, 20-25% Japanese tax plus 25-30% US income tax.

I read those two statements quite differently.

However I agree with the article. If you're not living at home you shouldn't pay taxes there. And if you can avoid paying taxes while abroad, well aren't you the lucky little thing.

[Big Booger]

I just won't pay it.. hehehe

I mean I can sit here in Japan, and tell them that I am paying my taxes in America, and never return to America. All the while not paying my taxes there either hehehe

I will be the Al Capone of Japan.. hehehe "Mr. Tax E. Vader" that'll be me. I'll just tell them I forgot and will pay it as soon as I can if I get caught LOL


j/k

[Taro Toporific]

I read those two statements quite differently.
However I agree with the article. If you're not living at home you shouldn't pay taxes there. And if you can avoid paying taxes while abroad, well aren't you the lucky little thing.

Even the rightwingers in the Heritage Foundation say:

International provisions of tax bill undermine U.S. competitiveness 5/13/2003 5:17 PM
...Current law tries to limit the damage of America's worldwide tax regime by taxing workers only on annual income above $80,000 -- a policy known as the Section 911 exclusion. The Finance Committee proposal eliminates this $80,000 exclusion.

Repealing Section 911 would significantly increase the cost of employing American citizens and make it more likely that foreigners would get these jobs instead. This would result in fewer exports since U.S. workers working abroad -- particularly executives -- are likely to purchase U.S. products. According to PricewaterhouseCoopers and Johns Hopkins University economists, eliminating Section 911 would reduce U.S. exports by $8.7 billion and result in a loss of nearly 150,000 U.S.-based jobs.

Two Democratic senators signal flexibility on tax cuts
Bush campaigns for deeper cuts
CNN / Tuesday, May 13, 2003 Posted: 1950 GMT
Democratic amendments
Sen. John Breaux, a moderate Democrat from Louisiana, said he would offer an amendment to kill a tax hike on Americans working overseas that was put into the package to hold its total price tag to $350 billion.
The tax increase hits Louisiana particularly hard because the state is home to many oil workers who work on foreign rigs.

[ramchop]

to clarify, when I said I agree with the article, I actually meant cst's letter.

NOVA English teachers are near US$80,000??!!? I'm in the wrong profession.

[bejiita]

Maybe the democrats in Iowa should have done what they did in Texas. Go take a vacation and bring the legislature to a halt so they couldn't pass the tax!

http://www.cnn.com/2003/ALLPOLITICS/05/13/texas.legislature/index.html

[GomiGirl]

NOVA English teachers are near US$80,000??!!? I'm in the wrong profession.

nope - I think it means that until now, the first $80K you earned overseas was exempt from tax - now the tax starts from the first dollar you earn OS.

CS, is that right?

[cstaylor]

As far as I understand the Senate's meager two paragraphs on what they plan to do... yes.

[Big Booger]

Well I say down with those Republican arses.. the current taxation suits me just fine.

[vvx]

Does it actually say the republicans are the ones who added this? I don't like em much, (well, any politicians for that matter) but it doesn't seem hard to believe the dems would have tacked this on in the senate. it won't pass.. my prediction is the 80k exemption will remain after all is said and done. I hope so anyway.

[kamome]

I'm not sure how the mechanics of such a proposal would work. The US-Japan Tax Treaty prohibits double taxation of a foreigner resident in the other country:

Article 5

(1) Double taxation of income shall be avoided in the following manner:

(a) In accordance with the provisions of the law of the United States, as in force from time to time, regarding the allowance of a credit against United States tax of tax payable in any country other than the United States, the United States shall allow to a citizen or resident of the United States as a credit against United States tax the appropriate amount of Japanese tax and, in the case of a United States corporation owning at least 10 percent of the voting power of a Japanese corporation from which it receives dividends, shall allow credit for the appropriate amount of Japanese tax paid by the Japanese corporation paying such dividends with respect to the profits out of which such dividends are paid. For the purpose of applying the United States credit in relation to taxes paid to Japan, the rules set forth in Article 6 shall be applied to determine the source of income.

Supposedly, a non-permanent resident of Japan who pays Japanese taxes on all of his employment income in Japan theoretically must be exempt from US taxes on that income, provided he meets the residence test, etc.

I'm not sure how eliminating the article 911 exemption will get around the provisions of the Treaty, but the Senate's thinking definitely is not a good sign for US expats. Luckily, corporations are bound to oppose this provision because it acts as a tax increase for their overseas subsidiaries who will have to equalize their expats for the additional tax amounts owed.

[cstaylor]

Does it actually say the republicans are the ones who added this? I don't like em much, (well, any politicians for that matter) but it doesn't seem hard to believe the dems would have tacked this on in the senate. it won't pass.. my prediction is the 80k exemption will remain after all is said and done. I hope so anyway.

Republicans have control of the Senate, therefore anything that happens in committee is under their leadership.

[Taro Toporific]

Republicans have control of the Senate, therefore anything that happens in committee is under their leadership.

Maybe the WORLD did END today. I went to the US Embassy Tokyo webstite at http://www.usembassy.state.gov/tokyo and to ask their ideas/options on the US Tax Treaty and found site is very DEAD. The dead don't pay taxes so we're in the clear!! :P

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[cstaylor]

The Senate jerks passed the law. Starting on the 2004 tax year, we all get screwed as Americans abroad. Let's hope the House throws away that provision.

[vvx]

You'd think I know more about the American legal system considering I live here.

Doesn't it first have to be passed by the senate, then the house, then approved by the prez?

[cstaylor]

You'd think I know more about the American legal system considering I live here.

Doesn't it first have to be passed by the senate, then the house, then approved by the prez?

That is correct... but having the Senate even consider something like this is very bad.... it's something I would have expected from the less-experienced House.

[vvx]

Starting on the 2004 tax year, we all get screwed as Americans abroad.

Isn't it a bit early to be saying that then?

[cstaylor]

Starting on the 2004 tax year, we all get screwed as Americans abroad.

Isn't it a bit early to be saying that then?

One thing that I thought about... once this law goes into effect (if the House passes it) there's no tax penalty for acquiring Japanese residency... any taxes you pay in Japan can be deducted from your American taxes.

[Taro Toporific]

[Taro Toporific]

Starting on the 2004 tax year, we all get screwed as Americans abroad.

Taxing changes for U.S. expats
Tax for an American in Canada could rise by US$2,240 a year
Financial Post / Tuesday, May 13, 2003
... Kevyn Nightingale of Toronto-based International Tax Services Group cites the example of a female U.S. citizen living in Canada, earning $60,000 and interest income of $1,000 per year. Currently, she files tax returns in both countries. Because of the FEIE, she paid no U.S. tax. If it was eliminated, she will pay an extra US$387 in AMT. Her U.S. return would expand from six to 15 pages, including a complicated foreign tax credit computation. Instead of filing it herself, she'd need to pay a tax professional between $500 and $1,500 to do the return correctly.
...David Lesperance, a U.S.-Canada tax lawyer for Burlington, Ont.-based Global Relocate Consultants, says individual clients have reacted to the proposed changes with "dismay and anger."
Corporate clients "are in a panic because they had to give some incentives to their American employees to go out in the field [outside the U.S.]. They had to provide an ex-pat package, which includes higher net salary, housing, schooling etc." These firms will have to gross up salaries significantly to guarantee employees the same net return they enjoyed previously.
On the flip side, this may be good news for Canadian employers, such as Calgary-based suppliers to the oil industry in the Middle East.

"Canadians who want to work abroad should jump on because they are now much more attractive employees than their American counterparts," Lesperance says.

[cstaylor]

G.O.P. to Seek $350 Billion in Tax Cuts

The proposed compromise also drops a $35 billion tax increase on Americans working abroad that caused an outcry among business leaders and many Republicans. ``I do not believe this Congress should raise taxes on some individuals and businesses in order to provide tax relief to others,'' Sen. George Allen, R-Va., wrote Monday to Senate Finance Committee Chairman Charles Grassley, R-Iowa.