Residence-Based Taxation Could Work With No Loss of Tax Revenue Says ACA

A new analysis of a possible move to residence-based taxation (RBT) suggests that it could be done without the US Treasury losing revenue, removing a major objection to switching from the current system of citizen-based taxation (CBT, otherwise known as double taxation and a major problem for overseas Americans).

The study, conducted by District Economics Group (DEG), a non-partisan economic consulting firm, on behalf of American Citizens Abroad Global Foundation (ACAGF), and has been made public by American Citizens Abroad (ACA) ACAGF’s sister organization. It is the result of more than 10 months’ work, and is described by ACA as 'the most comprehensive nongovernmental economic analysis of RBT'. It uses publicly available tax return data from the IRS, projections of the US economy from the Congressional Budget Office, US Social Security Administration statistics and Census data, plus IRS studies on US non-filers of tax returns and Federal Reserve Board studies of the distribution of wealth in the US, and then integrated with annual United Nations estimates of US migrants residing outside of the US.

In DEG's analysis, Americans who have been resident abroad in the log term could move seamlessly from CBT to RBT, the system used by almost all other countries. DEG has suggested that no-one would be forced to do this, and no-one would be made worse off, as the existing foreign earned income exclusion rules would remain for those wishing to use them. However, under RBT, overseas Americans would remain taxable on US income and would not be subject to US tax on foreign income. This was recently made the general rule for US companies, and could become the rule for individuals.

Surprisingly the number of US citizens living abroad in 2022 is estimated in the ACA survey to be 3,921,240. This is less than half the most recent estimate of 9 million expats announced by the State Department.

For more details of the methodology of the study, go to www.americansabroad.org/aca-new-study-released

If you are interested in licensing the detailed information contained in the study, email marylouise.serrato@americansabroad.org

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