Section 911 Foreign Income Exclusion

CURRENT MAILING ADDRESS:
Mr.

Tokyo, JAPAN 13

US VOTING ADDRESS:
Mr.
Rd.
MI
May 14, 2003

The Honorable Carl Levin
United States Senate
Washington, DC 20510

Dear Senator Levin:

I urge you to oppose the repeal of the foreign income exclusion for
individuals (Section 911, Internal Revenue Code) currently under
consideration as a tax cut `offset' in legislation before the
Senate.

As a voter in the Great State of Michigan who is currently living
and working overseas, I believe those proposing the repeal have not
considered the full impact of this action upon individual U.S.
citizens working abroad, upon U.S. corporations and smaller
enterprises promoting American business interests overseas, upon
U.S. residents who will suffer the economic consequences of
curtailed U.S. exports and services abroad, and upon the U.S.
economy as a whole.

My particular concern in writing to you is the equitable tax
treatment of individual Americans working overseas, whether for U.S.
or foreign employers. In proposing to repeal Section 911, I believe
U.S. lawmakers are ignoring a number of important facts:

・ The U.S. is the only major industrial nation that requires
its non-resident citizens to pay taxes on their foreign earnings.
This regressive practice puts American companies and American
workers at a serious competitive disadvantage in foreign markets.
The principal rationale for the exclusion-to make the tax treatment
of Americans working abroad more competitive with foreign nationals
and, thereby, to promote exports of US goods and services-is as
valid today as it was in 1926, when Section 911 was first
implemented to boost America's access to global markets.

・ Employment conditions and living requirements overseas are
not comparable to those in the U.S. Employers here in JAPAN and in
other cultural and financial centers throughout Asia, for instance,
recognize that the provision of housing allowances, educational
expenses, emergency home leave and medical insurance are the routine
costs of attracting and maintaining a competitive workforce. Few
Americans would be able to afford overseas employment without these
benefits, yet among foreign nationals competing for these jobs only
U.S. citizens are required to report these monies as "income."
This means that, without Section 911, Americans working abroad would
pay much higher taxes than U.S. workers with the same base pay. This
higher tax burden upon overseas Americans would not pass the "fair
and reasonable" test.

・ In proposing to repeal Section 911, U.S. lawmakers are not
considering that, even though large number overseas taxpayers are
middle-class workers who repatriate their savings, they are excluded
from tax and other benefits enjoyed by U.S. residents. None of the
income of Americans working abroad for non-U.S. employers counts
toward Social Security or Medicare, nor do these taxpayers have
access to tax-deferred or tax-exempt retirement plans. Any
contributions they make to pension plans where they work must, by
law, be reported to the IRS as income, along with the contributions
made by their employers. Again, the repeal of Section 911 means a
much higher tax bill for overseas Americans than for comparably
employed U.S. residents, without the benefits those taxes bring. No
amount of foreign tax credit will `off-set' this inequity.

・ Even overseas Americans working for U.S. corporations and
therefore still able to participate in 401Ks and contribute to
Social Security find their housing allowances, travel expenses, and
subsidies provided for their children's educational fees subject to
FICA withholding, on top of the U.S. and foreign taxes they pay.

・ Americans who work abroad often make significant
sacrifices, in terms of career development, social and cultural
adjustments, personal risk and feelings of isolation, salary/cost of
living differentials, and providing adequate schooling for their
children. The current $80,000-a-year exclusion helps to alleviate
these disadvantages and serves as an inducement for workers to
accept foreign-based appointments, with the resulting benefits to
American businesses and the American economy.

・ As for the impact upon our nation as a whole, Section 911
is based on the simple tenet that Americans working overseas promote
and sustain the export of U.S. goods and services to a global market
and thereby make a significant contribution to the health of the
U.S. economy. A 1995 study by Price Waterhouse LLP analysts
projected that a repeal of the foreign income exclusion would, at
minimum, result in a 2% reduction in US exports, which translates to
a loss of over 250,000 U.S.-based jobs. The inter-dependence of
American jobs and the success of U.S. enterprises overseas has only
increased since 1995, which means that the impact of a Section 911
repeal would be even more deeply felt today.

・ Remember, too, that Americans employed overseas free up
jobs for U.S. residents. What happens to the U.S. economy and
employment figures when hundreds of thousands of U.S. citizens
decide than an unfair tax burden has made overseas employment
insupportable, leaving them no other recourse but to return `home'
to an already-strapped employment scene? More importantly, what
happens to America's place on the global financial stage when U.S.
businesses can no longer count on American expertise in
international trade and finance?

Obviously, American citizens working abroad to promote U.S. exports,
services, and interests cannot afford the repeal of Section 911. The
detrimental impact of such a repeal upon U.S. competitiveness in
global markets is equally obvious. What U.S. lawmakers proposing the
repeal need to recognize is that, especially in these difficult
times, the U.S. economy cannot afford the consequences of such an
ill-considered action.

I feel that the foreign income exclusion is too necessary a tax
corrective to be sacrificed for political expediency. Please let me
know that you will work against the repeal of Section 911.

Sincerely,