A sincere thank you to the more than 4,300 Americans abroad—spread across 95 countries and voting in all 50 states—who participated in our survey on H.R. 10468, the Residence-Based Taxation for Americans Abroad Act. Your feedback underscores the urgent need for tax reform that reflects the realities of citizens living outside the U.S.
As a reminder, this bill proposes an elective approach to residence-based taxation (RBT), allowing each overseas citizen the choice to opt in.
Below is a snapshot of what you shared with us.
1. Strong Support for RBT
- Yes (Support): 3,955 respondents (92.7%)
- Maybe (Conditional/Undecided): 198 respondents (4.6%)
- No (Oppose): 47 respondents (1.1%)
An overwhelming majority of surveyed Americans abroad support residence-based taxation, citing tax simplification, elimination of double taxation, and alignment with global norms as the primary reasons to support the bill.
Common Reasons for Support
- Simplification of Tax Compliance: Reduces the burden of filing complex returns for both the U.S. and one’s country of residence.
- Avoidance of Double Taxation: Ensures Americans abroad aren’t subject to U.S. taxes on foreign-source income.
- Worldwide Standard: Brings the U.S. system in line with most developed nations that tax based on residency rather than citizenship.
2. Feedback from “Maybe” and “No” Respondents
While an overwhelming majority supported the bill, 4.6% of respondents were unsure, and 1.1% explicitly opposed it. Their primary concerns included:
- Uncertainty about Specific Tax Treatments: Many had questions about how the bill would address pensions, Social Security, and U.S.-sourced income.
- Preference for Automatic RBT: Some felt residence-based taxation should be the default rather than an elective option.
- Skepticism About Fairness: A few expressed concerns the bill might unintentionally benefit high-net-worth individuals more than average Americans abroad.
3. Opt-In Intentions
When asked whether they would opt in to RBT if it became available, respondents answered as follows:
- Yes: 3,531 respondents (82.8%)
- Maybe: 483 respondents (11.3%)
- No: 176 respondents (4.1%)
Main Motivations for Opting In
- Less Onerous Filings: Simplifies tax compliance by reducing paperwork, minimizing burdensome IRS international forms, and easing FBAR obligations.
- Freedom from Double Taxation: Eliminates restrictive measures such as Passive Foreign Investment Company (PFIC) rules.
- Financial Flexibility: Allows individuals to invest, save, and plan for retirement in their country of residence without major U.S. tax implications.
4. Reasons for Hesitation or Opposition
Respondents who answered “No” or “Maybe” expressed the following concerns:
- Eligibility and Income Sources: Uncertainty, particularly among those with federal pensions or U.S.-sourced rental income.
- Unclear Financial Impact: Questions on whether the change would reduce the overall tax burden or create new complications.
- Ambiguity in Bill Language: A need for clearer definitions and compliance requirements.
5. Written Feedback Highlights
Open-ended comments revealed several key themes:
- Appreciation for Bipartisan Efforts: Many respondents view the RBT bill as a positive bipartisan move to modernize U.S. tax policy and bring it in line with global standards.
- Frustration with the Current System: Described by some as “punitive” and “unfair,” particularly for working- and middle-class overseas Americans.
- Risk of Citizenship Renunciation: A number of individuals expressed an unfortunate desire to renounce their U.S. citizenship if significant reforms aren’t enacted.
Key Takeaways and Next Steps
Our survey reveals overwhelming support for residence-based taxation (RBT), with over 90% of respondents backing the proposed bill. However, concerns remain about technical details—particularly regarding U.S.-sourced income, pensions, and eligibility criteria.
Moving forward, community engagement will be crucial, and you can help shape the outcome by reaching out to Members of Congress and continuing to share your personal stories with them. Your collective input has been essential as we advocate for tax legislation that genuinely reflects the needs of Americans overseas. By speaking up and sharing our perspectives, we can advocate together for the simpler and fairer tax system that we all deserve.
To learn more about H.R. 10468, the Residence-Based Taxation for Americans Abroad Act, check out these resources from Democrats Abroad:
Thank you again for your participation in this survey and your continued support of the Democrats Abroad Taxation Task Force. We are working hard behind the scenes to make this a reality, and we’ll keep you up to date on our progress as the bill moves along.