The LaHood Bill: U.S. Expats Expect the Full Monty | Tax Notes International
Tax Notes International, January 6, 2025
The LaHood Bill: U.S. Expats Expect the Full Monty, by Robert Goulder
A few years ago, the nonpartisan consulting firm District Economics Group LLC reported on a residence-based taxation draft designed by American Citizens Abroad (ACA), a nonprofit membership organization that represents the interests of U.S. citizens living overseas. The report was commissioned by American Citizens Abroad Global Foundation, a tax-exempt charitable organization and the ACA' s sister organization.
The purpose of the exercise was to professionally produce a revenue score for a plain-vanilla version of residence-based taxation. This was at a moment when such a proposal seemed aspirational, and a common objection was that converting to such a regime - even on an elective basis - would prove costly. The ACA draft was never intended to form an actual legislative proposal. It was more of a provisional marker for scoring purposes.
According to the District Economics Group report, the ACA draft produced a positive revenue score of $0.67 billion, then applicable to the 2022-2031 budget window. The analysis drew on publicly available data from the IRS Statistics of Income publication, the Federal Reserve Board, and the U.N. The outcome provided proof-of concept that residence-based treatment need not bust the deficit - a harbinger of the LaHood bill.
The ACA draft contained pay-fors to achieve revenue neutrality. One can detect echoes of that approach in the LaHood bill. Naturally, strict revenue neutrality may require that details of the departure tax be modified down the road. For instance, the rate could be raised or lowered, or the scope of covered assets could be finessed to either broaden or narrow the tax base as needed. The Joint Committee on Taxation is still in the process of scoring the bill. The point is that revenue concerns need not bog down the quest for residence-based taxation.