Residence-based taxation (RBT) is a strategic investment in the U.S. economy, global interests, and American citizens

February 4, 2026

Residence-based taxation (RBT) is a strategic investment in the U.S. economy, global interests, and American citizens.

American Citizens Abroad (ACA) and other organizations have long focused on how RBT can benefit the individual U.S. citizens living and working overseas, however its impact is much more far reaching. RBT plays a role in advancing U.S. economic growth and national security interests by supporting U.S. citizens working in foreign countries. As essential “boots on the ground,” Americans abroad expand trade opportunities and secure markets for domestic businesses. By removing the financial barriers of double taxation, RBT ensures that U.S. talent remains competitive in these critical foreign positions. These aspects of a RBT system, while widely understood, are not often captured in discussions and are not easily quantifiable when analyzing the costs and benefits of the reform.

ACA has always maintained that U.S. citizens living and working overseas are key to creating economic opportunities that benefit all U.S. citizens, both those in the United States and in foreign locations. Whether it be a small one-person consultancy or a team of corporate leadership, who better to create U.S. business opportunities, open new markets, and advance U.S. interests than its own citizens.  

However, Americans are often at a disadvantage when competing for jobs located oversees. When applying for a position, an individual must either accept the reality of double taxation, paying both U.S. income taxes and income taxes of the nation in which they reside, on their foreign earned income, or negotiate for “tax equalization” with their future employer (where the employer bares the cost of the double taxation penalty) – something that no citizen of any other developed country must ask for. As a result, both Americans and the United States are at an inherent disadvantage in the global marketplace. Therefore, as Congress moves toward the introduction of RBT legislation, it is important that it be viewed as a tool for global competitiveness. This reform will put U.S. citizens abroad on an equal tax footing with citizens of other industrialized nations working outside their home country and lift the economic burdens of citizenship-based taxation.

RBT should be viewed as an investment in much the same way that the United States views key international strategic programs. For example, the United States routinely deploys orders of magnitude more capital overseas through executive-branch tools explicitly designed to advance U.S. economic and national security interests:

• U.S. International Development Finance Corporation (DFC)
  • Portfolio exposure cap: ~$60 billion[1]
  • Instruments: loans, guarantees, political-risk insurance, and equity
  • Explicit mandate: counter China, secure supply chains, anchor U.S. firms overseas
• Export-Import Bank of the United States (EXIM)
  • Annual authorizations typically $10–20+ billion[2]
  • Financing tied to mandatory U.S. content, U.S. jobs, and U.S. suppliers
• Department of Defense / National-Security-linked overseas expenditures
  • Tens of billions annually across logistics, basing, allied industrial support, and supply-chain security[3]

These programs are justified by the fact that they return interest income, fees and equity, create and support U.S. jobs, ensure the selection of U.S. firms as vendors and operators, facilitate placement of U.S. senior management in key operational roles overseas, RBT should be evaluated through the same investment lens. RBT would represent a one-time structural reform, not an annual appropriation, delivering sustained economic and strategic returns without balance-sheet risk or new bureaucracy.

RBT Supports U.S. Trade

U.S. citizens overseas often occupy senior roles in finance and capital markets, energy and infrastructure, advanced manufacturing and logistics, technology and supply-chain management.

These individuals function as commercial force multipliers -- driving U.S. exports and services revenue. They also steer procurement towards U.S. vendors and anchor supply chains to U.S. firms rather than foreign competitors. Profits and capital gains are repatriated back to the United States along with the institutional knowledge, intel, and expertise these individuals gain from working overseas.

ACA members can provide transaction-level evidence of these effects.

“I work in cross-border energy and strategic supply-chain transactions. I have direct connectivity with the U.S. Commerce department, EXIM, DFC and national-security stakeholders.  I have seen specific cases where U.S. tax friction reduced American participation abroad and by removing that friction it would have increased U.S. deal flow and generated higher downstream U.S. tax receipts through corporate profits, capital gains and domestic employment,” said Ben Freeman, ACA member.

“Americans on foreign boards improve U.S. access to those markets. The primary mechanism for generating powerful international ties is leveraging prior affiliations rooted in U.S. institutions.  Human capital that alleviates information asymmetries and fosters trust. The likelihood of two organizations forming a critical co-investment relationship increases directly with the number of prior education or employment affiliations shared by their employees. When RBT lifts the friction, allowing American professionals to join foreign boards, they import these U.S.-centric affiliations, strengthening the relational links between the international firm and the U.S. financial ecosystem.” Louis Scott, ACA member, consultant working in the UK.

RBT Strengthens National Security

RBT will also help bolster U.S. national security, a priority for both parties in Congress. Modern national security depends on resilient global supply chains, early access to scarce resources, and real-time commercial intelligence. U.S. citizens living overseas are indispensable “boots on the ground” in this system.

• Take tungsten as an example, a global leader in aerospace and aeronautics production, as well as drilling and advanced manufacturing.[4]

Nearly 90% of Tungsten’s global supply chain is controlled or processed by China. In a conflict scenario, Tungsten becomes an immediate strategic choke point. Securing alternative supply requires U.S. citizens operating in Central Asia, Africa, and allied jurisdictions, and U.S.-aligned professionals structuring offtake, processing, and financing. This requires continuous U.S commercial engagement that cannot be substituted by foreign nationals without misaligned incentives.

Other critical areas where U.S. presence overseas is decisive and in energy security (gas, infrastructure, grid assets), semiconductors and advanced manufacturing tooling and maritime logistics.

Citizenship-based taxation actively discourages U.S. citizens from occupying these critical roles at precisely the moment when geopolitical competition demands the opposite. RBT empowers U.S. citizens to deploy internationally and in these key economic areas and in strategic geographic regions throughout the world.

RBT represents:

• a small investment relative to existing overseas economic tools
• a high-return enabler of exports, supply-chain security, and U.S. influence
• a preventive national-security measure that reduces crisis-driven spending later

RBT should be viewed as an important component to the economic and national security infrastructure for the United States. If the United States wants to empower its citizens to spread not only U.S. values but to strengthen our economic footprint and ensure national security, then Congress needs to make RBT part of that formula. This is a priority for the Administration and the Congress, both Democrats and Republicans. Congress and the Administration should take a comprehensive approach to RBT and should consider the secondary benefits that perhaps cannot be quantified with numbers but are intrinsically understood.

All other industrialized nations tax based on where the income in earned, that is what RBT will do for its U.S. citizens living and working overseas. It will put U.S. citizens on equal footing with foreign nationals working to secure, in the interest of the U.S., markets and resources worldwide. U.S. citizens are at a disadvantage under citizenship-based taxation (CBT), which limits their ability to help the United States with its important economic and strategic priorities and initiatives. The time has come for the United States to relieve its citizens from the onerous barriers and economic weight imposed by CBT and give its citizens the support and tax structure they need to succeed internationally. Congress and the Administration need to consider the overall benefits of RBT as a long-term investment in the United States’ interests and in its citizens. 

ACA acknowledges and thanks contributors Ben Freeman and Louis Scott.

[1] U.S. International Development Finance Corporation from Alternative Funding Mechanisms in Review: Catalyzing Investment to Achieve U.S. Government Aims on JSTOR   

[2] FY 2026 EXIM Congressional Budget Justification; Export-Import Bank: Overview and Reauthorization Issues   

[3] Funding for Overseas Contingency Operations and Its Impact on Defense Spending; 2026-v11-cover-DOMO-no-bleed 

[4] China's Tungsten Export Controls: Strategic Mineral Crisis   

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