Based on data from the most recent annual report on taxation in member states of the Organization for Economic Co-operation and Development (OECD), ACA’s newly-issued research paper on tax trends reveals how the US's unique insistence on citizenship-based taxation laws harms overseas Americans.  The paper is available in summary form,  as a complete article, or as 14 presentation slides.

Entitled  “A comparison of tax trends (1962-2006) between the United States and eight major countries where overseas Americans reside” the paper concentrates on the OECD countries hosting an estimated 40 percent of overseas US citizens (Australia, Canada, France, Germany, Japan, Mexico, Switzerland and the United Kingdom), but the arguments are of more general application.

Since 1965, total taxation as a percentage of the gross national product has risen faster in foreign countries than in the United States.  In addition, tax structures outside the US have shifted from income tax towards social security and general consumption taxes, which are not deductible from income when filing US income taxes. The devaluation of the dollar in recent years artificially inflates the taxable income of Americans residing abroad. The manner of calculating US capital gains often leads to fictitious “gains” in dollars, which are then taxed on transactions which may de facto have been money-losers for the individual investor.

Thanks to ACA Directors Jackie Bugnion, and Peter Bordui, and to Peter Carson for their work on this paper.