Donald Trump Pledges to End “Double Taxation” for Americans Abroad, Aiming to Gain Voter Support

As the 2024 U.S. presidential election approaches, former President and Republican nominee Donald Trump has announced a new tax reform proposal aimed at easing the burden for U.S. citizens living abroad. With Election Day on November 5, Trump is attempting to court overseas Americans, pledging to end "double taxation" on their income. This proposal responds to a long-standing issue faced by the 4.4 million U.S. citizens residing outside the United States, who are currently required to file U.S. tax returns on their worldwide income, regardless of where they live. While Trump’s pledge has sparked optimism, it lacks specific details on how this change would be implemented, leaving many to question its feasibility.

Double Taxation: A Burden on Americans Abroad

The United States is one of the few countries that taxes its citizens based on citizenship rather than residency. This policy obligates American citizens living overseas to report and pay U.S. taxes on their global income, often in addition to the taxes they pay in their host country. Despite provisions to alleviate this burden, many expatriates still face the complexities and costs of double taxation.

Under current U.S. tax law, Americans abroad can use the Foreign Earned Income Exclusion (FEIE) to exclude up to $126,500 (for 2023) of foreign-earned income from their U.S. tax filing. The Foreign Tax Credit further offsets U.S. taxes owed by allowing individuals to deduct the amount of taxes paid to foreign governments. The U.S. has also signed tax treaties with various countries, providing reduced rates and exemptions on certain types of income.

Despite these provisions, the process of filing U.S. taxes as an expat remains complex. Many Americans abroad hire specialized tax professionals to navigate the overlapping tax systems, and some still face U.S. tax liabilities even after applying exclusions and credits. Consequently, a growing movement of U.S. expatriates is calling for a shift toward a residence-based tax system, similar to that of most other developed nations, which would only tax U.S. residents on income earned within the United States.

Trump's Proposal: An Appeal to Overseas Voters

Trump’s proposal to end double taxation aligns with his broader tax strategy for 2024, aimed at providing economic relief to Americans. This pledge echoes his previous tax policies, including cuts that sought to simplify the tax code and reduce tax burdens. In his campaign statement, Trump emphasized that he supports ending the double taxation of Americans abroad, though he has yet to clarify the methods or legislative steps required to implement this shift.

His proposal aims to attract the support of overseas voters, a key demographic given their voting power in tight elections. Vice President Kamala Harris, Trump’s opponent in the upcoming election, has also focused on economic policies in her campaign, including a middle-class tax cut and the elimination of taxes on tips. With both candidates vying for votes, these tax reform promises aim to resonate with Americans concerned about their financial wellbeing.

A Tight Race with Implications for Overseas Americans

Polls show a highly competitive race as the election draws closer. Recent polling data reflects a tight margin between the two candidates:

• ABC News/Ipsos: Harris leads Trump by 4 percentage points, 51% to 47%, among likely voters.
• CBS News/YouGov: Harris maintains a narrow 1-point lead, 50% to 49%.
• Emerson College: Reflects a statistical tie, with both candidates at 49%.

These close margins emphasize the significance of voter turnout and highlight the potential influence of overseas Americans, especially given Trump’s specific appeals to their tax concerns.

A Complex Path Forward

While Trump's proposal has generated attention, implementing a shift from citizenship-based to residence-based taxation would be complex. The Internal Revenue Service (IRS) enforces citizenship-based taxation, which generates significant revenue and deters tax avoidance. Moving to a residence-based system would require substantial legislative overhaul and potentially impact federal tax revenues. Additionally, logistical challenges exist, as any change would need to address the definitions of residency and the protection of the tax base.

Nonetheless, the proposal has sparked hope among expatriates who view it as a step toward simplifying tax obligations and aligning U.S. policy with other countries. As the election approaches, the prospect of tax reform for Americans abroad remains uncertain but serves as a focal point in Trump’s campaign strategy.

Conclusion: Implications for the Election and Overseas Americans

As Americans prepare to vote on November 5, Trump’s tax proposal serves as a timely appeal to U.S. citizens overseas. While lacking specifics, his statement on double taxation taps into a critical issue for many expatriates and differentiates him from his opponent, Kamala Harris. The outcome of this election could have lasting implications on U.S. tax policy, particularly for Americans abroad who hope for relief from the complexities of double taxation. With both candidates promoting tax relief measures, the next administration will play a pivotal role in shaping the future of U.S. tax obligations for expatriates.