United States – President suggests trimming benefits of foreign earned income exclusion
President Obama on September 19 recommended scaling back a wide range of tax benefits for high-income individuals, including those provided by the foreign earned income exclusion.
Specifically, the tax savings provided to high-income taxpayers (those singles and married couples with adjusted gross income in excess of $200,000 and $250,000, respectively) by the foreign earned income exclusion under section 911 would be limited to 28 percent. To illustrate, in the case of an individual with income subject to a top individual income tax rate of 39.6 percent in 2013, the proposal would effectively add back up to 11.6 percent of a portion of the income excluded under section 911.
The proposed changes would be part of his plan to cut the federal deficit by $3.2 trillion (net) over the next 10 years and fully offset the cost of a $447 billion job creation and infrastructure spending package (the American Jobs Act of 2011) that he outlined earlier this month in an address to a joint session of Congress.
Overall, the plan includes some $1.5 trillion in revenue provisions – some new and some recycled from earlier budget packages – that would, among other things, increase taxes on high-income individuals, tighten the international tax rules, change certain rules affecting life insurance companies and their products, eliminate provisions that benefit the oil and gas industry as well as the coal industry, and repeal certain longstanding tax accounting methods.