The problem with taxing foreign-earned income

SUSTG Analysis | Dr. Saud Al-Ammari | 6.25.12

Eritrea is one of only two countries in the world that applies citizenship-based taxation in addition to residence-based taxation.  The other? The United States of America.
In fact, the US is the ONLY industrialized country in the world to impose citizenship-based taxation. The immediate result for American expatriates is a blizzard of confusing and complex filing and reporting requirements that have kept innumerable accounting firms in the black and thousands of Americans up all night.  Their constant (and unwelcome) traveling companions include IRS Form 2555, US Code section 911, cost of living adjustment tables, physical presence tests, housing expense formulas and, coming soon, Form 8938 (Foreign Account Tax Compliance Act).
However, as Dr. Saud Al-Ammari notes in this pointed analysis, “Free Advice to My Schoolmate Barak Obama: Want to Grow Exports and Create More Jobs?  Don’t Tax Americans Abroad,” the larger issue is what this tax policy means for American exports and American jobs.