[tallanvor]

It does not discourage US workers from spending some of their careers overseas. Most workers, even if working overseas, don't make enough that they have to pay taxes on foreign earned income. --Between the deduction for money earned overseas, deductions for housing, and other standard deductions, if you earn enough that you're going to get taxed by the US, you earn enough that you might as well pay an accountant to help further reduce your tax burden.

I don't buy #1 either, since most people don't get citizenship in a country unless they plan on settling there.

[steve-howard]

It looks like you have to make over $150k/year to have to pay worldwide taxes:

http://www.irs.gov/businesses/small/international/article/0,...

It's not cool on principle, I suppose, but most people find it hard to sympathize with the problems you face when you make more than $150k/year.

[stevenwei]

Just to clarify, your link refers to the income limits that qualify someone for the exit tax (i.e. the tax that you have to pay the IRS upon giving up your citizenship).

If you remain a U.S. citizen but choose to live abroad (i.e. pay taxes in another country), you also have to pay income tax to the IRS, but you can exclude the first $95,100 of your income from being taxed.

Source: www.irs.gov/businesses/small/international/article/0,,id=97130,00.html

[planetguy]

The cutoff is, if I recall correctly, $80K. So it doesn't apply to most workers, only the competent ones.

[_delirium]

The foreign income exclusion is currently $92k, but even above that, in any country which has a bilateral tax treaty with the U.S. (almost all developed countries), you can deduct the foreign tax paid from U.S. tax obligations. I'm an American expat in Denmark, and from what I've back-of-the-envelope calculated, there is almost no possible circumstance in which I would owe U.S. taxes, because I get a credit for Danish taxes on my U.S. taxes, and Danish taxes are always higher, which zeroes out the U.S. taxes. So even if I made $150k I would not owe U.S. taxes.

In fact I typically don't take the $92k foreign income exclusion, because excluded income isn't eligible for IRA contributions, and I'd like to keep contributing to an American IRA. So I report my full Danish income on the 1040, then subtract the Danish taxes, and end up owing $0 without even using the exclusion at all.

[wilfra]

You still owe social security and other taxes - just not federal income tax.

[_delirium]

I don't, because there's a bilateral US-Denmark "totalization agreement" on social security, which ensures no double-taxation. There's a rubric determining which country you owe taxes to, depending on where you reside, what your nationality is, and who your employer is (but it's never "both"). It also takes a small step towards allowing you to shift years accumulated in one country's program to the other.

Such treaties exist with 24 countries, so of course you'd be right if I didn't live/work in one of those 24: http://www.ssa.gov/international/agreements_overview.html

[wilfra]

I stand corrected. The country I lived in is indeed not on that list which is evidently why I still had to pay SS taxes.