On October 14, 1960, President John F. Kennedy made an impassioned plea to University of Michigan students, exhorting them to move abroad and assist nations struggling under the weight of under-developed economies. President Kennedy was convinced that American talent is a unique, impactful export commodity.
That speech laid the foundation for the Peace Corps, officially formed on March 1st, 1961 by Executive Order.
The Trump Administration should revolutionize JFK’s bold stance by adopting policies that aggressively promote what should be labeled “The Prosperity Corps” – the estimated 7 million Americans living and working outside the U.S. This “Nation of Expats” represents a job-creation juggernaut, an export-promotion powerhouse.
Serving informally as Economic Ambassadors, Americans toiling in foreign markets are far from “spoiled fat cats.” Instead, they sustain and grow new and existing companies, while creating valuable business networks for Americans back home who are similarly dedicated to enhancing US business presence in far-flung markets.
Statistics recently trumpeted by the US Department of Commerce show that the sale of US products and services is surging in foreign markets. This is occurring not just in traditional overseas industries such as oil and gas, military defense/aviation and financial services. US workers are prominent and prosperous in many “new economy” sectors overseas as well, such as information technology and software development, infrastructure projects with hi-tech components, and rapidly evolving renewable energy/energy conservation industries.
The United States directly benefits from domestic manufacturing output that is exported to these countries. For example, the United States exports are disproportionately large to the United Arab Emirates, including aircraft, vehicles and electronic and general machinery. The presence of an estimated 50,000 Americans in the UAE has no doubt directly contributed to dynamic growth in bilateral trade volume with UAE, with exports from the US tripling over the past 10 years, yielding positive economic ties and benefits for U.S. workers.
Expat Americans also spur foreign direct investment back into the United States, further creating jobs and prosperity inside the homeland. Americans abroad organize themselves in many ways to maximize their influence, particularly by their membership in the thriving “AmCham” business council network which spans across 100 countries. The prospects of foreign nationals purchasing and recapitalizing job-sustaining investment assets in the US – such as residential and commercial real estate properties – increases with every American interaction.
When enacting tax reform, Congress and the Trump Administration are properly considering how certain amendments can make American companies more competitive overseas. Sadly, since JFK’s inspiring words, our tax system has fallen out of step with our competitors’ national tax systems, and we have taxed our overseas Americans in an uneven playing field.
We are the sole developed economy in the world which taxes its citizens’ economic activities while they are bona fide residents abroad. The exact same tax policy approach which legislators are considering to take towards US businesses operating abroad should be applied to Americans working abroad: tax revenue where it is earned. The more competitive we are in how we tax our citizens abroad, the more Americans we see working abroad, the more benefits we generate for the domestic economy.
Another example of US tax policy making it harder for citizens working abroad is the application of inexplicably complex and overly intrusive regulations promulgated under the Foreign Account Tax Compliance Act. FATCA, signed into law in 2010 but fully effective in 2015, is designed to stop tax evasion. This is a worthwhile goal indeed, but the regulatory net applies so broadly that personal and business accounts of law-abiding Americans simply trying to comply with the rules are caught up in its paperwork net – and drowning.
The impact is not just needless hassle. FATCA has made overseas Americans far less attractive as employees or business partners, with very little justification in terms of increased tax revenues being generated for the United States Treasury. Policy makers should recognize that if hiring an American as a key executive means subjecting a business to significant costs and intense scrutiny of a company’s accounts, reasonable foreign companies will shy away from the burdens of hiring Americans, putting our Economic Ambassadors at a great disadvantage in foreign employment markets when compared to citizens of other countries. FACTA is here to stay, but its regulations need to be fine-tuned to be more rational and avoid some its negative impacts on honest, hard-working Americans overseas.
Republicans and Democrats should renews call for legislation and Treasury Department regulations that actually treat hard-working overseas Americans as The Prosperity Corps that they truly represent for the nation’s interests internationally.
John L. Habib, and past Board member of AmCham Abu Dhabi and AmCham MENA, is the founding Managing Partner of HLS Attorneys.
