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. Last Updated: 07/27/2016

Americans Abroad Face Losing Hefty Tax Break

WASHINGTON -- As Congress wrestles over how much to cut taxes, Americans working abroad are facing an unexpected threat: a big tax hike.

As part of a compromise aimed at placating moderate Republicans, the Senate's $350 billion, 11-year tax cut package calls for repealing a decades-old policy that allows U.S. workers abroad to exclude up to $80,000 of their annual income from taxes.

The proposed repeal has infuriated business lobbyists, a driving force behind U.S. President George W. Bush's economic growth initiative. It has also further strained relations between House Republicans, who last week passed a bill to cut taxes by $550 billion without any offsetting tax increases, and their Republican colleagues in the Senate.

Ending the tax break for Americans living abroad is the biggest revenue-raiser in the bill -- it would generate an estimated $35 billion over the next decade. But Democratic Senator John Breaux was expected to push as early as Wednesday -- with the support of Republican Senator Trent Lott -- to kill it.

More than 4 million Americans live abroad, although officials could not say how many would be affected by a repeal. The Treasury Department said 358,391 taxpayers claimed the tax break in 2000.

Opponents of ending the provision say it could lead to double taxation of a broad range of Americans working abroad -- from oil and gas workers on rigs in the North Sea, to engineers and construction workers on their way to help the rebuilding effort in Iraq.

An aide said Americans living abroad can claim credit on their U.S. taxes for taxes paid to foreign countries. To corporate lobbyists who say the tax break is needed to lure workers to foreign locations, the aide said the senator's response is: "Pay them more. Don't expect domestic taxpayers to subsidize your work force."