Terror, Taxes Threaten U.S. Workers Abroad

Ken Derby, a teacher at the American International School of Budapest, Hungary, who has worked overseas for 18 years, says he and many other American teachers abroad would likely return to the United States because of the tax burden.

"In American international schools that have a high percentage of American teachers, a lot of those people would leave and other nationalities would be hired," he predicts.

The tax threat is definitely scarier than the threat of terrorism for those workers living in relatively safe countries.

"The topic that does not concern us is terrorism," says Jeff Barber, a teacher at the American School of Dubai in the United Arab Emirates. "The one thing that concerns all Americans working overseas is the $80,000 exclusion that is about to be rescinded."

Some Fear Jobless Influx to U.S.

The exact number of Americans working overseas is elusive, but the State Department says it has tracked around 4 million U.S. citizens who are currently abroad. However, that number is probably a low estimate, since that only counts those who have registered with the local U.S. embassy or consulate, a State Department spokeswoman says.

Because of the large numbers of U.S. citizens making a living overseas, another concern for the U.S. economy is that these workers losing their jobs and returning home would add even more job seekers in a climate where the unemployment rate is steadily rising and work is hard to come by for many.

"There will be a massive amount of Americans who are working for American companies who are sent back home," predicts Andy Sundberg, director and founder of American Citizens Abroad, a Geneva-based nonprofit group that serves the interests of U.S. citizens living overseas.

David Hamod, one of the most vocal advocates for keeping the tax exemption in place, started the Section 911 Coalition, which is lobbying to keep the exemption intact. He argues that having U.S. workers and companies overseas helps the U.S. economy because these firms will order goods and services from other American companies.

A study he commissioned from Price Waterhouse (now PriceWaterhouseCoopers) in 1995 found that the repeal of the exemption would result in the loss of 143,000 U.S.-based jobs and that U.S. exports would decline by 1.89 percent or $8.7 billion.

Kelly Gates, vice president of international business development for Birmingham, Ala.-based construction company B.L. Harbert, says his company would ultimately end up charging more to its clients to recoup the costs of hiring U.S. workers for international construction projects. One of those clients is the U.S. government.

Thinking Globally, Hiring Locally

While industry watchers doubt that companies are dramatically cutting back the number of their U.S. employees who work overseas, there are indications that many industries are turning more to local workers rather than exporting Americans abroad. The cheaper cost of local labor, especially during the current economic doldrums, has made hiring native workers more attractive for some companies and industries than sending American citizens abroad.

For example, U.S. financial services firms like banks and brokerages are planning to relocate more than 500,000 jobs offshore, or 8 percent of their work force, in the next five years, according to a recent study by management consultant firm A.T. Kearney.

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