Reply to Does anyone believe Chinese have a right to birthright citizenship?

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[quote=Anonymous]All American citizens, regardless of where they live overseas, must file income tax every year. No exceptions. This is probably something many of the tourist babies' parents don't realize.

The tax code is complicated but the essence is that the IRS allows an exemption on foreign earned income for non-residents of the USA of up to around 103,000 USD (goes up about a thousand each year) and you're also allowed to deduct a bit more for housing expenses, and you pay income tax on the remainder (at the tax rate for your full income, FYI).

However, most expats are still subject to the tax codes of the country they work in. If you are working in Europe, you will pay their taxes and as Europeans have higher tax rates than Americans (mostly) you will pay more of your income in tax than were you in the US. The IRS will not double tax you. However, if you're working in a country with a lower tax rate than in the US, you will pay the local taxes, then you can apply the exemption on the remainder of your income, and if any money is left over, you pay income tax on that amount. If you work in a country with no income tax, like the Gulf States, you apply the exemption and your housing deduction allowable, and pay income tax on the rest.

The US tax laws applies to your global earnings. So if one of those Chinese babies grows up and starts a very successful business in China without ever having set foot on US soil, his/her income from the business is still subject to US taxes. Is this fair or not? Well, perhaps that's the price for US citizenship.

(my main issue with the US tax code for overseas expats is that legally, Uncle Sam won't allow individuals to continue to contribute towards their social security and they've also set up the polices that makes it virtually impossible for American companies to continue to pay SS for their American employees working overseas).[/quote]

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