How much tax revenue will RBT bring in?
RBT should prove to be a significant revenue generator for the United States, producing $8.6 billion annually compared to $6.3 billion of revenue estimated to be collected under the current CBT system, i.e. $2.3 billion or 36% more annual tax revenue on an on-going basis. This additional revenue amounts to $23 billion over ten years.
Moreover, the tax reform proposal projects $7 billion of additional revenue for the initial year, or initial phase, after enactment of RBT legislation. This one-time result relates to taxes collected through the transition phase, during which the several million Americans already resident overseas will file with the IRS to be recognized as non-resident Americans for tax purposes. This “transition revenue” includes:
-Individual back taxes paid by Americans residing abroad and coming into compliance with the
-IRS on taxes due on the date of filing for the Departure Certificate;
-Departure Tax on mark-to-market unrealized capital gains paid by wealthy individuals already resident overseas more than two years, but who were not in compliance when the law became effective.
-Departure Tax on the mark-to-market unrealized capital gains paid by all wealthy Americans resident abroad less than two years prior to RBT becoming effective law. No Departure Tax from Americans already resident abroad for more than two years and who have been in tax compliance.
Therefore, according to ACA estimates, the increase in U.S. Treasury revenue is $30 billion over ten years, $23 billion from annual revenue increases and $7 billion related to the transition to RBT by Americans already residing abroad. Reduced IRS administrative expenses leads to an estimated savings of $3 billion over ten years, yielding a ten year total Treasury gain of $33 billion.
These estimates are based on conservative assumptions from data available, but it should be emphasized that they are just estimates; in fact, RBT may possibly generate even more additional tax revenue as the estimate of taxes currently collected from Americans abroad under CBT may be on the high side for reasons detailed in note “e” of Exhibit 1. Furthermore, the RBT projections focus on private citizens and green card holders; in addition to revenue from this group, the United States will continue to obtain tax revenue from U.S. diplomatic staff and military personnel overseas.
The RBT proposal must be scored by the JCT to confirm the advantages of RBT. At the very least, JCT should provide an estimate of the taxes actually paid by Americans abroad under the current CBT model.
The ACA estimates are presented in detail in Exhibit 1 and accompanying notes.