This U.S. tax change could benefit millions of Americans in Canada and around the world

As President Trump noted in his State of the Union, the U.S. economy is skyrocketing; this, of course, includes exports of goods and services that reached an-all time high last fall. This year, the White House and Congress have the opportunity to continue to grow U.S. exports to Canada and other economies while simultaneously fulfilling a key campaign promise to millions of U.S. expatriates—including about 900,000 living in Canada—who contribute tens of billions of dollars to both the Canadian and American economies.All it takes is making one simple change to the U.S. tax code you probably haven’t heard about. The United States—unlike every other developed nation—currently taxes its citizens on their worldwide income, no matter where they live or earn. Eritrea and North Korea are the only other two countries that use this archaic system, which is known as citizenship-based taxation. An American citizen who takes a job in Vancouver, for instance, would have to file both U.S. and Canadian tax returns declaring all their income to both tax authorities, even if they never stepped foot on American soil that year. This outdated policy puts the 5 million Americans who live and work outside of the United States at a distinct disadvantage in an increasingly global job market. The double tax burden functionally makes U.S. citizens 40 percent more expensive to hire than their foreign peers. It also disincentivizes Americans abroad from owning or expanding businesses. Even though many Americans living abroad qualify for a tax credit that might offset this double taxation, merely filing the extraordinarily complex forms relevant to expats is an administrative nightmare. Navigating the convergence of two different tax systems often requires expensive professional assistance that costs thousands of dollars annually. Citizenship-based taxation doesn’t merely harm expats, though. It harms the U.S. economy as a whole. That is, in part, because American workers based in foreign countries are naturally more familiar with potential vendors and suppliers back in the United States, compared to non-Americans. In other words, having American workers abroad means more business for American firms at home. U.S. citizens overseas are also key to securing and advancing U.S. trade and national security interests, and tax policy should help U.S. citizens in this regard. Residence-based taxation (RBT) is a strategic investment in the U.S. economy, global interests, and American citizens – American Citizens Abroad This is why my organization, American Citizens Abroad, and many others endorse switching to a residency-based taxation (RBT) system—like the one Canada and every other Western nation uses. Under this system, American citizens would only owe U.S. taxes on income earned in the United States. Foreign income earned and kept abroad, in countries like Canada, would no longer be subject to IRS reporting. Such an RBT policy would make it easier for multinational companies to hire Americans and likely boost U.S. exports to the rest of the world. Canada is currently home to more Americans than any other nation. But citizenship-based taxation makes them unnecessarily costly to hire—and makes it unappealing for Americans to start or expand U.S.-based businesses there. The American overseas population mirrors the U.S. population as a whole, with similar income and assets. They are hardworking employees, small business owners, and retirees—in Canada, they are neighbours, family, and friends. On the 2024 campaign trail, President Trump promised to finally end their double taxation burden. But it didn’t make it into the One Big Beautiful Bill tax cut package that Congress passed last year. Canadians, and American expats in Canada, can only hope this is soon corrected, as it will drive economic growth on both sides of the border. This is not a partisan issue. Every developed nation has this policy, whether led by conservatives or liberals. Why? Because it drives economic growth and competitiveness. It is good policy and politics. Ninety percent of Americans abroad want RBT. Both Democrats and Republicans understand the importance of U.S. citizens overseas, and they should support adoption of RBT; many already do. Presented in partnership with American Citizens Abroad.