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Senate Republicans, struggling to make more room for President Bush's cherished tax cut plan in their annual budget, yesterday settled on an unusual and controversial solution: raise taxes elsewhere.
Under White House pressure to include at least a bare-bones version of Bush's bid to eliminate taxes on corporate dividends, Finance Committee Chairman Charles E. Grassley (Iowa) and fellow committee Republicans broke from their no-new-taxes orthodoxy to propose tax increases on Americans living abroad, companies sheltering income overseas and others. All told, committee members approved more than 30 tax increases or other revenue raisers to help fund their tax cut in other areas, including dividends.
Americans working overseas would be hit the hardest: the bill would no longer allow them to exclude $80,000 in income from federal taxes. That provision alone would amount to a $32 billion tax increase.
Removal of the foreign income exemption is going to make a lot of people howl.