If you are one of the four million US citizens (or dual passport holders, US and other) living and working abroad, the latest news regarding President George W. Bush's mandate for a tax cut plan, is very worrisome.

As it is currently being negotiated between the US Congress House Ways and Means Committee and US Senate's Finance Committee, the usual things with this sort of politicking, the lure of a tax cut package for the masses sounds very enticing. Every time a tax plan is proposed no matter the party in power, the words are quite repetitive, "a tax cut that will stimulate the economy, and put extra money in every single family's pocket."

In the view of many (including economist Paul Krugman who writes for The New York Times), looking at the real tax-cut plan (or is it a just popularity promotion), two things stand out in black and white.

The tax cut is not going to benefit everyone; this year's tax cut appears heavily slanted toward more affluent taxpayers in spite of all the spin doctoring to the contrary.

And in order to pay for these purported wonderful tax cuts, there has to be tax increases elsewhere, which in the proverbial world of accounting, means the zero sum game we all know, debits must equal credits.

To raise the revenue on the credit side to pay for the tax cut, the biggest individual losers in this proposed deal are Americans working abroad who may have to forfeit the foreign earned income exclusion offset (IRS Code Section 911), an incentive that has existed since 1926. Living and working abroad, providing expertise and specialist skilled labour, particularly in developing countries has always been more expensive, more dangerous, more remote and emotionally difficult for US citizens.

In many foreign countries, living under armed security protection is a routine event.

Yet, as reported in the Wall Street Journal on Thursday, critics of the expatriate tax break view it as "corporate welfare and a savings for the highly paid." One wonders how US citizens who lost family and friends in the expatriate compound bombing in Riyadh, Saudi Arabia bombing this week felt when they saw that quote.

The American Citizens Abroad (a non-profit group dedicated to serving and defending the interests of US citizens worldwide, www.aca.ch/acanews.htm), states that for more than 40 years, the US has been conducting one of the most expensive, futile economic experiments ever undertaken by a western nation. The Section 911 Coalition (named for the exclusion) whose motto is 'Americans Abroad = US Exports = Jobs at Home', has waged relentless campaigns against the repeal of this offset. Can you effectively protect jobs in the US by using the US tax code to discourage US citizens from living, working and investing abroad? Their answer, all of the evidence to date, and it is considerable, suggests that not only does this not protect jobs at home, it leads to massive LOSS of jobs at home, and to now what has become the world's largest trade deficit.

The backlash from other influential industry groups such as US Chamber of Commerce, the National Association of Manufacturers, and the National Foreign Trade Council is intensifying. Amazingly, even President Bush did not include the repeal of the exclusion in his version of the tax cut.

The Associated General Contractors of America gave Republican Senators a specific warning that such a move could adversely impact the reconstruction of Iraq, all original estimate of $90 billion. It is interesting to note that Americans (and I am one of those with two passports) are the greatest promoters of a free and competitive global market, except when politicians and protectionist industries get into the act.

While other industrialised nations are not only catching up, but becoming far more competitive, consumers now have choices on a global basis.

In a significant side note, financial news servers reported this week that due to the interest spread differential and perceived value of European stocks, US investors have increased their allocations in foreign investments (offshore) to the highest level ever.

Tool manufacturer Stanley Tools, since its decision not to save on taxes by relocation, announced profits were significantly down and has already trimmed more than 1,000 jobs.

Does it really make any sense to blockade the port, long after the last ship has sailed?

Martha Harris Myron CPA CFP is a Bermudian, a wealth advisor and VP, Personal Financial Services at Bank of Bermuda. She holds a NASD Series 7 license, and formerly owned a US financial services practice meeting the needs of 400 individual and corporate clients. Confidential e-mail can be directed to marthamyron@northrock.bm

The article expresses the opinion of the author alone, and not necessarily that of Bank of Bermuda. Under no circumstances is this advice to be taken as a recommendation to buy or sell investment products or as a promotion for financial plans. The Editor of The Royal Gazette has final right of approval over headlines, content, and length/brevity of article.