Territoriality and Relieving Taxes on Income Earned AbroadThe United States currently taxes its citizens, residents, and corporations on all income, no matter where earned. If Congress were to adopt a territorial system, U.S. taxpayers would only pay tax on income produced at home. April 18, 2017
Today, most countries have switched to what is called a “territorial” system of international taxation. In a territorial system, a jurisdiction only levies a tax on income produced within the jurisdiction. The Blueprint put forth by House Republicans would switch to a territorial system, whereas the plans put forth by President Trump thus far have been silent on the subject. Note that this territoriality feature of the Republican tax reform proposal (i.e., giving up worldwide taxation), although related, is distinct from the border adjustability feature of the DBCFT.