Every year, American citizens residing overseas are taxed twice on their income: once by the IRS, and once by the country that they reside in. This double taxation increases the tax burden on overseas Americans and exposes them to needless complexity and bureaucracy.

Addressing this problem is simple. The U.S. should move toward a territorial tax system for individuals, as has proposed by Congressman George Holding (R-NC).

Late last year, Rep. Holding released the Tax Fairness for Americans Abroad Act, legislation that would ensure American citizens overseas would not have to pay U.S. taxes on foreign earned income.

The legislation creates a streamlined system to exempt foreign earned income of American citizens provided they can certify that they reside overseas and have been in compliance with U.S. tax law for the past three years.

Any gains attributable to foreign property sold that was acquired while an individual resided overseas is shielded from U.S. taxation.

To prevent tax avoidance, U.S. source income earned by a foreign resident (including any gains from the sale of foreign property while the individual was residing in the U.S.) would remain subject to U.S. taxation under the legislation.

Today, the U.S. is one of the only countries (with the African nation Eritrea) that has a citizenship-based system of taxation.

This has significant consequences for the roughly 9 million American citizens living overseas as they must pay U.S. taxes on their income even if this income was earned and taxed in a foreign country. Although a foreign earned income exclusion (up to $100,000) and a housing exclusion exist, these are insufficient in protecting taxpayers.

Not only does the current system create undue hardships for American taxpayers overseas, it also puts U.S. workers at a disadvantage in competing with workers from other developed countries.

The Tax Cuts and Jobs Act passed in 2017 moved to a territorial system for businesses. This reform will allow businesses to compete on a more level playing field when operating overseas.  This reform was also long overdue as the majority of the developed world had already moved toward a system that taxes based on where the income was earned.

However, American individuals are still subject to U.S. taxation on their overseas earnings.

This must be fixed and can be achieved by passing the Tax Fairness for Americans Abroad Act. The legislation creates a simpler, more equitable, and more competitive tax system for overseas Americans. As Congress considers further changes to the tax code, this legislation should be at the top of the list.