The Carter administration unveiled yesterday a compromise proposal designed to resolve the longstanding dispute over whether to toughen the tax treatment of Americans living abroad.
At a hearing before the House Ways and Means Committee, the Treasury recommended ending the present exclusion for some overseas income and replacing it with a series of deductions for housing, education and travel.
The proposal, worked out this morning with the White House and Office of Management and Budget, is similar to a bill now being sponsored in the Senate by Sen. Abraham Ribicoff (D-Conn.).
The administration's endorsement of this approach is expected to heighten momentum for replacing the previous system of taxing Americans living abroad with a new set of deductions, regarded by some as more equitable.
Congress voted in 1976 to stiffen the tax treatment of American citizens working overseas by reducing the portion of their incomes regarded as tax-free and revamping the method for computing the writeoff.
In the months since then, Congress has been besieged by complaints from U.S. multinational corporations and construction firms warning that the 1976 law would raise their costs and hurt American exports.
Congress has voted twice to postpone the 1976 changes, and the Senate is preparing to vote on another delay that ultimately would replace the present law with the Ribicoff proposal.
The Ways and Means Committee is expected to act soon on its own version of a compromise provision. Until yesterday, the panel was though likely to seek another one-year delay in the 1976 law. Now that is uncertain.
The administration's proposal would cost the Treasury another $280 million, compared with a $310 million price tag for the Ribicoff proposal. Revoking the 1976 changes entirely would cost $490 million.