The House passed legislation yesterday that would repeat a 1976 law that had sought to toughen the tax treatment of Americans living abroad, and voted instead to add new, even more generous tax breaks to those in force before.
The vote came under a special parliamentary procedure that prohibited any floor amendments and severely limited the time for debate. The final vote was 282 to 94.
The measure now goes to a House Senate conference committee, where it is expected to be trimmed somewhat closer to a slightly less munificent Senate bill. The 1976 provision was suspended, and never took effect.
The House measure is estimated to cost the Treasury about $480 million - only about $80 million less than it would take to exempt Americans living overseas from paying U.S. taxes altogether.
At the same time, the House approved a bill that would confer tax-exempt status on profits from bingo games sponsored by charitable or civic organizations. Under present law, they are subject to federal levy.
The 1976 provision toughening the tax treatment of overseas Americans had been hailed previously as one of that year's major "tax reform" achievements. Sponsors claimed then that Americans abroad were getting a free ride.
However, after the bill was passed, the provision received heavy criticism from the domestic construction industry, which complained it was reducing U.S. firms' ability to compete for building projects overseas.
Before the 1976 act, Americans living aboard were able to take their first $20,000 in earnings tax-free and compute the rest of their U.S. income taxes as though the amount above that were their first dollars earned.
The 1976 law reduced the exclusion to $15,000 and changed the method of computing U.S. income taxes. The Senate, responding to industry complaints, voted to scrap the whole system and allow cost of living deductions instead.
However, yesterday the House voted both to restore the pre-1976 exclusion and to provide deductions for housing, education and other living costs similar to those in the Senate bill, for those outside Canada and Western Europe.
There was no immediate indication when the measure would go to conference committee. Senate sources have indicated they may try to convene the session after passage of the big omnibus tax bill now in Finance Committee.
The Carter administration had vigorously opposed the House measure, but was unable to head if off in committee. Most economists conceded the 1976 provisions were too tough for taxpayers in high-inflation countries.
Yesterday, in an effort to speed that process, the House attached the overseas tax bill to an emergency measure designed to extend the time for altering a number of other key tax provisions.