A Senate Finance Committee amendment designed to encourage exports by granting bigger tax breaks to U.S. workers overseas may violate international trade laws, some congressional and private analysts have charged. i

As part of its $39.8 billion tax-cut package, the panel adopted a provision to exclude from U.S. taxes $50,000 a year in income earned overseas in a developing country or related to the export of U.S. products. The approximately 180,000 Americans working abroad now are entitled to a variety of deductions for unusually high costs associated with living overseas.

At issue is the portion of the Finance proposal that would give the extra tax break to individuals involved specifically in export-related services. Under the General Agreement of Tariffs and Trade and the Multinational Trade Negotiations approved by Congress earlier this year, tax relief directly tied to export-related income may be considered an illegal subsidy, opponents of the proposal say.

"If enacted, such [export-related] tax measures would most likely operate under a cloud of suspicion within the GATT community and would most certainly vitiate the credibility which the United States has established in the international trade arena," according to a memorandum written for the law firm of Paul, Hastings, Janofsky & Walker and circulated on the Hill last week. The law firm represents Lone Star Gas and Ebasco Corp., which want a larger flat income exclusion for overseas workers.

Sen. Abraham Ribicoff (D-conn.), sponsor of the proposal for targeting the concessions to exports, has argued on the other hand that West Germany, France and Canada already have similar targeted export aides which have not been challenged in the international trade arena.

But Mark Gorman, an aide to Sen. John Chafee (R-R.I.), said the possible GATT and MTN violation is "a concern that we have been thinking about and that a number of people have raised." Chafee had suggested instead a flat exclusion of $50,000 a year for all income earned by Americans working overseas.

Before 1978, U.S. citizens working overseas got a flat $20,000 exclusion ($25,000 for those who stayed at least three years). In 1978 Congress changed this to allow only the deductions for specific high expenses.

In this Congress, the sentiment has changed. The administration as well as both sides of Congress are interested in concessions for overseas work as a way of promoting exports.

Those on both sides of the targeted export subsidy issue see another serious problem with the Finance bill: how to define "export-related income." This issue soon may involve even more complicated arguments than those on the international-trade aspects of the bill.

Gorman, Chafee's staff aide, for example, commented on the Finance amendment: "We did this with the idea of returning some sanity to the [foreign earned income] law, but now it's twice as confused."