Expansion of the Totalization Program using Simplified Agreements to Eliminate Dual Taxation

Abstract

The United States has signed 30 bilateral social security agreements. Some of its partner countries, such as the U.K. or Germany, have signed international agreements to eliminate double taxation for nationals working temporarily abroad with more than 50 other countries. This project analyzes the potential macroeconomic impact of expanding the countries with international social security treaties by enacting new social security totalization agreements that are simpler than the standard totalization agreements enacted so far. The focus of this project is to simulate the effect on international flows of capital of eliminating double social security taxation through enacting limited treaties with additional countries beyond the current U.S. partners. For this, we extend a theoretical model of foreign direct investment to incorporate social security international agreements with several countries. We model limited totalization agreements that only eliminate double taxation. We use the model to forecast the effects of new, more flexible totalization agreements.