Hong Kong may face an exodus of Americans after a controversial proposal in the US to eliminate a tax exemption took one more step to becoming law yesterday. Some expatriates said they would renounce their citizenship if the US government passes the bill, which would end a long-running tax exemption on the first US$80,000 earned by Americans living overseas. The bill could also raise the cost of business significantly for companies overseas who employ Americans. Most multinational companies have tax-equalisation agreements which effectively compensate their employees for higher taxes. The Senate passed the package on Thursday but it now faces two more hurdles: a joint Senate and House of Representatives committee must agree on a compromise version and then President George W. Bush must sign it. 'I've received several messages from people who told me if this law goes through they will be forced to go back to the US, because they cannot afford to live and work overseas,' said Jeff Blount, chairman of the local chapter of Democrats Abroad. The US consulate estimates 50,000 Americans live in Hong Kong. Thousands more work on the mainland, with 12,000 registered at the Beijing embassy alone. There is widespread objection to the bill among American expats in Hong Kong, with AmCham, Democrats Abroad and Republicans Abroad all opposed to it. The US is the only major western industrialised country that taxes its citizens overseas. Frank Martin, president of the American Chamber of Commerce, said the bill 'will increase the cost of doing business and it will be an incentive to replace American employees with non-Americans'. Linda Kovarik, regional planning director at advertising firm Leo Burnett said if the bill became reality, she would be forced to reevaluate the cost of being American. 'I would have to question whether I would continue working abroad or give up my passport,' she said. 'I have always been very, very proud to be an American. I love my country. Giving up my citizenship would be a very tough decision,' said Ms Kovarik, who plans to write to her congressman on the issue. If the bill becomes law, Americans could see their tax bills rise anywhere from two to 10 times, according to Jill Elsner, managing director at US Asia Tax and Business Services. Bush's re-election push - A9