Here's some answers to the aforementioned questions:

1. What about deductions?
No deductions were accounted for in the above examples. Deductions are everyone's friend, but in order to get the best advantages from them, you need to figure out (preferably with a CPA) what your deduction estimates will be and how they correlate to your respective tax bracket(s).

2. Capital gains?
If you decide to sell your house under 2 years, of course you are susceptible to capital gains.

3. State relocation
As you know, state taxes vary tremendously. I don't see where relocation from one state has any bearing on your tax burden. For example, if you change residence on Jan 1, 2008, you have "zero" tax liability to any state for the 2008 tax year. Now if you move on April 1, 2008, you still will be obligated to pay 3 months of state tax (if your state has an income tax). Same thing goes for excise taxes.

4. New hires in Hong Kong
Let's look at 50k during your first year. We'll run generic numbers for a single and also married filing jointly.

30,650 74,200 4220.00 plus 25% of the amount over 30,650
50,000 - 30,650 = 19,350 * .25 = 4837.50 + 4220.00 = 9057.50

Now use the exclusion,
50,000 - 50,000 = 0, so your U.S. tax burden is 0.
Hong Kong = 50,000 * .16 = 8000.00

So comparing the two for a single, would be a 1057.50 disadvantage for tax equalization. Now you'd have to bring deductions into the mix to try and get your 19,350 lower to make up the difference.

Married Filing Jointly
15,100 61,300 1,510.00 plus 15% of the amount over 15,000
50,000 - 15,000 = 35,000 * .15 = 5250 + 1510 = 6760.00

Now use the exclusion,
50,000 - 50,000 = 0, so your U.S. tax burden is 0.
Hong Kong = 50,000 * .16 = 8000.00

So comparing the two for married filing jointly would be a $1240 advantage for using tax equalization.

**** Conclusion ****
Overall, deductions will affect your overall tax status using either the tax equalization or the tax exclusion method. The only point I'm trying to make here is that every pilot's tax situation is going to be different, as we have real estate brokers, accountants, lawyers, S corporations, partnerships, and million other iterations of other income. Being cognizant of how this will work for you is of critical importance. In my opinion, relying on the union to provide you with examples of how this works is outside of the scope of the union. Run your own numbers using samples of your past tax returns and see where they fall. That is going to be the closest estimation you can make.

About the above post, consult your CPA, because you are correct.