Clinton Wants to Tax U.S. Companies for Trying to Pay Less Taxes
Both major parties are dead wrong when it comes to the free movement of people and capital across borders.
The former secretary of state and senator from New York, Hillary Clinton, reportedly will on Wednesday announce plans to impose an "exit tax" on companies that move their headquarters out of America or merge with foreign firms to escape America's unreasonably high corporate taxes.
Back in 2012, when Sen. Chuck Schumer (D-NY) and the then-Speaker of the House, John Boehner (R-Ohio), proposed a similar tax on individuals who chose to leave America, the president of Americans for Tax Reform, Grover Norquist, noted that a similar policy "existed in Germany in the 1930s." Schumer, Norquist memorably suggested, "probably just plagiarized it and translated it from the original German."
Indeed, the Reichsfluchsteuer, or Reich flight tax, was a 25 percent levy imposed originally not by the Nazis but rather, on December 8, 1931, by the pre-Hitler, centrist government of Heinrich Brüning, who had a doctoral degree in economics. Not exactly something to try to emulate.
The details of Clinton's plan haven't yet been disclosed. But it's not too early to recognize it as a striking example of how, this election cycle, neither major American political party has the right idea when it comes to the free movement of people and capital across borders. The Republicans want to prevent immigrants from getting in. They usually say they are talking about illegal immigrants, but their rhetoric often indicates a hostility to legal immigrants, including Syrian refugees. The Democrats, meanwhile, want to prevent Americans from getting out.
As I pointed out back in 2012, the Universal Declaration of Human Rights, a product of the United Nations, says, "Everyone has the right to leave any country, including his own" and "No one shall be arbitrarily deprived of his property."
Maybe it's time for a third American political party that would let people and companies come and go freely. Neither the Republicans nor the Democrats as currently constituted seem to fit the bill. Yet the journey across borders is one that was once familiar history to many Americans, whether from the biblical Exodus or the waves of immigrants to the United States from Europe, East Asia, and South America.
There is a "natural rights" argument for free flow of human and financial capital, which is to say that it is unjust to force people or companies to stay where they do not want to be. And there is a national history argument for it, which is to say that our own country had an imperfect but nonetheless long history of welcoming immigrants. Go visit Ellis Island or the Statue of Liberty if you doubt that.
There's also a utilitarian argument for these free flows, part of which is that the electorate and the politicians need to hear the signals they are sending. Running a country with sealed borders is like driving a car blindfolded and with sound-deadening headphones on. That is a lesson not only of interwar Germany but also of the Cold War.
In 1963, at the Berlin Wall, President Kennedy said, "Freedom has many difficulties and democracy is not perfect, but we have never had to put a wall up to keep our people in, to prevent them from leaving us." Hillary Clinton's exit tax would do exactly what Kennedy said we've never had to do: set up a virtual wall, in the form of a tax, to prevent companies from leaving America.
A better option would be to create policies that would attract companies from overseas to flock to set up shop here in America. When we have foreign companies trying to sneak into America like Mexicans making their way across the Southern border, we'll know something has been fixed. Until then, Hillary's proposed Reichsfluchsteuer is likely only to hasten the rush by American companies for the exit.