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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.

DonkeyHotey/FlickrDonkeyHotey/FlickrThe 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.

Photo Credit: DonkeyHotey/Flickr

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  • josh||

    i remember the debate of eduardo saverin (facebook), and how many thought he should be punished in some way for moving to singapore. this was right before facebook went public. it was frightening the degree to which much of what i was hearing was reminiscent of a bad heist movie. forget economics, it's not even good dime store psychology to make it punitive for people to go their own way.

  • Bob K||

    I'd just like to see the USA tell all these corps fine but we will buy our drugs (or whatever but thinking about Pfizer) from China and if they are steal your patent take it up with your new country. Lets see how Ireland does protecting patents.

    Our armed forces are setup to protect the global commons. Its why we have bases around the world and these corporations are not factoring that cost into the equation when moving so let them feel the pain of not having the Stars and Stripes protecting their rights.

  • Sevo||

    "...let them feel the pain of not having the Stars and Stripes protecting their rights."

    Nice little company you have there; shame if anything happened to it, right, Bob?

  • Frankjasper1||

    What does the armed forces and bases have to do with patents?

    Oh in the case of pfizer...any profits earned in the us will be taxed in the us. The solution is to reduce the corporate tax rate and stop looking to double dip

    Please do some research next time. You sound greedy and envious with posts like this as if you are entitled to their earnings cause you happen to be also a part of the united states. Perhaps you should add some value instead of expecting others to cater to you.

  • gaoxiaen||

    It would be better to only have a corporate tax with no personal income tax. Let the deep pockets slug it out with the IRS.

  • See.More||

    It would be better to only have a corporate tax with no personal income tax.

    Do you realize that corporations do not pay taxes?

    Taxes are just another cost of business that, like all other costs, get passed on to the consumers.

  • Michael Price||

    "get passed on to consumers"
    Or workers. It all depends on which elasticity is greater.

  • Win Bear||

    Our armed forces are setup to protect the global commons.

    We don't want it to. Really. US forces should come home and stop "protecting" US corporations overseas. It's an unfair subsidy to multinational corporations, and other countries hate us for it.

    these corporations are not factoring that cost into the equation when moving so let them feel the pain of not having the Stars and Stripes protecting their rights

    I'm sure they have done that.

  • Michael Price||

    "Our armed forces are setup to protect the global commons."
    Ok, you're REALLY going to have to support that one. Unless you think that whatever arbitrary IP regime US corporations happen to think benefits them is a "global common" you're insane.

    "so let them feel the pain of not having the Stars and Stripes protecting their rights."
    That's a pain everyone feels all the time.

  • Sevo||

    We keep hearing that high taxes don't keep companies from expanding or 'creating jobs', and then find that revealed preferences say exactly the opposite.

  • Craig Smith||

    Truth...

  • Vampire||

    These douchebags are nothing but extortionists. Their approval rating is abysmal.

    They are not needed as they are a drain on liberty and property, of not only the people of now, but future generations. Each and every time something new comes about through market innovation and free individuals engaging in transactions free from force or theft, they must control it, and inject those elements as the violent third party looking for their cut.

  • Drake||

    Funny how Democrats think we should be like European socialists in all ways - except taxing income where it's earned.

  • Fairbanks||

    Sorry Ira, it's nitpicky, but when it's in a title it needs to be corrected: Clinton wants to tax U.S. companies for trying to pay FEWER taxes.

  • Fairbanks||

    Wasn't meant to be a response to Drake....

  • Win Bear||

    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,

    East Germany also effectively took away peoples' property when they tried to leave (or just shot them). It's a proud German tradition to try to punish those who want to leave that progressive utopia.

  • Bill Dalasio||

    Wait, Ira, didn't you assure us that Ms. Clinton was a champion of tax reform and deregulation?

  • ||

    Should our border be open to the person that wants to kill us?

  • SimonD||

    Wow, making noises about making corporations pay penalties for moving their HQs from the United States. I'm having a hard time thinking of a better way to make more corps leave (and take their money and jobs) more quickly than this. Sometimes I wonder if Mrs. Clinton WANTS to destroy our free enterprise system.

  • DevilDocNowCiv||

    Simon,

    No Dem, including Hill, can see the reality thru the walls of their PC bubble. High taxes and regulation dont bother Corp's in their bubble world, even when they say that a given Corp fled (to Ireland, say) for tax purposes. Thats why they explain that simple and evident reality, then self contradict when explaining that a lower tax and reg policy is irrelevant and we shouldn't pursue it.

    Barry may want to destroy our free enterprise system in favor of some University approved technocracy run by PC experts. Hill just wants power and money. She'll go along with such a plan if that's the way she see's leading to the power and money.

  • EMD||

    17 comments here. 8 billion on any Trump thread.

  • sewald@gmx.de||

    Greetings from Europe! The "Reichsfluchtsteuer" including the underlying political system does not succeed - nor will the protective U.S. behavior way do.

    I believe the more the U.S. tries to keep citizens and companies in the homeland to serve what ever purpose, the more citizens and companies will exit, just because they simply dislike to be kept.

    There is already a virtual wall for individuals: revocation of U.S. passports if you fail to pay your U.S. taxes, worldwide (double) taxation based on U.S. citizenship (discouraging people to live, prosper and invest abroad), an exit tax for the very rich and a fee to renounce U.S. Citizenship ($2,350) that is far too high for low and middle income dual national families abroad to pay and leave the U.S. system.

    But wealthy people are able to make a simple business case: how much is the fee and the possible exit tax in comparison to the annual fees to prepare a second U.S. tax declaration, annual payment of double taxes for to service in exchange and possible surplus U.S. tax on income that would be tax free in the foreign host country.

    If individuals are able to do such a calculation, companies are even more likely to secure future income; which might include a one time U.S. exit tax to be free at last!

  • Jason Vick||

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