Running Away is No Solution

In a blog post at Let A Thousand Nations Bloom, titled Exit From the Road to Fiscal Serfdom, Mike Gibson points to a Tim Kane post at Growthology.org under the heading Generational Shift? Fiscal Crisis Plus Global Migration Equals ..., which was inspired by a Robert J. Samuelson piece in The Washington Post titled Will Millennials become the chump generation?

Kane posits the following after reading Samuelson’s piece.

Samuelson asks the question…if young voters will punish fiscally irresponsible representatives in Washington. My alternative theory focuses on the context of immigration. Already you may have heard about the millions of illegals who departed the U.S. when the Great Recession dried up job opportunities. A lot of crass nativists might think “Good Riddance!” but I wonder what they’ll say when their own children seek greener pastures abroad in 10 or 20 years?

Consider: almost everyone younger than the Baby Boomers expects to get the short end of the fiscal stick. We were laughing about the unlikeliehood of getting Social Securiyt (sic) Checks when I was in high school in the 80s. So now that the reckoning is all but unkickable, do the Boomers think their kids and grandkids will just become fiscal serfs?  Think again…

The threat America faces is a world that competes for our greatest natural resource: it’s young. If we make the tax climate hellish, the U.S. is going to suffer outmigration as places like Canada, Australia, Brazil, Mexico, Chile realize what an opportunity they have to cream our entrepreneurial talent. If we don’t, and let the deficit spiral out of control, the dollar will fall and workers will go elsewhere for value reasons. There’s already a migratory tension in Europe, waged primarily with favorable tax treatment for high net worth immigrants.

Kane mentions Canada, Australia, Brazil, Mexico, and Chile as possible landing places for individuals outmigrating from the United States for “favorable tax treatment.”  Let’s take a look at tax rates in these countries, which I’ve pulled from here.

Canada:      individual:  0 - 29% (federal) 0 - 24% (provincial); payroll:  4.95%
Australia:      individual:  0 - 45%; payroll:  4.75 - 6% (state)
Brazil:        individual:  0 - 27.5%; payroll:  31%
Mexico:        individual:  3 - 29%; payroll:  None at this time
Chile:        individual:  0 - 40%; payroll:  None at this time
United States: individual: 15 - 39% (federal) 0 - 12% (state); payroll: 15.3% - 2.9% regressive (federal)

In reviewing just the countries mentioned by Kane, one notes that the “favorable tax treatment” one may consider fleeing to are not necessarily so favorable.  Additionally, if a sizable outmigration from the U.S. did occur, how long do you think the countries of favorable tax treatment choice would remain favorable to their newly minted immigrant pool of potential tax revenue?

Running away is no solution.

Posted by .(JavaScript must be enabled to view this email address) on 03/10 at 08:31 AM

  1. Kane is saying IF we make it hellish, i.e. worse than it already is today.  It’s not inconceivable, given the looming structural obligations that exist and are being created.  And what’s to say other nations will keep their rates static in the future?  Some of the eastern European countries have low flat taxes.

    Posted by .(JavaScript must be enabled to view this email address)  on  04/21  at  01:29 AM

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