Nate Jensen recently published an op-ed of note, asking "Why Are Your State Tax Dollars Subsidizing Corporations?" Nate has studied tax and corporate decision making for some time, and recently published "Incentives to Pander: How Politicians Use Corporate Welfare for Political Gain", which is on my reading list. This is, of course, a favourite topic of mine. A few excerpts from the op-ed:
Politicians are using public policies, from renaming a city to offering billions of dollars in grants, infrastructure improvements and tax abatements, to take credit for companies’ location decisions. ...
In all likelihood, incentives are overpaying firms, leading to lost resources that could be used for other purposes. If the incentives don’t pay for themselves, they must be paid for by either higher taxes or decreases on government spending. Local school districts are vocal opponents of incentives; they see their tax base being given away in the name of economic development.
But in fact it is most likely the quality of the work force that will be the deciding factor for Amazon, not the billions in incentives. Proponents of incentives often claim that these subsidies pay for themselves, and voters often support these efforts, believing the promises of good jobs. But this is possible only if governments perfectly target the companies that require incentives and pay just enough, and not a penny more, to sway a company’s decision.
...Political pandering is behind this explosion. But there is also some of what Brink Lindsey of the Niskanen Center and the political scientist Steven Teles call the “captured economy.” In between these politicians and corporations are economic incentive consultants, tax professionals and lobbyists all providing ways for businesses to maximize their take, and getting a percentage of these incentives in return.
There is a role for government in economic development. State and local governments can help businesses without access to finance survive and expand, provide worker training that is valuable to residents and companies, and invest in traditional education from pre-K to college. There are certainly worthy investments that can be made. But $7 million for Carrier, $3 billion for Foxconn and billions for Amazon is just using the public coffers for political theater.Highly recommended reading in full for anyone interested in tax competition.
The latest edition of the Canadian Tax Journal [gated] has a nice article by Daria Crisan and Kenneth J McKenzie that documents Canada's relatively generous tax subsidies for R&D spending, yet relatively underwhelming investment by large corporations, over the period 1981-2016. The article briefly summarizes the chronology of federal R&D programs and gives an overview of provincial policies. It finds that while Canada's spending on R&D is high relative to peer countries, the amount of R&D being undertaken relative to GDP consistently underperforms these peers and continues to decline. The bulk of the article is a presentation of data showing these trends. The conclusion is intriguing, positing three possible explanations for the puzzle of high spending but low investment:
The first is the rather obvious point that it may well be that Canada’s r&d performance would have been even worse in the absence of the subsidies. Of course we don’t observe this counterfactual, but it is consistent with the above observations.
The second comment is more speculative ... Canada relies much more than
other countries on the type of “indirect” tax subsidies that we consider here, which
are generally available to all companies, as opposed to “direct” subsidies, such as
targeted grants. It could be that the nature of r&d subsidies in Canada—the reliance
on indirect tax incentives rather than direct grants—is the problem. ...
This leads to our third, and final, observation. To our knowledge, there is in factThe authors conclude that their own ongoing research involves an empirical investigation of the effectiveness of direct and indirect incentives in promoting business r&d investment in Canadian
very little rigorous empirical evidence regarding the efficacy of direct versus
indirect government subsidies for r&d. Moving in this direction may well be the
right thing to do, but this seems to us to be based more on faith, and perhaps some
frustration with the Canadian “r&d policy puzzle,” than on solid empirical evidence.
Our hope is that the data presented here provide, at least in part, the basis
for additional research in this regard in a Canadian context.
I don't know whether the type of spending matters in terms of investment incentives. I would think that it matters what the spending is related to. For example, does spending a lot of money on companies to patent things actually lead to "innovation," whatever that word means? What I have read to date suggests not. There seems to be a strong connection of innovation spending toward traditional legal rights in copyright and patent, but these rights seem decreasingly relevant to many contemporary innovative business models.
Despite a general lack of empirical evidence that taxpayer dollars are well spent on R&D subsidies, governments everywhere spend and spend and spend to spur innovation. As a result empirical studies that shed light on the efficacy of this spending will always be welcome. If the studies show that traditional modes of subsidizing R&D do not provide the intended results, the question is whether governments themselves will be willing and able to innovate in terms of how they support innovation. From the chronology presented herein and my own research on the topic, the prospects seem dim. I look forward to seeing more of this important research.
Tagged as: Canada innovation R&D scholarship subsidies
In September, Donald Trump started calling for the US to tax imports from Mexico and China etc, on various theories having to do with his vision of what fair trade policy involving the United States would require. Democratic lawmaker Bill Pascrell appears to have seized the moment to re-introduce a bill that has failed multiple times in the U.S. Congress over the years, namely, the so-called Border Tax Equity Act. The idea of this act is simple: tax US consumers on imports and give the money to US companies that export things. If you find it amazing that anyone anywhere could support a tax and redistribute scheme like this, blame it on the pitch: Pascrell (and others) laud this as an answer to what they have characterized as a discriminatory practice, namely the exemption of exported products from value added taxes (VAT) by the 160+ countries that have federal consumption taxes. The argument is that "[t]he disparate treatment of border taxes is arbitrary, inequitable, causes economic distortions based only on the type of tax system used by a country, and is a primary obstacle to more balanced trade relations between the United States and its major trading partners."
This argument is specious and I don't expect the bill to pass but this issue is one that just does not seem like it will go away, I think because it is too easy to pitch the VAT border tax adjustment as "unfair." I had an exchange with trade expert Simon Lester almost ten years ago on this very subject, and re-reading my response today, it seems to cover the bases so I thought I would re-post it. You can see his original post here including a discussion in the comments between myself, Simon, and Sungjoon Cho on the matter. Sungjoon helpfully linked to a GATT working party report from 1970 but his original link is dead, however you can find that report here. Here is what I said (highlights added):
The great fallacy here is that the foreign exporter to the U.S. is somehow subject to no tax while the U.S. exporter is subject to two taxes. This is simply not the case. Other countries, especially our biggest trading partners (e.g. Canada) have both a federal corporate income tax and a federal consumption tax, while the U.S. has only a federal corporate tax. You cannot honestly assess the impact of the VAT in the context of only one country’s corporate income tax, and supporting this legislation this way is dishonest. The Textileworld site you reference conveniently ignores foreign corporate taxes in its analysis—I will leave you to decide for yourself why they might do that.Further...
...I will give a drastically oversimplified example. Assume a U.S. person manufactures a product in the U.S. which it will sell in Canada. The company’s profit on the sale is subject to federal income tax in the U.S., plus VAT in Canada (there called a general sales tax). Let us assume a Canadian company makes a similar product. With the same profit margin as the U.S. company on that product, the big issue here is the different rates of federal corporate taxes each company pays to its home country, because both pay an equal amount of VAT tax in that market. What the export credit in the U.S. would do is lower the U.S . company’s federal income tax burden relative to the Canadian one.
Now flip the scenario, the U.S. manufactures and sells a product in the U.S., where there is no VAT, and the Canadian company manufactures a product in Canada to sell in the U.S. Now each company again will pay its income tax to its home country but what happens to the VAT? Well there is no U.S. federal sales tax, and Canada’s VAT only applies to sales in that market, so the VAT is not imposed on the Canadian product coming in to the U.S.—it is exempt from their VAT. Again, in the U.S. market, there is no price distortion other than the difference in corporate income tax burdens—neither product is subject to VAT. If the U.S. imposes a border tax, I think you might now see that as distortionary (to the extent you believe that a tariff is distortionary in any event). Now you might say yeah, but many states have state sales taxes, wouldn't that equalize the incoming product, exempted from sales (VAT) tax in its foreign country? The answer is, of course, yes. But you don’t see very many people complaining if New York does not impose its sales tax on a product being shipped out of New York for sale in Canada—that is a (much-ignored) direct corollary to the VAT exemption.
I could go on but this argument has been made many times before. I appreciate that tax is complex and there are many alternative taxes and scenarios in which they apply differently, so that it is easy to be swayed by something that “seem unfair.” The bottom line is that people will continue to compare VAT to income taxes when it suits their purposes (i.e., supports protectionist policies like the border tax), and not when it doesn’t (i.e, when they want to pressure a government to lower its corporate tax rate to align with other nations’ corporate tax rate). But don’t be fooled by someone who tries to get you to look at one piece of a complex puzzle and guess what the image is.
[I]f you seek a level playing field, border taxes and rebates do not achieve that, and in fact, I doubt anyone could ever be confident about how to go about getting it via tax breaks for some and tax penalties for others (I have some ideas about where I would start, but I'll restrain myself). A border tax/rebate does not operate like an inverse VAT or offset an extra cost imposed by a VAT. A border tax is a tariff and a rebate is a subsidy, plain and simple, and I would expect many of our trading partners to oppose it if enacted.Today, I am less convinced that the income tax is worth saving and more open to a federal VAT, but that's a discussion for another day. To the above I would only add that in 2009 the US Congressional Research Service undertook a study called International Competitiveness: An Economic Analysis of VAT Border Tax Adjustments, well worth reading--the authors were Maxim Shvedov (now tax policy expert at AARP) and Donald Marples, whose more recent work on inversions with Jane Gravelle is also of interest. Their conclusion:
Incidentally, abolishing all income taxes might solve the problem of the income tax competition, but then you have a much different problem. By some estimates, if the U.S. were to abolish the income tax entirely in favor of a sales tax, the rate could be as high as 50%. More likely scenario: we keep the income tax just like it is and ADD a 10-20% federal VAT. This would get rid of the erroneous "VAT as distortion" complaint but I personally would rather keep the debate and take a pass on the VAT.
Economists have long recognized that border tax adjustments have no effect on a nation's competitiveness. Border tax adjustments have been shown to mitigate the double taxation of cross-border transactions and to provide a level playing field for domestic and foreign goods and services. Hence, in the absence of changes to the underlying macroeconomic variables affecting capital flows (for example, interest rates), any changes in the product prices of traded goods and services brought about by border tax adjustments would be immediately offset by exchange-rate adjustments. This is not to say, however, that a nation's tax structure cannot influence patterns of trade or the composition of trade.In summary: No, taxing at the border for the reasons given does not introduce "equity." It introduces WTO-prohibited tariffs and export subsidies. One could imagine that if the tariffs so raised were used to fund public goods, the possibility for an equitable outcome could be increased. But taking the money out of the pockets of US consumers and putting it in the pocket of US exporters in no way fulfills the stated policy goal.
Tagged as: fairness politics tax policy VAT
Here is an interesting article by James Alt, David Dreyer Lassen and Joachim Wehner that might help explain why it's hard for governments to contend with the problem of tax planning (or base erosion, or however one might like to categorize the issue): governments themselves are inclined toward playing around with numbers, too, or what the authors call engaging in gimmickry. It's also another compelling argument for more transparency in governance coupled with an example of why governments are ambivalent about meeting that goal. Abstract:
This article analyzes the political origins of differences in adherence to the fiscal framework of the European Union (EU). It shows how incentives to use fiscal policy for electoral purposes and limited budget transparency at the national level, combined with the need to respond to fiscal rules at the supranational level, interact to systematically undermine the Economic and Monetary Union through the employment of fiscal gimmicks or creative accounting. It also explains in detail how national accounts were manipulated to produce electoral cycles that were under the radar of the EU budget surveillance system, and concludes with new perspectives on the changes to (and challenges for) euro area fiscal rules.And here are some observations from the paper:
We show that: (1) despite reporting rules and an elaborate monitoring mechanism (including Eurostat), political incentives resulting from the electoral cycle and the state of the economy systematically undermined compliance with SGP fiscal rules; (2) under such rules, the scale of gimmickry depends on the degree of fiscal transparency in the domestic budget process; (3) incentives for fiscal gimmickry grew with the adoption of these fiscal rules, and tampering with accounting related to subsidies was not the only way in which countries evaded the SGP and Eurostat supervision; and (4) contrary to a good deal of contemporary discussion, non-compliance with the SGP was not 'all about Greece'. Greece was indeed an extreme case, the least transparent of the countries we study. However, the patterns we identify appear whether or not we include Greece in the data.
Countries with higher fiscal transparency generally observed SGP requirements for fiscal reporting, but occasionally violated the deficit limits.
When larger deficits loomed in an economic downturn, low-transparency countries also systematically circumvented the reporting rules using creative accounting.
Our result – that despite common supranational rules and monitoring, domestic institutions (budget transparency), politics (elections) and economic cycles (recessions) explain much of the variation in outcomes – reinforces the argument that 'the source of fiscal discipline is at the domestic level'.
...asymmetric information in an economic union is not only of academic interest, but has serious, real-world consequences for sustaining co-operation among national governments.
...Why would governments choose to misrepresent the state of their public finances? Euro member countries generally face three audiences: domestic voters, bond markets and the EU itself. Conceptually, countries projecting deficits or debt levels that violate the SGP rules can – for a given level of budget transparency – do three things. Each involves a different trade-off. First, they can observe the fiscal rules and make real adjustments to tax and expenditure levels, which will placate bond markets and Eurostat, but will be costly if the resulting policies are unpopular with voters at the national level. Secondly, they can forego fiscal consolidation, break the rules outright, and post deficits and debts in excess of SGP thresholds. This also can come at a price. Greece's entry into the common currency was delayed due to too-high deficits and, after the introduction of the euro, the system had penalties that made it potentially costly for countries to violate the rules. Thirdly, countries can resort to gimmickry, leaving real outcomes (especially spending) unchanged.8 Voters are unharmed in the short run, and gimmicks fool bond markets and supranational authorities to the extent they are undetected. Here the trade-off is intertemporal: if undetected, gimmickry keeps governments on good terms with everyone in the present, but may entail considerable costs, if deficits and debts later accumulate, in the form of high bond yields and even political unrest. Strategic choice could involve more than one of these avenues for action.
...If countries face costly constraints – either politically, from voters, or economically, from supranational fiscal rules or markets – why would countries not simply reduce transparency in order to facilitate fiscal gimmickry? They could, but making governance structures less transparent is visible, carries substantial reputational costs and, in our context, is penalized by bond markets.
...how can we make gimmickry observable and quantified, when the point of misrepresenting fiscal quantities is to avoid detection? We next show how gimmickry can be inferred from traces left in the national accounts, even after Eurostat scrutiny.
...One measure of gimmickry that is reasonably well known to practitioners is the stock-flow adjustment (SFA). The SFA is a statistical residual, an accounting item defined to reconcile the difference between a change in a government's debt (the total face value of the 'debt-like' or 'fixed' claims held against it) and budget deficit (the excess of spending over revenue)
...shares and other equity' transactions become gimmicks when, for instance, payments to cover recurring losses by a state-owned company are treated as equity purchases instead of current transfers.
...A government's electoral incentives are captured by years left in its term of office, ending in zero in the election year: there should be more gimmickry when fewer years are left
...Panel A clearly reveals an electoral cycle in gimmicks which is conditional on transparency. But increasing transparency reduces or eliminates the electoral cycle.
... Appendix 8 presents estimates with different measurements and coding of rules, transparency and other variables, varied samples and including a lagged dependent variable. Those tests qualitatively support our main results: the presence of an electoral cycle in gimmicks, more pressure from hard times and recourse to gimmicks exacerbated by rules – all of which are conditional on limited transparency.
Moreover, supranational fiscal rules that are intended to sustain co-operation instead exacerbate incentives for national governments to manipulate reported data rather than fix fiscal policy.The following observation meshes with other work on the tendency of governments (such as here and here and here) to deficit-finance more generally:
These are systematic tendencies, rather than the actions of any single country. Budget process transparency can reduce the incentives to manipulate, even those that would otherwise intensify in times of economic stress. Warnings that have been raised in policy and research papers since the early 1990s about the risks of moral hazard in economic policy making for countries in economic unions remain a concern.
In democracies, even advanced ones, politicians' incentives to employ gimmicks get stronger as elections approach.And finally the punchline:
...The results show that Greece was not a special case; rather, it was the extreme case of a general, and comprehensible, pattern.The appendices contain rich details and references.
Tagged as: economics scholarship tax policy
Making Congress and their staffers pay the full cost of their insurance is fine with me because that is how the law will treat millions of middle class families. All members of Congress and most staffers will have salaries high enough they would not qualify for subsidies on the exchanges. If Congress is going to make regular people with similar salaries buy insurance out-of-pocket than that should be good enough for Congressional aides.
I also have no problem with the law forcing Congressional staffers to lose their relatively good insurance because that is a long term goal of the law for everyone. The excise tax on “Cadillac coverage” was designed to stop employers from providing good insurance, covering a large share of your premium, and/or getting them to drop offering coverage altogether. What might happen to Congress is very similar to what Congress intended to happen to others.
Finally, if Congress is worried their staffers can’t afford to buy insurance out-of-pocket they can just use the money Congress would have spent on their premium and raise their salaries by the corresponding amount. The financing of the law was based on the theory that a dollar in benefits is exactly the same as a dollar in salary. The theory, put forward by Obama’s economists, advisers and the Joint Tax Committee is that if you force companies to offer their employees worse insurance, they will increase their wages by an equal amount. This sounds like a perfect opportunity to put the theory to the test.Have laws apply to lawmakers the same as it applies to the governed, have the law play out as it was designed, and put the underlying economic theory to the test: these seem like common sense ways to make sure that our democratic decision-making structure is working. Unfortunately we have ample evidence that this structure is working better for lawmakers (and lobbyists) all the time, and correspondingly worse for everyone else. Congress exempting itself from things that won't personally benefit its members is not a new story, and in light of the brazen roll-back of the "Stop Trading on Congressional Knowledge Act" in order to make it easier for members to quietly line their pockets via insider trading, there is ample reason for pessimism.
Tagged as: governance institutions rule of law social contract u.s.
Are multinational companies a public good? If not, why are taxpayers subsidizing their global marketing strategies?
The story is that the Canadian government recently set up food trucks in Mexico in order to promote "Canadian cuisine," which the National Post pictures as follows:
|Above: poutine. Below: tourtière, both from Quebec.|
(the article says only QC has any sort of cultural food identity. Sorry BC!)
|Don't judge this book by its cover.|
Tagged as: Canada culture globalization MNCs tax policy
US tax reform is so big and so bad it needs 11 working groups to handle it all! From the Camp/Levin press release:
Each of the 11 groups will review current law in its designated issue area and then identify, research and compile feedback related to the topic of the working group. The working groups will be responsible for compiling feedback on its designated topic from: (1) stakeholders, (2) academics and think tanks, (3) practitioners, (4) the general public and (5) colleagues in the House of Representatives. Once the work of those groups has been completed, the Joint Committee on Taxation will prepare a report for the full Committee, due by April 15, 2013, that describes current law in each issue area and summarizes the other information gathered by the Committee Members.And the 11 working groups and their chairs (R) and vice-chairs (D) are:
- Charitable/Exempt Organizations--David Reichert (R-WA), John Lewis (D-GA)
- Debt, Equity and Capital--Kenny Marchant (R-TX), Jim McDermott (D-WA)
- Education and Family Benefits--Diane Black (R-TN), Danny Davis (D-IL)
- Energy--Kevin Brady (R-TX), Mike Thompson (D-CA)
- Financial Services--Adrian Smith (R-NE), John Larson (D-CT)
- Income and Tax Distribution--Lynn Jenkins (R-KS), Joseph Crowley (D-NY)
- International--Devin Nunes (R-CA), Earl Blumenauer (D-OR)
- Manufacturing--Jim Gerlach (R-PA), Linda Sanchez (D-CA)
- Pensions/Retirement--Pat Tiberi (R-OH), Ron Kind (D-WI)
- Real Estate--Sam Johnson (R-TX), Bill Pascrell, Jr. (D-NJ)
- Small Business/Pass Throughs--Vern Buchanan (R-FL), Allyson Schwartz (D-PA)
I will try to keep tabs on International, but Financial Services will inevitably veer toward international as will many of the other groups. Income and Tax Distribution really ought to be international in scope too but probably won't be. I don't know either Devin Nunes or Earl Blumenauer but a quick look at both gives no reason to be optimistic that anything like comprehensive reform will come out of this working group. Let's take a quick look:
Devin Nunes is a Tea Party darling, new to Ways & Means, looks like an energy and national security guy all the way, but background and education in agriculture. As to tax, pretty quiet until he signed on as co-sponsor to Paul Ryan's H.R. 4529, "A Roadmap for America's Future", which is all about cutting medicare and social security, and now he's promoting his "American Business Competitiveness (ABC) Act", which apparently would abolish corporate tax all together and maybe advocate for a consumption tax instead. I think we can see which way he's going to go in this working group. Let's look for him to use the words "competition" and "freedom" and maybe "fair" or "level playing field" a lot and therefore to push for less taxation on multinationals in general (if he can't get rid of it all together) and to be against anything like unitary taxation (formulary apportionment) or corporate tax transparency, the two pillars that would be central to any comprehensive tax reform in the US or really anywhere. On the other hand, he does seem to favor transparency sometimes [don't miss the impressive list of supporters]. So surprise me, Devin! I do love surprises.
How about his vice chair? Earl Blumenauer has been in Congress since 1996, has a law degree (Lewis & Clark 1976), and is certainly from Portland: he's into mass transit, bicycle commuting, various conservation/environmental causes, PBS, and weed. But he's also a free trade guy, supportive of all the FTAs you can throw at him, that's earned him some protests from the left. He seems pretty quiet on tax, though in 2012 he started getting vocal about big oil subsidies, the AMT and the Bush tax cuts. It looks to me like the tax issues on his radar are domestic ones, mostly involving saving entitlement programs and increasing progressivity--both are safe, vague ground for democrats. I expect he'll use the word 'fair' a lot, but it won't mean what Nunes means when he says it, and Blumenauer will focus on the distributional impact of any proposed reforms, looking for signs it violates progressivity. But I don't expect him to offer all that much, overall. International tax doesn't seem to be anywhere at all on his list of priorities.
So the working group charged with major overhaul of international tax law in the US will be chaired by one anti-tax tea party young gun, and one seasoned and mild-mannered Portlandia character with his mind on other things.
Should be fun to watch this.
Tagged as: institutions tax culture tax policy u.s.
Last fiscal year, Americans paid about 69.9 cents per pound of refined sugar. The world price was less than 27.8 cents.Why is that? Why, industrial policy/central planning of course: state-provided infrastructure, subsidies, import quotas, tariffs, etc. But according to the beneficiaries of all of this central planning, it's not all the planning. It's global competition from mercenary states that don't have things like...wait for it....labor and environmental protections!
"Go down to Brazil," [anti-NAFTA sugar farmer James Dickson] says. "Check out the working conditions." Brazil's labor costs are much lower, and so are its environmental regulations. "They do stuff to their sugar we would never do."Carney says not so fast, there's plenty of that to go around:
The federal government also made it possible for the industry to get cheap labor from the Bahamas and Jamaica. Through the British West Indies program, which was created during the Great Depression, "the United States government played a direct role in negotiating employment contracts for offshore laborers," explained Everglades historian David McCally. Uncle Sam even paid to ferry cane-cutters from the islands to Florida.
The guest-worker program put in place exploitative pay levels and work rules. For its part, Florida helped the industry by making it difficult or even illegal for cane cutters to quit. One farmer, lobbying the USDA against allowing Puerto Rican cutters, explained his reason: "Labor transported from the Bahama Islands can be deported and sent home, if it does not work, which cannot be done in the instance of labor from domestic United States or Puerto Rico."All of this was the subject of a little known film called H2 Worker by Stephanie Black (who also produced Life and Debt, a must-see for anyone interested in development economics) which you should watch if you haven't yet, even though it is admittedly quite slow in parts.
Florida sugar cane is an industry literally built on big government, and growers know it will wither in a free market.Not literally. But otherwise true enough.
Tagged as: development economics globalization governance tax policy
The 982-acre island would then be developed into a U.S. commonwealth or city-state of 35,000 people with its own laws, customs and currency.Come on now. There is a whole city there, it's called Detroit, it's full of buildings and infrastructure that are underused, just waiting for investment. You don't want to invest in that, though, because that would entail accountability to others and-gasp--paying taxes (well, maybe--after incentives and subsidies, maybe not). It's so much easier to make profits if you don't have to pay taxes or observe other regulatory standards such as those protecting worker's rights, the environment, etc. What you want is a regulatory haven that is conveniently located to your clients, that isn't tainted with the tax haven moniker, and that won't be caught up in any global anti-tax evasion net. Offshore, but in your own backyard, and not treated like the rest of offshore (otherwise what is the point). A US commonwealth or city-state just about does the trick...ingenious!
Have any doubts that this is about building a tax haven? Just read to the end of the article:
Here's the scenario for the Commonwealth of Belle Isle that Lockwood and others want to see: Private investors buy the island from a near-bankrupt Detroit for $1 billion. It then would secede from Michigan to become a semi-independent commonwealth like Puerto Rico and the Northern Mariana Islands.
Under the plan, it would become an economic and social laboratory where government is limited in scope and taxation is far different than the current U.S. system.
There is no personal or corporate income tax. Much of the tax base would be provided by a different property tax — one based on the value of the land and not the value of the property.
It would take $300,000 to become a "Belle Islander," though 20 percent of citizenships would be open for striving immigrants, starving artists and up-and-coming entrepreneurs who don't meet the financial requirement.I called the Honduras charter city little more than a glorified gated community; this is clearly the same. An economic and social laboratory? Hardly--add it to a long list of contenders. The story says "City officials are likely to reject the plan." Too bad, because it would be fun to watch the US open its own tax haven even as it tries to shut down all the others.
Tagged as: offshore sovereignty Tax law tax policy u.s.