Boorishly Provincial: Penalising Capital Flow In and Out of the U.S.

More worried about tax cheats than prosperity:

Capital, and all of its blessings, flows to where it is treated best. The recently passed Hiring Incentives to Restore Employment Act of 2010 (the “HIRE” Act) imposes new obstacles to the flow of capital into and out of the U.S. While ostensibly limited to “reporting” requirements to address offshore tax evasion by U.S. persons, at some point U.S. investors will balk at the level of reporting and forego profitable investments in the world at large, and foreign investors will simply move on to greener pastures and avoid the U.S. in making capital available. While such enforcement legislation may be considered to be tax revenue enhancing, the lost national revenue from reduced capital investment and tax compliance costs doesn’t seem to be on anyone’s radar screen – indeed, there is almost a complete absence of attention to the new rules in the national media. Once upon a time, U.S. tax policy was influenced by the impact of the tax code on U.S. economic growth and capital development – sadly for the U.S. economy, such concerns have taken a backseat in the ongoing campaign to root out tax dodgers.

This will also encourage talented younger people with no money but great potential to decide to bail on the U.S. and seek greener pastures (pun intended) elsewhere.  Except that most other money in the world isn’t green…

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