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Archive for the ‘Migration’ Category

As a general rule, I like immigration and I don’t like redistribution.

As such, I share the late Milton Friedman’s concern about the risks of having a welfare state combined with open borders. And based on many conversations all over the country, I think that’s a big reason why many people oppose amnesty (augmented by Republican partisans who fear, probably with some validity, that changing the political landscape of America is the real reason Senator Schumer is a big advocate of amnesty).

So how can we reap the benefits of immigration without the risk of a bigger welfare state?

In part, we should have programs designed to attract people with skills and education.

I’m a big advocate and defender, for instance, of the EB-5 program that gives a preference for foreigners who invest in America’s economy and create jobs.

And if you peruse Mark Perry’s chart, we must be doing something right. Look at all these immigrant groups that are boosting per-capita income for the United States (including people from Lebanon, home of the Princess of the Levant).

I’ve always thought far more Americans would be sympathetic to immigration if they could be convinced that people were coming to America for the right reasons – i.e., to earn money rather than mooch off taxpayers.

With that in mind, Professor Tyler Cowen of George Mason University has a Bloomberg column about Denmark that cites the great work of Nima Sanandaji about how Americans of Nordic descent have much higher incomes than the people remaining in Nordic nations. Tyler’s entire article is worth reading, but I want to focus on a quasi-open-borders proposal that he puts forth in his conclusion.

For all the anti-immigrant sentiment that is circulating at the moment, would it hurt the U.S. to have fully open borders with Denmark? It would boost American gross domestic product and probably also improve American education. History teaches that serious assimilation problems would be unlikely, especially since many Danes already speak English. Open borders wouldn’t attract Danes who want to live off welfare because the benefits are so generous at home. How’s this for a simple rule: Open borders for the residents of any democratic country with more generous transfer payments than Uncle Sam’s.

I can’t think of any reasonable objection to this idea. Everything Tyler says makes sense. People like “Lazy Robert” won’t be lining up to get plane tickets to America. Instead, we’ll get the young and aspirational Danes.

For what it’s worth, I even think he understates the case since the type of people who would migrate to America wouldn’t just boost GDP. They almost surely would do something arguably more important, which is to boost per-capita GDP.

Just think of all the productive entrepreneurs who would take the opportunity to escape over-taxed Denmark and come to the United States. Along with ambitious and skilled people from nations such as Italy, France, and Sweden (though our welfare state is very expensive, so I admit I’m just guessing at nations which would be eligible based on Tyler’s rule about “more generous transfer payments”).

By the way, Denmark apparently has learned a lesson about the risks of being a welfare magnet.

A story from Spiegel Online has the details.

Denmark’s strict immigration laws have saved the country billions in benefits, a government report has claimed. …The extremely strict laws have dramatically reduced the flow of people into Denmark in recent years, and many government figures are delighted with the outcome. “Now that we can see that it does matter who comes into the country, I have no scruples in further restricting those who one can suspect will be a burden on Denmark,” the center-right liberal integration minister, Søren Pind, told the Jyllands Postennewspaper. Pind was talking after the ministry’s report — initiated by the right-wing populist Danish People’s Party (DPP) — came to the conclusion that by tightening immigration laws, Denmark has saved €6.7 billion ($10 billion) over the last 10 years, money which otherwise would supposedly have been spent on social benefits or housing. According to the figures, migrants from non-Western countries who did manage to come to Denmark have cost the state €2.3 billion, while those from the West have actually contributed €295 million to government coffers.

Sounds like Danish lawmakers don’t want to add even more passengers to the nation’s already-overburdened “party boat.”

And who can blame them. The nation already has a crippling problem of too many people depending on government.

P.S. If you want to enjoy some immigration-related humor, we have a video about Americans migrating to Peru and a story about American leftists escaping to Canada.

P.P.S. For those interested in the issue of birthright citizenship (a.k.a. anchor babies), I’ve shared some interesting analysis from Will Wilkinson and George Will.

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Long-run trends are an enormously important – yet greatly underappreciated – feature of public policy.

  • Slight differences in growth can have enormous implications for a nation’s long-run prosperity.
  • Gradual shifts in population trends may determine whether a nation faces demographic decline.
  • Modest changes in the growth of government can make the difference between budgetary stability and fiscal crisis.
  • And migration patterns can impact a jurisdiction’s viability.

Or, in the case of California, its lack of viability. Simply stated, the Golden State is committing slow-motion suicide by discouraging jobs, entrepreneurs, investors, and workers.

Let’s look at some of the data. Carson Bruno of the Hoover Institution reviews data showing that the aspirational class is escaping California.

California’s consistent net domestic out-migration should be concerning to Sacramento as it develops state policy. As the adage goes, people vote with their feet and one thing is clear, more people are choosing to leave California than come. …Between 2004 and 2015, roughly 930,000 more people left California than moved to the Golden State… The biggest beneficiaries of California’s net loss are Arizona, Texas, Nevada, Oregon, and Washington. California is bleeding working young professional families. …those in the heart of their prime working-age are moving out. Moreover, while 18-to-24 year olds (college-age individuals) make up just 1% of the net domestic out-migrants, the percentage swells to 17% for recent college graduates (25 to 39 year olds).

And here’s why these long-run migration trends matter.

…while there is a narrative that the rich are fleeing California, the real flight is among the middle-class. …the Golden State’s oppressive tax burden – California ranks 6th, nationally, in state-local tax burdens – those living in California are hit with a variety of higher bills, which cuts into their bottom line. …which leads to a less economically productive environment and less tax revenue for the state and municipalities, but a need for more social services. And when coupled with the fact that immigrants – who are helping to drive population growth in California – tend to be, on average, less affluent and educated and also are more likely to need more social services, state, county, and municipal governments could find themselves under serious administrative and financial stress. …the state’s favorable climate and natural beauty can only anchor the working young professionals for so long.

We’re concentrating today on California, but other high-tax states are making the same mistake.

Here’s some data from a recent Gallup survey.

Residents living in states with the highest aggregated state tax burden are the most likely to report they would like to leave their state if they had the opportunity. Connecticut and New Jersey lead in the percentage of residents who would like to leave… Nearly half (46%) of Connecticut and New Jersey residents say they would like to leave their state if they had the opportunity. …States with growing populations typically have strong advantages, which include growing economies and a larger tax base. Gallup data indicate that states with the highest state tax burden may be vulnerable to migration out of the state…data suggest that even moderate reductions in the tax burden in these states could alleviate residents’ desire to leave the state.

Writing for the Orange County Register, Joel Kotkin explains how statist policies have created a moribund and unequal society.

…in the Middle Ages, and throughout much of Europe, conservatism meant something very different: a focus primarily on maintaining comfortable places for the gentry… California’s new conservatism, often misleadingly called progressivism, seeks to prevent change by discouraging everything – from the construction of new job-generating infrastructure to virtually any kind of family-friendly housing. …since 2000 the state has lost a net 1.7 million domestic migrants. …California’s middle class is being hammered. …Rather than a land of opportunity, our “new” California increasingly resembles a class-bound medieval society. …California is the most unequal state when it comes to well-being… Like a medieval cleric railing against sin, Brown seems somewhat unconcerned that his beloved “coercive power of the state” is also largely responsible for California’s high electricity prices, regulation-driven spikes in home values and the highest oil prices in the continental United States. Once the beacon of opportunity, California is becoming a graveyard for middle-class aspiration, particularly among the young.

In other words, class-warfare policies have a very negative impact_ on ordinary people.

Meanwhile, returning to California, a post at the American Interest ponders some of the grim implications of bad policy.

…many of the biggest, bluest states in the country—including New York, Illinois, and Massachusetts—have also experienced major exoduses over the last five years (although these outflows have been offset, to varying degrees, by foreign immigration). These large out-migrations represent serious policy failures… The new statistics out of California are a bad omen for the future of the state’s doctrinaire blue model governance. …if families and the young continue to flee California, the population will become older and less economically dynamic, creating a shortfall in tax revenue and possibly pressuring Sacramento raise rates even higher. Meanwhile, California faces a severe pension shortfall, both at the state and local level.

Here’s a map from the Tax Foundation showing top income tax rates in each state. If you remember what Carson Bruno wrote about California’s emigrants, you’ll notice that states with no income tax (Washington, Texas, and Nevada) are among the main beneficiaries.

So the moral of the story is that states with no income taxes are winning, attracting jobs and investment. And high-tax states like California are losing.

But remember that the most important variable, at least for purposes of today’s discussion, is how these migration trends impact long-run prosperity. More jobs and investment mean a bigger tax base, which means the legitimate and proper functions of a state government can be financed with a modest tax burden.

In states such as California, by contrast, even small levels of emigration begin to erode the tax base. And if emigration is a long-run trend (as is the case in California), there’s a very serious risk of a “death spiral” as politicians respond to a shrinking tax base by imposing even higher rates, which then results in even higher levels of emigration.

Think France and Greece and you’ll understand what that means in the long run.

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Taxpayers don’t like coughing up big amounts of money so other people can choose not to work.

And they really get upset when welfare payments are so generous that newcomers are encouraged to climb in the wagon of government dependency.

This has an effect on the immigration debate in the United States. Most Americans presumably are sympathetic to migrants who will boost per-capita GDP, but there is legitimate concern about those who might become wards of the state.

Welfare migration also has become a big issue in Europe.

Reuters has a report on efforts by the U.K. government to limit and restrict the degree to which migrants from other E.U. nations can take advantage of redistribution programs.

Cameron says he needs a pact to curb benefits for new migrant workers from EU countries… Proposals to allow British authorities to withhold in-work benefits for up to four years from EU citizens moving to work in Britain are under intense scrutiny.

You can understand why Cameron feels pressure to address this issue when you read horror stories about foreigners coming to England and living comfortable lives at taxpayer expense.

This isn’t just a controversy in Britain.

The U.K.-based Guardian has a story on support for such measures in Austria.

The Austrian foreign minister, Sebastian Kurz,…would not only call on the chancellor, Werner Faymann, to vote in favour of Cameron’s “emergency brake” on migrants’ benefits, but also to adopt the measure in Austria as soon as possible. …”Those who don’t pay into the system will get fewer benefits or none at all,” Kurz told the newspaper Kronen Zeitung. “We should embrace that principle if we want to guarantee that our welfare state remains affordable and attractive for top talent.” …he also supported Cameron’s call for the UK to be allowed to stop paying child benefit to EU migrants whose children live abroad.

European politicians are right to be worried. There’s evidence even from Sweden that welfare programs lure migrants into dependency.

And studies of American data show that excessive levels of redistribution can be at least a partial magnet for welfare recipients.

Here are some of the findings from a 2005 scholarly article by Professor Martin Bailey of Georgetown University.

…the results also indicate that welfare benefits exert a nontrivial effect on state residential choice. …the welfare migration hypothesis does not require welfare to exert a dominant effect, only a real effect. And here, the results provide strong, robust indications that the effect is real. …the results imply that migration may discourage states from providing high welfare benefits because such generosity attracts and retains potential welfare recipients.

Professor Bailey then found in a 2007 academic study that states understandably impose some restraints on welfare spending because of concerns that excessive benefits will lure more dependents.

Whether states keep welfare benefits low in order to prevent in-migration of benefit-seeking individuals is one of the great questions in the study of federalism. …This article develops a model which…suggests that competition on redistributive programs does…constrain spending to be less than what the states would spend if migration were not a concern.

This makes sense, and it echoes the findings of a study I wrote about in 2012 by some German economists.

Simply stated, you get better policy when governments compete.

But that doesn’t mean Cameron and other European politicians are doing the right thing. Instead of limiting handouts just for migrants, they should be lowering redistribution payments for everybody, including natives.

After all, European nations (like many American states) have elaborate redistribution systems that often make dependency more attractive than work.

Indeed, the United Kingdom has a more generous package of handouts that almost every other European nation.

The bottom line is that it’s a bit hypocritical (and in some cases perhaps even racist) for Cameron and others to target welfare for migrants without also addressing the negative impact of similar payments for natives.

P.S. To give British politicians credit, there have been some recent positive steps to reduce welfare dependency by cutting back on handouts.

P.P.S. In any event, Americans shouldn’t throw stones because we live in a glass house based on our foolish laws that shower refugees with initiative-sapping handouts.

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I was in Montreal last week for a conference on tax competition, where I participated in a debate about whether the corporate income tax should be abolished with my crazy left-wing friend Richard Murphy.

But I don’t want to write about that debate, both because I was asked to take a position I don’t really support (I actually think corporate income should be taxed, but in a far less destructive fashion than the current system) and because the audience voted in favor of Richard’s position (the attendees were so statist that I felt like a civil rights protester before an all-white Alabama jury in 1965).

Instead, I want to highlight some of material presented by Kansas Governor Sam Brownback, who also ventured into hostile territory to give a presentation on the reforms that have been implemented in his state.

Here are some slides from his presentation, starting with this summary of the main changes that have taken place. As you can see, personal income tax rates are being reduced and income taxes on small businesses have been abolished.

By the way, I don’t fully agree with these changes since I think all income should be taxed the same way. In other words, if there’s going to be a state income tax, then the guy who runs the local pet store should pay the same rate as the guy who works at the assembly plant.

But since the Governor said he ultimately wants Kansas to be part of the no-income-tax club, I think he agrees with that principle. When you’re enacting laws, though, you have to judge the results by whether policy is moving in the right direction, not by whether you’ve reached policy nirvana.

And there’ no doubt that the tax code in Kansas is becoming less onerous. Indeed, the only state in recent years that may have taken bigger positive steps is North Carolina.

In any event, what can we say about Brownback’s tax cuts? Have they worked? We’re still early in the process, but there are some very encouraging signs. Here’s a chart the Governor shared comparing job numbers in Kansas and neighboring states.

These are positive results, but not overwhelmingly persuasive since we don’t know why there are also improving numbers in Missouri and Colorado (though I suspect TABOR is one of the reasons Colorado is doing especially well).

But this next chart from Governor Brownback is quite compelling. It looks at migration patters between Kansas and Missouri. Traditionally, there wasn’t any discernible pattern, at least with regard to the income of migrants.

But once the Governor reduced tax rates and eliminated income taxes on small business, there’s been a spike in favor of Kansas. Which is particularly impressive considering that Kansas suffered a loss of taxable income to other states last decade.

But here’s the chart that is most illuminating. In addition to being home to the team that won the World Series, Kansas City is interesting because the metropolitan area encompasses both parts of Missouri and parts of Kansas.

So you can learn a lot by comparing not only migration patters between the two states, but also wage trends in the shared metropolitan area.

And if this chart is any indication, workers on the Kansas side are enjoying a growing wage differential.

So what’s the bottom line?

Like with all issues, it would be wrong to make sweeping claims. There are many issues beyond tax that impact competitiveness. Moreover, we’ll know more when there is 20 years of data rather than a few years of data.

That being said, Kansas clearly is moving in the right direction. All you have to do is compare economic performance in Texas and California to see that low-tax states out-perform high-tax states.

Indeed, if Kansas can augment good tax policies with a Colorado-style spending cap, the state will be in a very strong position.

P.S. This joke also helps explain the difference between California and Texas.

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Here’s a quiz for readers.

When politicians increase taxes, the result is:

This is a trick question because the answer is (j), all of the above.

But let’s look at some of the evidence for (d), which deals with the fact that the geese with the golden eggs sometimes choose to fly away when they’re mistreated.

The Internal Revenue Service has a web page where you can look at how many taxpayers have left or entered a state, as well as where they went or where they came from.

And the recently updated results unsurprisingly show that taxpayers migrate from high-tax states to low-tax states.

Let’s look at some examples, beginning with Maryland. Here are some excerpts from a report in the Daily Caller.

Wealthy taxpayers and job-creating businesses fled Maryland at an accelerating rate as then-Gov. Martin O’Malley implemented a long list of tax hikes during his first five years in the state capital. More than 18,600 tax filers left Maryland with $4.2 billion in adjusted gross income from 2007 – O’Malley’s first year as governor — through 2012, according to a Daily Caller News Foundation analysis of the most recently available Internal Revenue Service state-level income and migration data. …Nearly 5,600 state-tax filers left Maryland in 2012 and took $1.6 billion with them, more than double the 2,300 who departed with $732 million in 2011. The fleeing 5,600 filers had average incomes of nearly $291,900. …Most of 2012’s departing residents moved to the more business-friendly Virginia, according to the data. …Florida was the third most common destination for Marylanders.

Here’s a chart looking at the income that moved into the state (green) compared to the much greater amount of income that left the state (red).

The story then makes a political observation.

O’Malley’s economic record may partially explain why his campaign for the 2016 Democratic presidential nomination has yet to gain traction among voters outside of Maryland.

Though I wonder whether this assertion is true. Given the popularity of Bernie Sanders, I can’t imagine many Democrat voters object to politicians who impose foolish tax policies.

Now let’s shift to California.

A column in the Sacramento Bee (h/t: Kevin Williamson) explores the same IRS data and doesn’t reach happy conclusions.

An unprecedented number of Californians left for other states during the last decade, according to new tax return data from the Internal Revenue Service. About 5 million Californians left between 2004 and 2013. Roughly 3.9 million people came here from other states during that period, for a net population loss of more than 1 million people. The trend resulted in a net loss of about $26 billion in annual income.

And where did they go?

Many of them went to zero-income tax states.

About 600,000 California residents left for Texas, which drew more Californians than any other state.

Here’s a map from the article and you can see other no-income tax states such as Nevada, Washington, Tennessee and Florida also enjoyed net migration from California.

Last but not least, let’s look at what happened with New York.

We’ll turn again to an article published by the Daily Caller.

More taxpaying residents left New York than any other state in the nation, IRS migration data from 2013 shows. During that year, around 115,000 New Yorkers left the state and packed up $5.65 billion in adjusted gross income (AGI) as well. …Although Democrat Governor Andrew Cuomo acknowledged that New York is the “highest tax state in the nation” and it has “cost us dearly,” he continues to put forth policies that economically cripple New York residents and businesses.

Once again, much of the shift went to state with no income taxes.

New York lost most of its population in 2013 to Florida — 20,465  residents ($1.35 billion loss), New Jersey — 16,223 residents ($1.1 billion loss), Texas — 10,784 residents ($354 million loss).

Though you have to wonder why anybody would move from New York to New Jersey. That’s like jumping out of the high-tax frying pan into the high-tax fire.

At this point, you may be wondering why the title of this column refers to lessons for Hillary when I’m writing about state tax policy.

The answer is that she wants to do for America what Jerry Brown is doing for California.

Check out these passages from a column in the Wall Street Journal by Alan Reynolds, my colleague at the Cato Institute.

Hillary Clinton’s most memorable economic proposal, debuted this summer, is her plan to impose a punishing 43.4% top tax rate on capital gains that are cashed in within a two-year holding period. The rate would drift down to 23.8%, but only for investors that sat on investments for six years. This is known as a “tapered” capital-gains tax, and it isn’t new. Mrs. Clinton is borrowing a page from Franklin D. Roosevelt, who trotted out this policy during the severe 1937-38 economic downturn, dubbed the Roosevelt Recession.

FDR had so many bad policies that it’s difficult to pinpoint the negative impact of any specific idea.

But there’s certainly some evidence that his malicious treatment of capital gains was spectacularly unsuccessful.

In the 12 months between February 1937 and 1938, the Dow Jones Industrial stock average fell 41%—to 111 from 188.4. That crash presaged one of the nation’s worst recessions, from May 1937 to June 1938, with GDP falling 10% and industrial production 32%. Unemployment swelled to 19% from 14%. Harvard economist Joseph Schumpeter, in his 1939 opus “Business Cycles,” noted that “the so-called capital gains tax has been held responsible for having accentuated, if not caused, the slump.” The steep tax on short-term gains, he argued, made it hard for small or new firms to issue stock. And the surtax on undistributed profits, Schumpeter wrote, “may well have had a paralyzing influence on enterprise and investment in general.” …A 2011 study from the Federal Reserve Bank of St. Louis reported…“The 1936 tax rate increases,” they concluded, “seem more likely culprits in causing the recession.” …A 2012 study in the Quarterly Journal of Economics attributes much of the 26% decline in business investment in the 1937-38 recession to higher taxes on capital.

So what’s Alan’s takeaway?

Hillary Clinton’s fix for an economy suffering under 2% growth is resuscitating a tax scheme with a history of ushering in recessions. The economy would be better off if the idea remained buried.

Maybe we should ask the same policy about her that we asked about FDR: Is she misguided or malicious?

P.S. Some folks may argue that Hillary has more leeway than governors to impose class-warfare tax policy because it’s harder to emigrate from America than it is to move across state borders.

That’s true.

The United States has odious exit taxes that restrict freedom of movement. And even though record numbers of Americans already have given up their passports, it’s still a tiny share of the population.

Likewise, not that many rich Americans have taken advantage of Puerto Rico’s status as a completely legal tax haven.

But while it’s true that it’s not easy for an American to escape the jurisdiction of the IRS, that doesn’t mean they’re helpless.

There are very simple steps that almost all rich people can take to dramatically lower their tax liabilities. So Hillary and the rest of the class-warfare crowd should think twice before repeating FDR’s horrible tax mistakes.

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In most cases, I can understand why immigration is a controversial issue.

Take amnesty, for instance. Opponents make reasonable points about the downside of rewarding folks who cut in line while supporters make reasonable points about deportation being harsh and impractical.

There’s also a fight relating to welfare, with critics (and not just in America) saying that immigrants are more likely to be poor and a burden on taxpayers and advocates pointing out that it makes more sense to wall off the welfare state rather than walling off the country.

The “anchor baby” issue is another emotional topic, with people on both sides of the issue making both legal and practical arguments about whether children born in the United States should automatically become citizens.

And then there’s the biggest question of all, which is deciding on the “right” number of immigrants, with answers ranging from none to completely open borders.

I get why these topics don’t have answers that are satisfactory to all sides.

But there is one immigration controversy that leaves me most puzzled. Why are some people opposed to the “EB-5” program designed to attract rich investors to America?

As I noted when defending Governor Scott Walker’s support for the program, this should be a slam-dunk issue. The program attracts people who will create jobs and won’t be a burden on taxpayers. Isn’t that a win-win situation?

Apparently not. Check out these excerpts from a hostile column by Kenric Ward in Roll Call.

Set to expire by year end, the EB-5 immigration program is up for renewal on Capitol Hill. Can Americans expect the biggest supporters of controversial investor visas to bring them under control? There are ample reasons to scrap the pay-for-play system that has been exposed by numerous government investigations. …Ostensibly, the EB-5 program uses foreign capital to create U.S. jobs. In fact, no one knows how many jobs. No one knows exactly where the money comes from, or where it winds up. Such niggling details don’t matter to lawmakers. They glibly call EB-5 a job-creating tool. That’s their story, and they’re sticking to it. …a visas-for-cash program was ill-conceived and ultimately unenforceable. The American model that uses hundreds of freewheeling middlemen as “job creators” is even more ripe for cronyism and outright fraud.

By the way, Mr. Ward makes a very valid point about cronyism. I’ve also criticized this aspect of the program, which almost seems designed to reward politicians and other insiders.

But I don’t want to throw the baby out with the bathwater.

Other people, however, think the baby is the problem.

This Washington Post story basically says the program is unfair because rich people get to come to America.

…unions and immigrant advocates are focusing attention this week on a federal visa program that they deride as “Immigration Reform for the 1%.” The target of a series of press conferences in a half-dozen cities is the EB-5 immigrant investor program, which allows foreigners to get green cards by investing at least $500,000 in American businesses, as long as the money creates at least 10 jobs. Created by Congress in 1990 as a way to stimulate the U.S. economy, the program is supported by business groups and has increasingly been used in recent years by real estate developers and other firms seeking foreign investors. …“We have this program that gives a pretty fast track to immigrants from the 1 percent and gives incredible advantages to developers,” said Isaac Ontiveros, a research analyst for UNITE HERE, a union that represents nearly 300,000 hotel, casino and food service workers. He estimated that one-third of businesses funded by EB-5 are hotels or casinos.

Though I wonder whether Mr Ontiveros is simply looking to hold up reauthorization of the program in hopes of adding amnesty to the legislation.

Ontiveros added: “How does this help the 11 million people in this country who are stuck in immigration reform limbo?” …some critics saying the program doesn’t do enough to benefit targeted poor areas, especially rural ones… Ontiveros said…“We want those in Congress and at the local level to be aware of the inequities of this program,” he said.

In any event, I actually agree with Ontiveros that the program is inequitable. But that’s precisely the point. Lawmakers in America are picking and choosing who to let in the country and they’re deciding that it’s better to have successful investors.

Now let’s look at the issue from the other side. Why do upper-income people from overseas want to become Americans?

Well, an article in Quartz explains that they often come from nations that have unpalatable policies and that they want greater long-run stability.

The world’s wealthy and super-rich are increasingly on the hunt for second passports as they seek to protect their wealth, optimize their children’s education and move to countries with…greater economic and political stability. A report from New World Wealth reveals the top eight countries that have become popular second citizenship destinations for 264 000 of the world’s millionaires from 2000-2014. …Most countries with large outflows of millionaires have stringent tax regimes, prompting the super-rich to move to countries that are more favourable for their wealth.

This chart shows the countries with the greatest number of departing millionaires.

I imagine that folks escape France and Italy because of excessive taxation, while they leave the other countries because of a desire to redomicile in places where the quality of life is better and rule of law is stronger.

By the way, it’s a good sign when rich people want to come to the United States and a worrisome indicator when they don’t. Indeed, America would attract more really rich people if we didn’t have an onerous worldwide tax system.

P.S. In my humble opinion, the most troubling aspect of our immigration system is the way the refugee program is funding terrorists with welfare checks.

P.P.S. To close on a happier note, here some immigration-themed humor, starting with this amusing video about Americans sneaking into Peru and ending with this satirical column about Americans sneaking into Canada.

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I can understand why immigration reform is so contentious since it touches on all sorts of hot-button issues, such as jobs, politics, national identity, and the welfare state.

But I don’t understand why there’s a controversy just because Governor Walker of Wisconsin supports a specific part of the immigration system that provides easier access for foreigners who are willing to invest money and create jobs in America.

Seems like a win-win situation, but check out these excerpts from a report in the Milwaukee Journal Sentinel.

We’ll start with a description of the program.

Congress created the EB-5 program in 1990… Under the Citizenship and Immigration Services’ Immigrant Investor Program, foreigners can obtain these visas by investing $500,000 in high unemployment areas — or $1 million elsewhere — in projects generating or saving 10 jobs over two years. According to The New York Times, the federal government puts the green card applications from these foreign investors on the fast track. In general, it takes about two years to obtain legal residency through the program; other visa programs take much longer.

Not let’s get to the controversy over Governor Walker’s support.

…there’s one federal visa program you won’t hear him attack. It’s the controversial and deeply troubled immigrant investor program. The program — known as EB-5 — puts wealthy foreigners on the path to U.S. citizenship if they invest at least $500,000 in an American commercial project that will create or preserve 10 jobs. Critics have called the abuse-riddled program a “scam” that essentially sells green cards to the affluent and their families, with more than 80% of those in the program coming from China. …David North, a fellow with the conservative Center for Immigration Studies, said…the program is flawed in its premise. “I think it’s immoral, fattening and otherwise unattractive to sell visas, which is what we’re doing now,” North said.

By thew way, there are reasons to be unhappy about the EB-5 program, at least in the way it operates.

I’ve already shared examples of how political insiders are manipulating the program for cronyist purposes.

But today let’s look at the concept of whether it’s good to have an “economic citizenship” program.

And we’ll start the very relevant point that any immigration system is going to be arbitrary.

  • A lottery system is arbitrary because you get to come to America because of luck.
  • A family-reunification system is arbitrary because you get to come to America because of your genes.
  • A system based on refugee status is arbitrary because you get to come to America based on geopolitical circumstances.
  • Even an “open borders” system is arbitrary because you don’t get to come to America if you’re a terrorist, criminal, have communicable diseases, etc.

So if a system is going to be based on arbitrary factors, what’s wrong with deciding that one of the criteria is economic benefit to the United States?

Indeed, maybe I’m too myopic because of my background and training, but it seems like economic benefit should be a factor that everyone can support. After all, these won’t be people seeking handouts from the welfare system.

Consider these passages from a recent New York Times story about all the EB-5 money that’s boosting the Empire State’s economy.

Through a federal visa program known as EB-5, foreigners, more than 80 percent of them from China, are investing billions of dollars in hotels, condominiums, office towers and public/private works in the hope it will result in green cards. Twelve-hundred foreigners have poured $600 million into projects at Hudson Yards; 1,154 have invested $577 million in Pacific Park Brooklyn, the development formerly known as Atlantic Yards; and 500 have put $250 million into the Four Seasons hotel and condominium in the financial district. The list of projects involving EB-5 investments also includes the International Gem Tower on West 47th Street and the New York Wheel on Staten Island. …In the last four years, the program’s popularity has surged. In fiscal year 2010, 1,885 visas were issued. But by fiscal year 2013 that figure jumped 354 percent to 8,564, according to government data. Last year, the entire annual allotment of 10,000 visas had been claimed by August — before the end of the fiscal year in October. This year the quota was reached even earlier, on May 1.

As an aside, this program isn’t attractive to those with lots of money because of America’s punitive tax system.

“This program is not for the very rich in China, because the superwealthy do not want to pay U.S. taxes.” Instead, he said, the wealthiest Chinese prefer to have their legal residences in low tax jurisdictions like Hong Kong or Singapore, and then take advantage of 10-year tourist visas to the United States.

While I’m tempted to now explain why we should fix our bad tax system, let’s stick to the topic of immigration and delve further into the issue of whether it’s good to attract economically successful foreigners to America.

Some scholars say the answer is yes, but they think the EB-5 program is inefficient.

Here’s some of what Professor Eric Posner of the University of Chicago Law School wrote for Slate.

The program is a mess. …it’s almost impossible to figure out whether a specific investment generates jobs rather than reshuffles them from one place to another. There have also been examples of outright fraud and political cronyism. Part of the problem is a lack of documentation but the real problem is that the program is misconceived. …the price we charge for citizenship is extraordinarily low. …A shrewd investor will find an investment that pays a couple percentage points below the market rate. If he invests $500,000 in order to obtain, say, a 6 percent return rather than an 8 percent return, then the true price he pays for U.S. citizenship is $10,000 in foregone return.

So what’s the alternative?

Gary Becker, the late University of Chicago economist and Nobel laureate, once proposed that the United States should sell citizenship to foreigners for a flat fee. The EB-5 program approximates Becker’s proposal, albeit in the most inefficient way possible. Becker argued that citizenship is a scarce good just like tomatoes and hula hoops, and is thus subject to the law of supply and demand. America owns visas and should sell them to willing buyers at the market-clearing price. We would attract immigrants who are skilled enough to earn wages that would cover the fee, and we would gain again from the tax on their wages once they began work in this country. These types of immigrants—the ones who could afford the fee—would be least likely to burden the public fisc by needing welfare payments.

The Becker plan, which Posner basically supports, certainly would be simpler than the EB-5 program.

And it presumably eliminates the instances of corrupt cronyism that taint that otherwise good system.

Moreover, many of the nations with economic citizenship programs use this approach.

But here’s the downside. If you sell citizenship directly, the money goes to the government rather than to the productive sector of the economy.

That might be acceptable if it meant that the politicians reduced or eliminated some tax. But I fear the real-world impact would be to simply give the crowd in Washington more money to waste.

So perhaps the real challenge is to figure out some smarter way of operating the EB-5 program so we get even more private investment and job creation while also reducing opportunities for cronyist intervention.

P.S. If you want to enjoy some immigration-themed humor, here’s some involving Peru and Canada.

P.P.S. While I don’t like government getting more money, that shouldn’t be the only factor when grading a policy proposal. I fretted, for instance, that pot legalization in Colorado would be a mixed blessing because it would generate more tax revenue. But thanks to Colorado’s Taxpayer Bill of Rights, the politicians haven’t been able to spend all the new money, so it’s unambiguously a win-win situation.

P.P.P.S. The Princess of the Levant is in America because of the immigration lottery, so I certainly won’t be complaining too much about arbitrary systems. [correction: The PoTL has informed me that her U.S. residency is the result of her grandfather’s application and not the lottery]

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