Stoll: Right To Leave U.S. Could Be Trumped by 30% Tax

Monday, 21 May 2012 09:35 PM

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Call it the return of the Reichsfluchtsteuer.

The president of Americans for Tax Reform, Grover Norquist, did not use the term. That is what Mr. Norquist was talking about, though, when he spoke to The Hill newspaper about the legislation proposed by Sen. Schumer, the Democrat of New York, to tax at a 30 percent rate the $2 billion capital gains of Facebook co-founder Eduardo Saverin, who renounced his American citizenship before Facebook’s initial public offering.

Sen--Charles-Schumer,-D-N-Y-,-left,-accompanied-by-Sen--Bob-Casey,-D-Pa.jpg
Sen. Charles Schumer (left) and Sen. Bob Casey arrive for a news conference to unveil their proposed response to Facebook co-founder Eduardo Saverin's decision to renounce his U.S. citizenship.
(AP Image)
“I think Schumer can probably find the legislation to do this. It existed in Germany in the 1930s and Rhodesia in the ‘70s and in South Africa as well,” Norquist said. “He probably just plagiarized it and translated it from the original German.”

The Reichsfluchsteuer, or Reich flight tax, that German government imposed on Jews trying to flee in the 1930s was 25 percent; Schumer and his Senate colleague Bob Casey, Democrat of Pennsylvania, want 30 percent. Give Schumer some credit for creativity.

According to Norquist, the New Yorker did not just plagiarize and translate. He also raised the rate. (Norquist’s comment was a variation on Molly Ivins’ comment about Patrick Buchanan’s speech to the 1992 Republican National Convention, that it sounded better in the original German.)

Sen. Schumer is an easy target, but the blame for this one is bipartisan, as is so often the case in Washington. The speaker of the House, John Boehner, a Republican, told ABC News’ “This Week” that Saverin’s exit from America was “outrageous” and that he would support Schumer’s legislation if it is necessary to prevent people from leaving America to avoid taxes.

The law that imposed the exit tax Saverin was trying to avoid, the Heroes Earnings Assistance and Relief Tax Act of 2008, was signed into law by a Republican president, George W. Bush, after being passed in the Senate by unanimous consent and in the House by a vote of 403 to 0.

Schumer would surely bridle at having his exit-tax policy compared to that of the Nazis, as would Boehner, so let me be clear: The Reichsfluchsteuer was originally imposed not by the Nazis, but, rather, on Dec. 8, 1931, by the pre-Hitler, centrist government of Heinrich Brüning, who had a doctoral degree in economics.

As Howard Ellis wrote in “Exchange Control In Central Europe,” published in 1941 by Harvard University Press, “it is worth remarking that the National Socialists inherited it from Social Democrat supported coalition governments after nearly two years of elaboration.”

Others have observed that it is not the only parallel that can be drawn between today’s era and the Weimar Republic, which featured high unemployment, deficits, and the threat of inflation.

Ellis writes that the exchange control policy remained in place “because it was an instrument par excellence of political power,” and concludes, “the political predecessors of Hitler nurtured an institution which paved the way for totalitarianism.”

Ellis’s account was later challenged by Frank C. Child, who was chairman of the economics department of the University of California, Davis, from 1963 to 1980. In his 1958 book “The Theory and Practice of Exchange Control in Germany,” Child complained that critics of the German policies “reflect prejudices based upon distaste for Nazi political, social, and idealogical [sic] tenets.”

Moreover, Child wrote, the critics suffer from “an apparent preconception that free trade and free markets guarantee the best of all possible worlds and that any departure from free and impersonal markets, by definition, reduces the welfare of each and every nation. This is a demonstrably false proposition.”

As Holman Jenkins noted in the Wall Street Journal, Sen. Schumer’s sally against Saverin comes amid the implementation of the U.S. Foreign Account Tax Compliance Act, which makes it harder for Americans to get money out of the country.

The left will already be furious about this column for its mention of Nazi Germany in the context of capital gains taxes.

Let me conclude by getting the right angry, too, by invoking the Universal Declaration of Human Rights, a product of the United Nations.

It says, “Everyone has the right to leave any country, including his own” and “No one shall be arbitrarily deprived of his property.”

What meaning does a right to leave have if the government is going to help itself to 30 percent of the migrant’s property on the way out?

Ira Stoll is editor of FutureOfCapitalism.com and author of Samuel Adams: A Life.

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