What’s the Plus?

 

Say what you like about Donald Trump, but he has shown that he has a strange ability to come up with quirky ideas. In last couple of days, the leader of the MAGA Church announced that the USA would be launching a “Gold Card” scheme for anyone willing to put five million dollars into the USA. In return they would get “Green Card Plus,” privileges.

You could say that anyone who voted for Mr. Trump because he would apply his business genius to running the country was getting precisely that. Mr. Trump, the so called savvy real estate man was doing to governing the superpower what he had done with his properties – keeping the “riff-raff” out and going all out to win the high rollers. More of the story ca be found at:

https://www.ft.com/content/d93a408e-b598-4e37-aad7-21f07d353c34

 

 In fairness to Mr. Trump, he’s been echoing what every country does with its immigration policy. If you look at just about every country on the planet, you’ll find that they’re all about trying to keep poor people out and getting rich people in. The only difference between Mr. Trump and the rest of the world is that he’s merely more vocal about it.

However, whilst I guess I get Mr. Trump is coming from, what is harder to get is the detail. What exactly is the “plus” when we talk about “Green Card” plus and what exactly is it that Mr. Trump is offering that would make the type of people who can chose the country rush over to America and why does America need to attract wealth?

Let’s face it, America remains the world’s leading wealth creating engine. Even the rise of China and India as strategic competitors, America’s role as the world’s wealth creator is secure. Rich Chinese and Indians keep a good portion of their fortunes in the USA as a “just in case” things go wrong.

America remains the home of the world’s largest corporations (particularly in the industries that matter) and has the world’s largest number of billionaires. According to the Forbes List of World’s Wealthiest, America has dominated the top ten since the 1990s. So, given the large number of super wealthy people in America, one has to ask, will attracting more super wealthy from elsewhere actually benefit America?

The American passport remains one of the world’s more attractive ones. Taxes are comparatively lower than in say the European Union at large (though Europeans would point out that there are more benefits that in Europe). There is a semblance of law and order in the parts of America that matter and as one American citizen pointed out, the US government will extract you out of difficult situations in various parts of the world.

Yes, America has plenty of great opportunities for professional middle class people. I think of the Indian IT industry, which developed because America was the best home for Indian IT people to do things.

However, what the “Gold Card” scheme is aimed at is not a working professional from a less developed nation hopping for a higher salary. It’s aimed that the people who don’t really need a day job.

I guess there is the element of security. As mentioned, a billionaire in a place like China would undoubtedly want to have a certain amount of money in the USA just in case the Communist Government in China turns nasty (which has happened). However, beyond that, its hard to think of what else the USA offers for potential investors from outside.

Perhaps the obvious might be tax. As mentioned, the USA has a relatively lower tax rate than most developed countries. Trump and his Republican predecessors have continuously cut taxes. Yet, despite this, America has an industry of experts telling wealthy people how to get second passports for less taxes.

If anything, the problem with getting the wealthy into America is not so much the tax bill but why you get charged tax. The USA remains one of the very few places that charges you for your citizenship rather than your residence. Under American law, US Citizens and Permanent residents are considered “US Persons,” and therefore have to file taxes even if they happen to be outside the USA. I still remember my internship in Citibank Singapore, where we simply could not sell financial products to “US Persons,” (of which I happened to be one as I was still a US Green Card holder at the time).

So, if you think about it, there is no reason for the super wealthy earning fortunes derived from elsewhere should invest to get “US Persons” tax status when they can invest in the USA through other means but gain residency in other more tax friendly places.

If Mr. Trump is serious about wanting to attract more wealthy residents to the USA, perhaps he should look at changing the tax system beyond cutting taxes.