Thursday, July 25, 2019

Tax the Rich: not the Poor

Taxing Remittances? How About Taxing the Rich When They Send Their Money Abroad? The Trump hath tweeted, and proclaimed that he wants to subject Guatemalan imports to tariffs, and to subject the remittances that Guatemalan immigrants in the United States send back to their families in Guatemala to a tax. 

What, you may ask, has the little Central American nation done to deserve such treatment? Simple: Its Supreme Court has struck down the nation’s president’s agreeing to Trump’s insistence that the it must stop all Honduran and El Salvadoran refugees passing through Guatemala en route to the United States and compel them either to stay in Guatemala or to return from whence they came.

In other words, Trump is giving Guatemala a choice between death by shooting or death by hanging. The small and impoverished nation clearly has no capacity to house, employ, and provide services to hundreds of thousands of asylum seekers. Nor can it weather the imposition of tariffs on its exports to the U.S., which comprise 40 percent of all its exports. And it would fairly reel from a tax on remittances, which amount to 13 percent of the nation’s GDP. 

But if the Guatemalan high court doesn’t think the president there has the authority to accede to Trump’s demands, what would American courts say about Trump’s authority to punish Guatemala because he’s mightily pissed at it. POTUS can surely slap tariffs on a nation without congressional approval, but I have no idea whether he can slap a tax on individuals sending a portion of their wages across borders to their families. 

If the courts were to uphold such a tax, however, it could open the door for taxing what amounts to a real drain on U.S. resources—as the remittances to Guatemala decidedly do not. I’m referring to the more than trillions of dollars that U.S. corporations send abroad, to nations with lower tax rates and/or cheaper labor, and the billions that many super-wealthy Americans have secreted in such nations as well. While remittances to Guatemala have no effect whatever on the U.S. economy, and immigration from Central America has minimal effect on this nation of more than 320 million souls, the expatriation of investment, profit, and income that our corporations and mega-rich have engaged in has devastated much of our industry, reduced our tax base and concomitant public investment, and contributed greatly to the wage stagnation that has beset us for the past 40 years.  

Slapping a tax on Guatemalan remittances is pure Trumpian nationalism—that is, racist, symbolic posturing. Putting a progressive tax on dollars sent abroad rather than invested here at home, by contrast, is genuine economic patriotism. Which is why it will never be the subject of a favorable Trump tweet. ~ HAROLD MEYERSON

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