In the latest Index of Economic Freedom, the United States fell to 9th in the world. The writer of the following letter in today’s Wall Street Journal brings up an aspect of economic freedom — the freedom to leave the country without being penalized — that the Index apparently doesn’t include. That freedom is also eroding.
Freedom Means Free to Leave, Too
Regarding Terry Miller’s “The U.S. Loses Ground on Economic Freedom” (op-ed, Jan. 12): For all of its methodological strength, the Index of Economic Freedom entirely leaves out one of the most treasured individual freedoms?the freedom to migrate out of one’s own country without undue interference from government. As long as a person has remained current on tax payments, the ability to leave a nation to establish citizenship elsewhere should be a sacrosanct human right. As Article 13 of the Universal Declaration of Human Rights states: “Everyone has the right to leave any country, even his own.”
In the U.S., the economic penalty for permanent expatriation is so severe that it is unduly burdensome to exercise the “right to emigrate.” If the Index were to account for this freedom (or lack thereof), there is no doubt that our country would finish even further down the list.
Under U.S. tax law, a citizen who wishes to renounce his citizenship must pay a mark-to-market exit tax. This tax treats all assets in excess of $600,000 as if they had been sold, and thus liable for immediate payment of capital gains taxes. There is also a 10-year reporting requirement to the IRS, post expatriation.
Other countries have found more fair ways to deal with this issue. Ireland taxes its expatriating citizens only when they actually sell their assets within three years of emigrating. Denmark gives its former citizens the option to pay when they sell their assets anytime in the future. Switzerland avoids a mark-to-market exit tax and requires only that a citizen be current on his existing taxes when he leaves.
Adding this metric would enhance an otherwise interesting set of measurements on economic freedom. It would also further demonstrate our eroding economic freedom.
James D. Jameson
Rancho Santa Fe, Calif.
