I’m just returning from a week-long driving trip from where I’m currently living outside Brussels, through Luxemburg, Germany and Austria. I did my best to tune out politics and policy debates, and just enjoy the beautiful cities and scenery (truly Bavaria and Western Austria have to be some of the prettiest and most pleasant places on Earth).
Yet one conversation with an Austrian friend, a highly regarded banker, brought home to me just how profound the crisis is that faces our country. This man is generally a fan of America, believes in capitalism and free markets, and worries that the best things about Europe are threatened by the insupportable welfare state that drains not just money, but initiative and gumption, from Europe.
He was sad in reporting his changing perception of America. His firm now avoids taking on U.S. clients—even extremely wealthy ones, which not long ago would have been considered big gets—because of the hassles of dealing with the U.S. regulatory regime. Having a U.S. passport was once seen as a golden ticket, the chance to participate in the most dynamic, innovative, growth-oriented economy in the world. Now a U.S. passport is considered, at least in part, a tremendous liability since it means one is subjected to an aggressive tax and regulatory regime without borders. We discussed the high-profile case of the Facebook mogul renouncing his citizenship, but he suggested it’s more commonplace and alarming than that the hoopla surrounding that event would suggest. He said wealthy people he knows and works with regularly weigh the costs and benefits of have U.S. citizenship and entertain the idea of renouncing it.
This friend is no fan of Obama, but saw this problem as much bigger than one man or just this Administration. America’s regulatory and international tax system has become such a nightmare that many simply don’t want to do business with the U.S. and think that excluding the U.S. is a viable, attractive, option.
This is truly alarming. Most Americans, myself included, take for granted that we are a country where people want to come and do business. Yet we are losing this position. Just as the real cost of welfare system isn’t just the dollars transferred to one party to the next, but the perverse incentives it creates and the good behavior it discourages, it seems the real costs of our regulatory and tax systems isn’t limited to the simple costs of compliance. It is also the business activity and investment that America loses by pushing potential partners away, and, just as disturbingly, the destruction of America’s reputation as the Land of Opportunity, where hard work and talent can take you anywhere.
We’ve relied on this reputation to attract the best and brightest from around the world to come and work with us. This is fading and will continue to fade unless we change course quickly.