Taxation and the right of exit

The Economist's Free Exchange writes that many higher-earning Danes are voting on its tax regime . . . with their feet:

None of this is to say that the strains of commitment in Denmark have imperiled its stability in the near term. But as the low-tax, high-growth EU entrants from the east close in on the west, competition for both human and financial capital will intensify, drawing away ever more well-educated, cosmopolitan Danes-- unless they are given sufficient incentive to stay put. In effect, free migration within Europe allows wealthier Danes to bargain to keep a greater portion of their earnings. The interesting question is how hard they will bargain.

The numbers don't seem that large, but they come out of Denmark's most valuable human capital; the immigrants flowing the other way tend to be much lower skilled.

It is hard for high levels of taxation to survive a right of exit; Europe has mostly been protected (so far) by its many languages, which make it harder to move. But as the EU increases labor mobility, expect to hear more about harmful tax competition. Or more American-style efforts to keep the citizenry from moving abroad to work1.


1In case you didn't know, America, alone among developed countries, taxes the foriegn earnings of its expatriates. Also alone among developed countries, it holds you liable for taxes ten years after you renounce your citizenship, and confiscates your property if it determines that you have renounced your citizenship for the purposes of tax avoidance.

Presented by

Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

The Case for Napping at Work

Most Americans don't get enough sleep. More and more employers are trying to help address that.

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register.

blog comments powered by Disqus

Video

The Case for Napping at Work

Most Americans don't get enough sleep. More and more employers are trying to help address that.

Video

A Four-Dimensional Tour of Boston

In this groundbreaking video, time moves at multiple speeds within a single frame.

Video

Who Made Pop Music So Repetitive? You Did.

If pop music is too homogenous, that's because listeners want it that way.

Video

Playing An Actual Keyboard Cat

A music video transforms food, pets, and objects into extraordinary instruments.

Video

Stunning GoPro Footage of a Wildfire

In the field with America’s elite Native American firefighting crew

Video

The Man Who Built a Forest Larger Than Central Park

Since 1979, he has planted more than 1,300 acres of trees.

More in Business

Just In