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02/10/2006 Archived Entry: "Proposal to tax foreign money transfers"
The Phoenix Business Journal reports, "A new state proposal asks voters to approve construction of a security wall along the Mexican border and pay for it via a new tax on wire transfers from Arizona to foreign countries." The reasoning behind the proposed tax: "Mexican immigrants and nationals working in the U.S. sent $20 billion back to Mexico in 2005, according to the Federal Reserve Bank in Dallas. The proposed ballot question would assess a new 8 percent tax on international money transfers from Arizona. Those funds would be used [to] construct the wall and pay for other border security efforts." In short, the State wants to make the Mexicans pay for the wall meant to keep them out. Of course, not wanting to discriminate against one nationality or ethnic group (horrors!), the proposed tax would be levied on all foreign money transfers, with the happy consequence (for the State) of more revenue. At least, in the short term. In the long term, the tax would devastate foreign investment in Arizona. What foreigner in his or her right mind would invest money in a State that charges 8% in order to access it from their home country? As always, the rich will find a way around the problem. For example, the foreigner might transfer the money to a more friendly/sane state from whence it can be more easily retrieved. But, even if Arizona didn't take steps to close such loopholes and to impose draconian penalties for trying to evade the tax, each and every step in accessing money invested in Arizona would increase the expense and inconvenience of doing so. Moreover, most of the people the tax will punish are not rich enough or are too law-abiding to take evasive measures. Just one example: hundreds of thousands of Canadians are snowbirds. Every winter, they point their cars and caravan southward, usually toward Florida or Arizona where they spend the coldest of Canadian months. And I do mean "spend." To Arizona, these migrants are a tremendous economic boon. They bring check books and credit cards, they eat in restaurants and stock up on gifts for their grandchildren, they create rather than take jobs and just generally represent 'found' money. But who would buy a second home in Arizona when moving money from its sale a few years down the line would cost them or their heirs an extra 8%? Given that the U.S. economy (and the dollar itself) is being propped up by foreign investment without which it would collapse, it is lunacy for any State to post a sign on its border that basically reads, "We don't need your stinking foreign money! We will punish you for investing it here!" The proposed tax reportedly has the support of Republicans.