everyday economics and tax impact

Unusual Ways to Achieve Deficit Reduction

by Elaine Schwartz    •    Apr 8, 2014    •    563 Views

Hoping to diminish their country’s deficit, last year, Malta’s President and Parliament decided to sell citizenship. The price tag is $891,000 and the perk is that Malta is in the EU. Consequently, you get an island home with a back door leading to the European Union. That means easy travel to the other 27 member states as well as to the 69 countries that offer visa free entry to EU citizens. Malta has contracted with a consulting firm to vet applicants. The firm charges a $95,000 application fee and gets a commission for every approval.

In the Caribbean, St. Kitts and Nevus, Antigua and Barbuda and Dominica also have citizenship price tags. For St. Kitts and Nevus, you could give $250,000 to a retired sugar workers fund or a $400,000 real estate donation.

Paying for US citizenship actually has been proposed by Nobel Prize winning economist, Gary Becker. In a Wall Street Journal opinion column, he and Edward Lazear suggested that people pay $50,000. Assuming we would continue at an annual rate of one million legal immigrants, a $50,000 per person fee would raise $50 billion. Becker and Lazear like the idea because of its market-based approach.

Currently we do have a much smaller program. The US will exchange 2 years permanent residence and citizenship in 5 years for a $1 million investment in a business with 10 or more people or $500,000 targeting an economically depressed area.

Our bottom line? A market-based solution to the immigration debate deserves some consideration. With deficit reduction one of its positive externalities, paying for citizenship has potential.

Sources and Resources: Between Slate and the NY Times, you can get a pretty good description of Malta’s “golden passport” program and its broader implications. Then, trying to take it a step further, Becker and Lazear provided a new approach that deserves some debate.



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