Trump wants a certain kind of immigrant: the uber-rich
Mr Trump’s promise to exempt income that gold-card recipients earn elsewhere would be a huge draw.
IN HIS LOVE of lucre Donald Trump can be crass. In their pursuit of efficiency, free-marketeers can be, too. Consider the sale of citizenship. Most people dislike the idea of treating national belonging as a commodity. Yet a dozen or so countries hawk passports and more than 60, including America, offer residency in exchange for an investment or donation. The country’s “golden visa” scheme is cumbersome, underpriced and inefficient. On this point, the president and the market agree.
Mr Trump intends to raise the cost of such a visa to $5m (see chart). Beyond price, details about his plans remain hazy. Will the $5m fee be a donation or a recoupable investment? Howard Lutnick, the commerce secretary, says it will go towards paying down the national debt, implying the former.
The visa will allow permanent residence with a route to citizenship. Generously, Mr Trump says that recipients will not have to pay tax on income earned abroad—an exemption unavailable to citizens and green-card-holders. The Department of Government Efficiency is reportedly building software to administer it. Mr Trump has signed no executive order to launch the scheme; lawyers suspect Congress would need to authorise it.
Setting aside whether the president can singlehandedly dispense the cards, his proposal raises questions. The Trump team says it can sell 1m, raising $5trn. That would be a colossal amount, enough to pay off a seventh of America’s debt. Mr Lutnick says the target market is the 37m people who can afford the card globally.
For their part, immigration lawyers report lots of inquiries. People will pay good money to live in America. The current golden visa, known as EB-5, is hugely over-subscribed. Like many schemes elsewhere, it requires an investment, which starts at $800,000 and can be recouped. The programme caps visas at 10,000 a year. Demand is highest among Chinese and Indian citizens. Since applicants queue by country and each country gets the same maximum number, China and India have the biggest backlogs. Chinese people can wait ten years for a visa; Indians, five.
America’s government could get a better deal from the EB-5: it is a sop to the property industry more than a boon to public finances. Investments are structured as low-interest loans and each has to create ten jobs, a provision that helped make the scheme palatable to Congress. Investors accept paltry, below-market returns—typically between 0.5% and 1% on invested capital—as the cost of the visa, says Madeleine Sumption of the University of Oxford. It has ended up being a gravy train for developers and middlemen.
Mr Trump is right that some foreigners will pay more for speed and ease, and that donations to the Treasury would make a difference to public finances. Small island states—some Caribbean countries, Malta, Vanuatu—make a killing on passport sales. There they can represent a double-digit share of government revenue, notes Kristin Surak at the London School of Economics. The impact of the gold card in America would be smaller, but still substantial.
Heavy weather
Even so, the forecast of 1m sales looks as misjudged as a fur stole on a sweaty night at Mar-a-Lago. The immigration-investment industry’s rule of thumb is that clients should not tie up more than a tenth of their net worth in an investor visa. That means gold-card applicants would need to be sitting on at least $50m. There are only about 100,000 such high-fliers around the world and most are already in the land of the free, says Dominic Volek of Henley & Partners, an adviser to the footloose ultra-rich. To find the optimal visa price Mr Trump could run an auction; so far he has given no indication that he will.
The tax issue is a big and important unknown. Mr Trump’s promise to exempt income that gold-card recipients earn elsewhere would be a huge draw. If not for the tax liability, demand for an EB-5 would be even higher. But such a carve-out would prompt howls from everyone else. Congress would have to change the tax code, which seems unlikely. Not granting the exemption would further temper demand.
As a consequence, it is hard to imagine tens, let alone hundreds, of thousands of millionaires each year taking a hefty sunk cost and high taxes to skip the queue. Mr Volek expects just a couple of thousand gold-card applicants a year at the price of $5m. After all, there are cheaper ways for rich people to get into America: some can gain an E-2 visa by investing in an American firm; company owners can open a subsidiary and transfer on an L-1. Although Mr Trump says his gold card will replace EB-5, it is inscribed in law until 2027.
Industry insiders report that it is actually Americans clamouring for other countries’ visas. This may pick up if Mr Trump tanks the economy, says Mona Shah, a British lawyer in New York. “I’m feeling it as well,” she sighs. “I still miss Europe.” As it happens, an EU passport courtesy of Malta goes for around €1m ($1.1m).
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IN HIS LOVE of lucre Donald Trump can be crass. In their pursuit of efficiency, free-marketeers can be, too. Consider the sale of citizenship. Most people dislike the idea of treating national belonging as a commodity. Yet a dozen or so countries hawk passports and more than 60, including America, offer residency in exchange for an investment or donation. The country’s “golden visa” scheme is cumbersome, underpriced and inefficient. On this point, the president and the market agree.
Mr Trump intends to raise the cost of such a visa to $5m (see chart). Beyond price, details about his plans remain hazy. Will the $5m fee be a donation or a recoupable investment? Howard Lutnick, the commerce secretary, says it will go towards paying down the national debt, implying the former.
The visa will allow permanent residence with a route to citizenship. Generously, Mr Trump says that recipients will not have to pay tax on income earned abroad—an exemption unavailable to citizens and green-card-holders. The Department of Government Efficiency is reportedly building software to administer it. Mr Trump has signed no executive order to launch the scheme; lawyers suspect Congress would need to authorise it.
Setting aside whether the president can singlehandedly dispense the cards, his proposal raises questions. The Trump team says it can sell 1m, raising $5trn. That would be a colossal amount, enough to pay off a seventh of America’s debt. Mr Lutnick says the target market is the 37m people who can afford the card globally.
For their part, immigration lawyers report lots of inquiries. People will pay good money to live in America. The current golden visa, known as EB-5, is hugely over-subscribed. Like many schemes elsewhere, it requires an investment, which starts at $800,000 and can be recouped. The programme caps visas at 10,000 a year. Demand is highest among Chinese and Indian citizens. Since applicants queue by country and each country gets the same maximum number, China and India have the biggest backlogs. Chinese people can wait ten years for a visa; Indians, five.
America’s government could get a better deal from the EB-5: it is a sop to the property industry more than a boon to public finances. Investments are structured as low-interest loans and each has to create ten jobs, a provision that helped make the scheme palatable to Congress. Investors accept paltry, below-market returns—typically between 0.5% and 1% on invested capital—as the cost of the visa, says Madeleine Sumption of the University of Oxford. It has ended up being a gravy train for developers and middlemen.
Mr Trump is right that some foreigners will pay more for speed and ease, and that donations to the Treasury would make a difference to public finances. Small island states—some Caribbean countries, Malta, Vanuatu—make a killing on passport sales. There they can represent a double-digit share of government revenue, notes Kristin Surak at the London School of Economics. The impact of the gold card in America would be smaller, but still substantial.
Heavy weather
Even so, the forecast of 1m sales looks as misjudged as a fur stole on a sweaty night at Mar-a-Lago. The immigration-investment industry’s rule of thumb is that clients should not tie up more than a tenth of their net worth in an investor visa. That means gold-card applicants would need to be sitting on at least $50m. There are only about 100,000 such high-fliers around the world and most are already in the land of the free, says Dominic Volek of Henley & Partners, an adviser to the footloose ultra-rich. To find the optimal visa price Mr Trump could run an auction; so far he has given no indication that he will.
The tax issue is a big and important unknown. Mr Trump’s promise to exempt income that gold-card recipients earn elsewhere would be a huge draw. If not for the tax liability, demand for an EB-5 would be even higher. But such a carve-out would prompt howls from everyone else. Congress would have to change the tax code, which seems unlikely. Not granting the exemption would further temper demand.
As a consequence, it is hard to imagine tens, let alone hundreds, of thousands of millionaires each year taking a hefty sunk cost and high taxes to skip the queue. Mr Volek expects just a couple of thousand gold-card applicants a year at the price of $5m. After all, there are cheaper ways for rich people to get into America: some can gain an E-2 visa by investing in an American firm; company owners can open a subsidiary and transfer on an L-1. Although Mr Trump says his gold card will replace EB-5, it is inscribed in law until 2027.
Industry insiders report that it is actually Americans clamouring for other countries’ visas. This may pick up if Mr Trump tanks the economy, says Mona Shah, a British lawyer in New York. “I’m feeling it as well,” she sighs. “I still miss Europe.” As it happens, an EU passport courtesy of Malta goes for around €1m ($1.1m).
For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter.
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