In 2012, Puerto Rico was in the depths of a nearly decade-long recession and looming debt crisis.
The island had lost about 10% of its population— mostly young, educated professionals, i.e., the most lucrative members of its tax base.
So politicians did something radical: they established incredibly attractive tax incentives in order to attract new residents. Among others, the incentives provide a 4% corporate tax rate to approved businesses, and a 0% tax rate on investment income.
This attracted thousands of individuals and businesses from the US mainland.
That’s because, while US citizens typically have to pay taxes to the US government no matter where they live or earn their income, Puerto Rico is a rare exception where bona fide residents can escape US federal income taxes, according to the US tax code.
And Puerto Rico’s tax incentives were successful in attracting a lot of wealth to the island. In fact, I moved there myself and established a business under the incentives.
Countries often use their tax or immigration policies to attract new residents or businesses.
Also in 2012, for example, Portugal was facing a severe economic crisis. So in response, the government introduced its golden visa program, which provided residency to individuals who purchased qualifying real estate in the country.
The plan worked: by 2023, Portugal had issued over 11,000 golden visas to investors and 18,000 members of their families, attracting around €7 billion in foreign investment.
But by late 2023, after locals became fed-up with rising real estate prices, Portugal ended the real estate investment option.
But Portugal’s success inspired other European nations to launch similar programs. Some, like Spain’s, are also being terminated due to its success and rising real estate prices, while others programs like Greece’s, have merely raised the investment requirement. Still other countries, such as Hungary, are introducing their own programs.
Now, the United States is considering a similar approach with what the President is calling the “Gold Card” instead of “Green Card”.
At first glance that may seem seem odd, given that the US is already a highly attractive destination for investors and foreigners.
But the US is also the most indebted country in the history of the world. And it has a notoriously horrible immigration system.
For example, why on earth does the “Green Card Lottery” exist? The US should be awarding permanent residency to the best and brightest immigrants, not randomly picking out of a hat who gets to come in.
Unlike current US investor visas, the proposed “Gold Card” would require a significantly higher investment of $5 million, which is pretty steep just for residency.
But once again, the program it would replace is idiotic.
The existing US Immigrant Investor Program, the EB-5, requires an investment of around $1 million.
But it requires investors to navigate the Byzantine US immigration system. This includes submitting a business plan to State Department bureaucrats, as if they’re qualified to judge the merits of a business.
The old EB-5 program has injected billions into the US economy, but it has also faced scrutiny for fraud and administrative backlogs.
This proposed “Gold Card” visa differs in that it there is no mandate to generate US jobs, and there is no cap on the number of visas they can issue.
So the theoretical upper limit on revenue is huge.
The President mused, “if we sell a million, that’s $5 trillion… If we sell 10 million, which is possible — 10 million highly productive people coming in… that’s $50 trillion. That means our debt is totally paid off, and we have $15 trillion above that.”
Based on our analysis, we don’t think that’s a realistic estimate.
Outside of the United States, there are only about 120,000 “Ultra High Net Worth” individuals globally who are worth more than $50 million, according to UBS’ latest Global Wealth Reports.
So at a price tag of $5 million, those 120,000 people would be the primary target.
Even if half of them came to the United States, which is an extremely high estimate, it would be $300 billion, which doesn’t really move the needle.
But if they were to reduce the price tag to, say, $1 million, especially if it could be paid over time, then the global market could potentially generate millions of applications, and the total revenue potential for the federal government could go into the trillions.
It’s also worth pointing out that new foreign residents who cough up a million dollars to become new US residents should have a significantly positive impact on the economy.
The President also teased an idea of providing tax incentives as well, that they would only owe tax on their US income, and not their foreign income.
Currently, citizens and Green Card holders owe tax to the US government on their worldwide income. What the President is referring to is known as “non-domiciled” or “non-dom” tax regime, where only income earned in the US would be taxed.
“Non-dom” tax regimes are nothing new. The UK had a very popular one until they screwed it up last year. As a result, many welathy foreigners who were living in London are now fleeing to places like Switzerland, where you can negotiate a tax deal directly with the government.
There’s no clearer contrast to the right and the wrong approach to attracting wealth and talent to your country.
America should be considering all its options if there is any hope of reversing the decline.
And this is a good sign of that mindset. However, the outcome is still far from certain.
On the other hand, from an individual American’s perspective, it’s great that there are already golden visa programs around the world that can help you diversify internationally with foreign residency, property ownership, and investment.
Because if you live, work, invest, and have everything you hold dear in one jurisdiction (which happens to be the most indebted government in the history of the world) that’s a significant risk.
With problems the size of America’s, you don’t want all your eggs in one basket.
