Capital Controls, The Real US Border Fence

Politics / US Politics
Aug 12, 2010 - 02:46 AM

By: Jennifer_Barry

You probably haven’t heard of capital controls, but they are common around the world. These mechanisms can control the inflows of money into a country or money leaving the nation or both.

Why do countries impose capital controls? Governments may try to limit inflows if they believe their currencies or stock markets are appreciating too fast, or they may slow outflows because they fear crashes like the Asian Financial Crisis of 1997-8.

It may come as a surprise to many Americans, but the US already has some soft capital controls. Two years ago, an exit tax was quietly slipped into the Heroes Earnings Assistance and Relief Act of 2008 (also known as the HEART Act). As I discussed in the November 2008 newsletter, the US is the only nation that levies income tax on money earned abroad. Since Americans could escape this burden ten years after renouncing US citizenship, and foreign residents could always return home, Congress decided to close this “loophole.â€