A Tax-Credit Approach to Addressing Brain Drain
Matthew Lister*
The full text of this article can be found in PDF form here.
INTRODUCTION
This Paper is addressed to the problem of so-called 鈥渂rain drain鈥� from developing, and especially least developed, countries to highly developed countries. In particular, I will focus on a specific sort of brain drain, and offer an approach to addressing the problem. I shall argue that the approach proposed here offers a more plausible and fairer way to ameliorate the bad effects of certain sorts of brain drain than do rival approaches. It is important to note that I do not here offer a 鈥渟olution鈥� to the problem of brain drain. I am not sure that this is a problem that has, on its own, a 鈥渟olution鈥� without addressing much more difficult and far-reaching issues relating to development and global justice. But, this is a problem that can be addressed in many possible ways. I claim that the approach I argue for here has several advantages over rival views and has some intrinsically attractive features as well. It will not eliminate the root problem, but doing that is, at best, a very long-term project. What I will offer here is a step toward addressing problems associated with certain types of brain drain without creating significant new ones.
Currently, many developing and least developed countries suffer serious shortages of skilled professionals鈥攄octors, teachers, engineers, nurses, economists, lawyers, and others. This shortage stems not only from a lack of capacity to train professionals, but also due to the large number of such professionals leaving for higher salaries, better working conditions, and more stable lives in developed countries. While the desire to better one鈥檚 life can hardly be faulted, this movement of skilled professionals has contributed to underdevelopment, poverty, and unacceptable levels of provision of education, health care, and governmental administration in much of the developing world.
I. THE PROPOSAL
Put most briefly, with details to come, my proposal is to use a sort of tax credit roughly akin to the foreign tax credit currently available to U.S. citizens living and working abroad, to compensate developing countries that suffer a loss in the type of situation I will specify below. To over-simplify, the United States (atypically, in comparison to most other countries) currently considers the worldwide income of its citizens as taxable. This potentially subjects U.S. citizens living and working abroad to crushing double taxation. However, this risk is greatly reduced by the availability of foreign tax credits, which allow U.S. citizens to receive a credit against their U.S. taxes for taxes paid to the countries in which they live. Under my proposal, citizens of selected countries working in the United States or other highly developed countries who meet the other criteria discussed below would be charged income tax by their home countries equivalent to what someone making the same income in the home country would be charged. This tax, to be collected by the country of employment, would be credited against taxes owed in the country of employment, and would be returned to the home country, thereby compensating, at least to a degree, the home country for the lost investment in the human capital of the citizen working abroad. The details of the proposal, and its advantages over alternatives, are spelled out below.
*Senior Lecturer (associate professor), Deakin University School of Law (Australia) & Senior Fellow, Zicklin Center for Business Ethics Research, University of Pennsylvania. Earlier versions of this Paper were presented at the Pacific Northwest Political Science Conference in Portland, Oregon in 2016 and at the Taxation and Migration symposium at the St. Louis University School of Law. My thanks to Alex Sager, Shelley Wilcox, Alex Lenferna, Andrew Valls, Burke Hendrix, Gillian Brock, William Thomas Worster, Lukas Moravec, Jan Rohan, David Elkins, Allison Christians, Leila Adim, Cristina Trenta, Chad Flanders, and Henry Ordower for helpful comments and discussion.