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May 24, 2012
News Analysis: Throwing 'Nazi' Into the Tax Policy Debate
Joseph J. Thorndike

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When two Democratic senators proposed a bill to increase the penalties on billionaire expatriates, Grover Norquist, president of Americans for Tax Reform, offered a typically helpful suggestion. The lawmakers should look to Nazi Germany for inspiration, he said.

"I think Schumer can probably find the legislation to do this," Norquist told The Hill newspaper while discussing the bill proposed by Sens. Charles E. Schumer, D-N.Y., and Robert P. Casey Jr., D-Pa. "It existed in Germany in the 1930s and Rhodesia in the '70s and in South Africa as well." In fact, Norquist continued, Schumer "probably just plagiarized it and translated it from the original German."1

Norquist is, as usual, overstating his case. But his Nazi comparison found at least one defender. Writing for the normally levelheaded, Ira Stoll expanded on the comparison:

    The Reichsfluchtsteuer, or Reich flight tax, that the Nazis imposed on Jews trying to flee in the 1930s was 25 percent; Mr. Schumer and his Senate colleague Bob Casey, Democrat of Pennsylvania, want 30 percent. Give Mr. Schumer some credit for creativity, Mr. Norquist; the New Yorker did not just translate, he also raised the rate.

Where might that twisted logic take us? If tax penalties on expatriation are simply Nazi policy transplanted to Washington, what else might qualify?

1. Dependent exemptions and child credits

Pro-family tax incentives could be seen as being inspired by Nazi precedent. After all, in 1934 the Nazis introduced a special tax break to encourage large families. "Under the tax project, the burden of direct taxes varies according to the number of children in the family," reported The New York Times after a speech by Fritz Reinhardt, state secretary in the Nazi regime.2 The preference meant that large families with moderate incomes would avoid income taxes entirely.

The tax preference for large families might have been an inspiration for pro-family elements of the current U.S. tax system. In fact, to the extent that the child credit is refundable, it might be fair to say -- in a Norquistian sense -- that American lawmakers have out-Nazified the Nazis. Of course, the alternative minimum tax effectively curbs the policy for some taxpayers.

2. Industry-specific tax incentives

U.S. policymakers have been known to support industry-specific tax incentives. So did the Nazis. In an effort to boost hiring, Germany introduced in 1934 a special tax exemption for new automobiles. As a result, "there was greater demand for cars and consequently a reduction in unemployment and in relief cost," reported one Northwestern University economist writing in 1935.3 Can you say "domestic manufacturing incentive"?

3. Expensing

In a bid to encourage business investment, Germany allowed companies to deduct from taxable profits the full cost of new industrial and agricultural equipment purchased between June 30, 1933, and January 1, 1935. The incentive boosted machinery sales from 881 million reichsmarks in 1932 to more than 2 billion reichsmarks in 1934, according to contemporary reports.4 Sounds like fiscal stimulus to me.

4. Business Construction Incentives

The Germans granted a 10 percent rebate on corporate taxes to any company that spent an equivalent amount on industrial construction between June 30, 1933, and January 1, 1935. Another law extended that rebate to money spent on building repairs and improvements.5 That should sound familiar to proponents of targeted tax provisions.

5. Withholding

The United States didn't introduce withholding for personal incomes until 1943, but the Germans were already collecting taxes at the source in the mid-1930s. Withholding rates were scaled according to income and family size -- pretty sophisticated stuff for the era. Moreover, the Nazi regime withheld a flat 10 percent on income from dividends and interest.6 In a way, that is more advanced than the U.S. withholding regime today.

6. Securities Transfer Tax

In case you thought champions of a financial transactions tax were breaking new ground, let's recall that the Germans levied a tax on all securities transactions involving at least one party domiciled in the Reich.7


Snarkiness aside, this list should remind us to be careful when we go fishing for the historical roots of contemporary policies. With a little bit of effort, you can find just about any policy in just about any time or place.

More to the point, comparing the Schumer-Casey tax proposal to the German Reichsfluchtsteuer is ridiculous. You don't have to approve of the Schumer plan to find the connection offensive. In case it needs to be spelled out, the German tax was imposed on departing citizens trying to escape a genocidal regime. Say what you will about the tax burdens of American citizenship (or the unfairness of the new Schumer-Casey penalties), but there is no moral equivalence between soaking a billionaire who is moving to avoid taxes and robbing people who are fleeing for their lives.

People might be overly sensitive about Nazi analogies, but almost invariably, those analogies aren't even on point. As a general rule, unless the topic at hand is world domination, single-party rule, or genocide, the Nazi comparisons are best left unspoken. All they do is cheapen an already coarse political debate.


1 For a release on the bill, see Doc 2012-10626 or 2012 TNT 97-32 . For related coverage, see p. 1111.

2 "Nazi Tax Plan Eases Big Families' Burdens," The New York Times, June 28, 1934, at 15.

3 Paul Haensel, "The German Tax Reform of 1934-35," Tax Magazine, Dec. 1935, at 705.

4 Id.

5 Id.

6 Id.

7 Id.