In the United States, there have been recent calls for secession of various states, including some in the South. A common response to proposals for Southern secession is that most Southern states receive more in federal spending than their inhabitants pay in federal taxes. (For examples, see the Google search results for the phrases “secession” and “more than they pay”, “The Sanctimony of the South” by Gram Slattery, and “What seceding from the U.S. will cost you”, among many others).
- Tax haven status: Free from the United States federal tax system, states could choose to become tax havens for wealthy individuals and corporations. Such could offer substantial benefits to the local populations from revenues on the relatively low taxes imposed on foreigners moving in, increased local investment, and other benefits of immigration (see the item on “immigration policy”).
- Regulatory policy: Various businesses might wish to incorporate in the United States due to familiarity with its legal system, language, and business culture, but wish to avoid onerous regulations. States which seceded and proposed more friendly regulatory systems could benefit substanitally from foreign investment. For some, this invokes the image of smog-spewing factories located just outside the US border, but if the secession were on amicable terms, the seceding state could agree to impose some kind of Pigovian tax on pollution and remit funds to the US government as compensation for cross-border emissions.
- Immigration policy: Many right-leaning Southern states might impose restrictive immigration laws upon seceding. Indeed, I would not support such policies. However, seceding states could instead decide to expand legal immigration, possibly as part of a strategy to ease their fiscal burdens and repopulate dying cities. Former New York City Mayor Michael Bloomberg actually suggested that the federal government allow increased legal immigration to Detroit to encourage economic development. Seceding states could pursue such policies freely. A variety of benefits to immigrant-receiving areas exist, including windfalls in the value of developed land, increased division of labor, revenues from immigration taxes, and numerous others.
- Other economic and non-economic benefits of increased autonomy: The freedom to conduct “policy experiments” is quite valuable. States with residents opposed to the War on Drugs could decriminalize or legalize drugs without the fear of federal intervention. Liberal states in the Northeast could secede and impose all kinds of policies that would otherwise stand no chance against Republican opposition in Congress. Residents of seceding states might appreciate their greater individual influence over issues previously handled by a central government.