Hillel Nadler (Wayne State; Google Scholar) presents The Case for Taxing Inbound Portfolio Investment at Boston College today as part of its Tax Policy Collaborative hosted by James Repetti and Diane Ring:

The tax rules governing investment in the United States offer very favorable tax treatment to foreign investors: the typical foreign investor pays no U.S. tax on passive investment in the United States. These tax rules have been shaped by the assumption that the United States needs to attract scarce financial capital to fill the gap between domestic saving and investment. But that assumption is wrong; global financial capital is not scarce. Over the past three decades, regressive economic policies abroad have suppressed consumption and led to an overabundance of foreign saving. What is more, instead of financing productive investment, the flow of that saving to the United States has financed unproductive consumption, leading to a widening trade deficit and helping fuel financial instability. 

This Article calls for a reevaluation of U.S. inbound tax rules, proposing to increase taxation on foreign investment to address trade imbalances and enhance financial stability.

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