I really liked Steffen Molynieux’s observation that these actions totally blow away all that bullshit about a social contract. Leftists like to say, if you don’t like it, leave. But now the government says, you can’t!
Internet message boards bristled with denunciations of Saverin’s “treachery” and promises to renounce Facebook. “Way to defriend America, [expletive deleted],” one annoyed American taxpayer tweeted. Another Twitterer, who happened to be outspoken rich guy Marc Cuban, told his followers that “if i could realistically stop using facebook, … I would. Just wrong.”
(MORE: This is your Life (According to Your New Timeline))
The story behind Saverin’s move is a little more complicated than the headlines suggest. The Brazilian-born, Singapore-based investor with the cherub face was one of Mark Zuckerberg’s original backers during Facebook’s Harvard days; while no longer involved in the company as an executive, he retains a 4% stake, which could be worth as much as $4 billion after Facebook goes public.
There’s no question that by giving up his American citizenship and settling down in Singapore, an investor-friendly tax haven with no capital gains taxes, he’ll spare himself a hefty bill from Uncle Sam. He’s not going to escape the IRS entirely, though; the US charges citizenship-renouncers an “exit tax” which could add up to as much as $150 million in his case, one tax expert contacted by the Los Angeles Times estimates.
Saverin maintains that his renunciation of American citizenship, which actually took place last September, wasn’t a ploy to skip out on American taxes, but rather an attempt to free himself from burdensome restrictions on American investors abroad. “U.S. citizens are severely restricted as to what they can invest in and where they can maintain accounts,” the Wall Street Journal quotes a spokesman for Saverin saying. “Many foreign funds and banks won’t accept Americans. This was a financial rather than a tax motive.”
(Read more)
Ilyse Hogue of The Nation is incensed:
In making this decision, the Brazilian native did more than expose his blind disregard for all that his adopted country has done for him. He has made himself the poster child for the callous class of 1 percenters who are all too happy to use national resources to enrich themselves, and then skate, or cry foul, when asked to pay their fair share. The story evokes the image of the marauding aliens from the movie Independence Day, who come to Earth to take what they can get before moving on to another planet.
Wait a second! Did Eduardo Saverin plunder us? Are we now a desolate husk of a country, sucked dry by Eduardo Saverin’s rapine? Well, no. Facebook created wealth. Mr Saverin is leaving having deployed his capital in a manner that made America better off than it was when he arrived. But will he escape without rendering unto Caesar what is Caesar’s? Well, no. Both Mr Manjoo and Ms Hogue mumble in passing under their breath while coughing that Mr Saverin will have to pony up an “exit tax”. So what’s this woefully insufficient tribute come to, such that Mr Saverin may be so bitterly denounced for exploitation and despoilment? According to Danielle Kucera, Sanat Vallikappen and Christine Harper of Bloomberg:
Saverin won’t escape all U.S. taxes. Americans who give up their citizenship owe what is effectively an exit tax on the capital gains from their stock holdings, even if they don’t sell the shares, said Reuven S. Avi-Yonah, director of the international tax program at the University of Michigan’s law school. For tax purposes, the IRS treats the stock as if it has been sold.
Got that? Mr Saverin’s on the hook for the amount his capital-gains tax would have come to had he sold all his American stock holdings. Tim Worstall sketches it out on his napkin:
[T]he net effect of his citizenship renunciation on his immediate tax bill is to increase it, hugely. For it will, at minimum, start with the idea that he’s just made a $3.5 billion or so profit (adjusted downwards for the difference between the private market value of Facebook last fall and the IPO price) on his Facebook stock which he got originally for minimal amounts of money. At the standard 15% long term capital gains rate that’s near $500 million right there.
Half a billion dollars! That is not scot-free. Did the marauding aliens in “Independence Day” leave behind a half billion American dollars after having successfully invested in Earth? They did not! One wonders how many pounds of flesh Mr Manjoo and Ms Hogue think Mr Saverin owes for the privilege of having Uncle Sam’s hooks out once and for all.
Senator Charles Schumer: Eduardo Saverin Can Never Set Foot in U.S.
Ron Paul: The Egregious Ex-Patriot Act Has No Place in a Free Society