I write this post on the eve of facebook going public tomorrow (actually today since I am writing this after 12am), and while I don’t get the hype about the facebook IPO this is a buzz that is unavoidable. Part of that buzz is the news story that one of the co-founders of facebook, Eduardo Saverin, is renouncing his American citizenship, and of course people’s minds go straight to the fact that he stands to save hundreds of millions of dollars by doing so. He is denying that is the reason, but I say so what!? Actually, my heart says “Good for him!”
His critics obviously include politicians attempting to garner the attention of the public,
Senator Charles Schumer told a news briefing on Thursday: “It’s infuriating to see someone sell out the country that welcomed him and kept him safe, educated him and helped him become a billionaire … We plan to put a stop to this tax avoidance scheme.”
Schumer and Senator Bob Casey, both Democrats, said at the briefing that they were proposing legislation to crack down on what they see as expatriate tax avoidance.
Under the bill, expatriates worth $2 million or more, or with average income tax liability exceeding $148,000 over the past five years, would be presumed to have renounced their citizenship for tax avoidance purposes.
These high-income expatriates would get a chance to prove otherwise to the Internal Revenue Service, but if they could not do so, then they would face a 30-percent tax on future investment gains, no matter where they were residing.
So long as the taxpayers failed to pay these taxes, they would not be allowed to re-enter the United States. “We simply cannot allow the ultra-wealthy to write their own
rules,” Casey said.
As often is the case when Senator Schumer provides sound bites, I have no idea what the hell he is talking about. Does he mean that every foreigner who comes here for school should pay taxes forever? Why does anyone have a duty to continue to pay taxes after those services stop? I think an analogous situation would be when I go to Dunkin Donuts. There is a tip jar, I rarely use it, if you want more money from me charge me more. If Mr. Schumer wanted more tax dollars then the rules should have forced him to pay more. Crying about it afterwards seems petty and childish.
At least, Mr. Schumer is trying to make sense…Mr. Casey just seems like he is jumping on the class warfare bandwagon. How did Mr. Saverin make his own rules?! There are laws and rules regarding one’s action to expatriate. You know who created them? Congress. Mr. Saverin is just following them, if you don’t like the rules, change them that is why you are a freaking Congressman.
I truly believe that no one has to patriotic duty to overpay taxes. My feelings go so far as to say you can leave your Country for greener tax pastures. Is it a move that I would make? Probably not, but unlike Mr. Saverin, my family is here, I was born here, I have no business interests outside the US, my friends are here and I feel a tie to America that he obviously does not. I am a HUGE fan of my Country, but this isn’t Mr. Saverin’s Country, or alternatively, he doesn’t feel the bond that I do.
This situation reminds me of one of my favorite legal quotes by Judge Learned Hand in Helvering v. Gregory (1934),
Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes and public duty to pay more than the law demands
This wasn’t said last month or even last year Judge Hand uttered those words in 1934! For reference purposes, the modern income tax system was created in 1913. If arranging one’s affairs means leaving this Country then so be it!
Hat tip to you Mr. Saverin.
Yes, I see that it is sort of ironic that I claim to not understand the hype, but this is the second time I am writing about Facebook in the span of a week.
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