This Eduardo Saverin story is just the kind of link-bait in which Chuck Schumer specializes. He would make a good search engine optimization chief at a website. But there is a larger point, and not just bad Facebook puns, to be made in the controversy over Facebook co-founder Saverin’s renunciation of citizenship to avoid tax liability derived from the social network’s upcoming IPO.
In a press release, Schumer and Casey called Saverin’s move an “avoidance scheme.” The plan they will introduce later on Thursday specifically takes aim at individuals like Saverin who “flee” the country and become residents of another, taking measures to re-impose taxes on expatriates and bar them from re-entering the country.
Schumer and Casey charge that Saverin is looking to save up to $67 million in taxes by renouncing his citizenship. The amount was calculated by Bloomberg as Saverin’s initial capital gains bill, but denied by Saverin’s spokesman.
Specifically, the ex-PATRIOT Act, which stands for “Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy” would “impose a mandatory 30 percent tax on the capital gains,” as well as attempt to re-impose the taxes on any expats found to have left the country simply to avoid taxes. This would only apply to people with a net worth over $2 million or an average tax liability over a five-year period of $148,000 and up. The bill would also add to the existing rule that those who renounce their citizenship for tax purposes be barred from entry into the United States again, increasing the enforcement of that rule.
This is not a widespread practice. Last year 1,700 people renounced their citizenship, and not all to avoid taxes. Since taxes on the rich are incredibly low in America compared to the rest of the world, it would be odd to see a rash of expats like this unless they all really like Singapore, Saverin’s destination. And at the state level, where there is some variance in tax rates, the studies show that rich people moving to capitalize on tax treatment is a very rare occurrence.
But I don’t necessarily mind making an example out of someone who thinks the rules don’t apply to them. I’ve seen enough highlighting of welfare queens and undocumented immigrants to be OK with a big press conference for a billionaire tax dodger. This new legislation would probably not apply to Saverin, since he’s already renounced his citizenship. It is, I suppose, a warning to others to not follow him down the same path. But more than that, it just points out, at an anecdotal level, a certain hubris on the part of one member of the global elite. Maybe populism is a dirty word in Washington, but I still see a bit of value in that.