Saturday, May 12, 2012

Avoiding Taxes: The Lengths People Go

Mr. Eduardo Saverin, one of the founders of Facebook, has renounced his U. S. citizenship, in order to reduce his tax bill.

There's a lot of comments in the Bloomberg article (above link) but the ones that interested me most seemed to be along three lines.

He had to leave because the U. S. taxes are driving entrepreneurs out of the country.
Mr. Saverin owns approximately 4% of Facebook. That company hopes that the miracle of IPO's will produce about $100 billion in valuation in a little while. His share would be about $3.84 billion. First of all, he will not pay highest personal federal income tax bracket (35%) because this will be a capital gain. He will owe the feds 15% on the gain.

If he further lives in Connecticut (which has the highest state income tax) he would pay an additional 21.4% for the state income tax, to the best of my understanding.

If so, this would leave Mr. Saverin with a mere $2.56 billion. (Which is hardly enough to live on, poor baby.) Seriously, though, if earning $2.5 billion isn't enough to encourage you to be an entrepreneur, then you have a serious personality problem.

He's a patriot for taking a stand on our government's repressive tax policy. Patriotism is relative to a country. For example, our founding fathers might be considered patriots because they "renounced" their citizenship in England. England, however, would consider them deserters at best, terrorists at worst: certainly England would not consider them loyal patriots to England.

Mr. Saverin is not a patriot of the United States. Patriots do what their nation requires and support its existence (if not some of its edifices) unconditionally. He's smart, to cut his tax bill this way, but not a patriot.

He should have all his money confiscated because he left. Destroying someone who wants to leave is not the answer, either. I say he is not a patriot—have even gone so far as to call him a deserter in one case—but he's still free to leave.

We did create an "exit tax", to prevent people like Mr. Saverin from paying no taxes at all when they leave (i.e., taking the money and running) but that's 15%, no more than he would have paid on capital gains anyway.

(He saves money because his bill is locked in to the worth of his share of Facebook as of April 30, the day he chose to make his departure official. That value will presumably be much less than $3.84 billion; could literally be only millions.)

All I can hope is he doesn't come back, because if there's anything we don't need, it's on-again-off-again "pseudo-patriots".

So, ultimately, I wish Mr. Saverin well. I have no specific ill will against him for his actions, which were intelligent. "Good bye, Mr. Saverin; fare thee well."

But citizens who have so little loyalty as to renounce their citizenship to avoid paying a tax, we don't need.

So I add: "Good riddance."

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