Sen. Schumer Proposes 30% Tax on Facebook Co-Founder, Others Who Renounce U.S. Citizenship for Tax Purposes
You’ve probably already read this storyâ€”Facebook Co-Founder Renounces U.S. Citizenship in Advance of IPO, Saving Millions in U.S. TaxesÂ â€”heard about it on the radio, or seen it on TV. Â But Paul L. Caron of The TaxProf Blog has done a remarkable job of aggregating all the media responses to the story from about 20+ outlets, and linking to previous posts this week on the developing story. Â Â
Bloomberg:Â Â Schumer Proposes Tax on People Like Facebookâ€™s Saverin:
U.S. Senator Charles SchumerÂ proposed legislationÂ that would impose a 30% capital gains tax on people like Facebook co-founder Eduardo Saverin unless they show they didnâ€™t renounce their U.S. citizenship to avoid taxes. News that Saverin, 30, the billionaire co-founder of Facebook had renounced his U.S. citizenship was reported earlier this month in advance of tomorrowâ€™s initial public offering that now values the social network at as much as $104 billion. He will save at least $67 million in federal income taxes by dropping his citizenship, according to a Bloomberg analysis of the companyâ€™s stock price.
â€śEduardo Saverin wants to de-friend the United States of America just to avoid paying taxes,â€ť Schumer, a New York Democrat, told reporters today. â€śWe arenâ€™t going to let him get away with it.â€ť Schumerâ€™s proposal would empower the IRS to impose a 30% capital gains tax on future investment gains of wealthy individuals who the agency decides renounced their citizenship for tax-avoidance purposes. It also would bar such people from re-entering this country. He said he will move the legislation â€śas quickly as possible.â€ť …
Schumerâ€™s proposal requires the IRS to determine whether individuals with a net worth of at least $2 million, or who have an average income-tax liability of at least $148,000, renounced their citizenship for tax-avoidance purposes. If the IRS determines that tax avoidance was a main reason for renouncing citizenship, that person â€świll be barred from any type of re-entry into the United States,â€ť according to a summary of the legislation provided by Schumerâ€™s office:
- ABC News
- CBS News
- Fox News
- New York Post
- Wall Street Journal
- Washington Post
- WSJ Deal Journal
Prior TaxProf Blog posts:
- Facebook Co-Founder Renounces U.S. Citizenship in Advance of IPO, Saving Millions in U.S. TaxesÂ (May 11, 2012)
- Will Facebook Co-Founder’s Renunciation of U.S. Citizenship Increase His U.S. Tax Bill?Â (May 12, 2012)
- Seto, Kleinbard Explain Tax Consequences of Facebook Co-Founder’s Renunciation of U.S. CitizenshipÂ (May 13, 2012)
- Tax Savings From Facebook Co-Founder’s Renunciation of U.S. Citizenship: $67 MillionÂ (May 16, 2012)
WSJ:Â New Ex-Patriot Tax on Facebook Co-Founder ‘Isn’t Worthy of America’
Wall Street Journal editorial: Â The Saverin Lesson : A Punitive Exit Tax on the Facebook Expat Isn’t Worthy of America:
Facebook on Thursday priced the IPO it expects to launch Friday at $38 a share, valuing the social media company at $104 billion. But so much for that welcome sign of confidence in American entrepreneurship and capital markets. This being the age of envy, the bigger story in some circles seems to be the decision by Facebook co-founder Eduardo Saverin to renounce his U.S. citizenship in favor of Singapore.
Democratic Senators Chuck Schumer and Bob Casey, a pair of envy specialists, pounced on the news by announcing Thursday that they will introduce a plan to tax capital gains at 30% for any wealthy Americans who try to escape from U.S. shores. No doubt they hope to score political points by punishing the fleeing rich who will strike most Americans as unpatriotic, but the Senators are doing far more harm than Mr. Saverin is to the U.S. and its global reputation.
Not that we have any sympathy for Mr. Saverin, whose citizenship decision is a remarkable act of ingratitude toward the country that welcomed him as a child from Brazil. America’s rule of law and relatively open markets have allowed him to take $30,000 in savings and turn it into Facebook shares that after Friday may be worth more than $2 billion. …
Singapore has no capital gains tax, while President Obama wants to raise America’s rate to nearly 24%â€”and 30% if his Buffett Rule becomes law. Then there is Mr. Obama’s plan for a 44% dividend tax and 45% estate tax.
Whatever Mr. Saverin’s motivation, the more important point is that it is his decision, however misguided. America was built on millions of similar individual decisions to come to our shores. It is precisely that ability to decide for oneself that has made America such a magnet for two centuries.
The way to continue to be a magnet for the best and brightest is not to impose Soviet-style exit taxes to punish people who want to leave the country. That is what oppressive and demagogic regimes do, and it’s humiliating to see U.S. Senators posture in such fashion. The way to punish Mr. Saverin is to make the U.S. so appealing and dynamic again that he’ll be sorry he ever left.
It could be he’s fallen in love with Singapore because of the humidity, the 12 hours of night and day year-round, and the lack of press freedom.