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Federal Facebook follies
We punish people for entering the country illegally. Now Sen. Charles Schumer (D-N.Y.) wants to punish people for leaving the country legally. But only if they’re rich and leaving denies Washington a cut of their fortune. Class warfare? Extortion? Maybe. But let’s just call it absurd.
The object of the senator’s ire is Eduardo Saverin, the very rich co-founder of Facebook who became filthy rich Friday when the company spectacularly went public. His share from the initial public offering will likely be billions of dollars, which would be worth about $67 million to $100 million in federal capital gains taxes — if he were a citizen or lived in the United States.
He isn’t and he doesn’t.
Saverin was born in Brazil. He was brought to the U.S. as a child and subsequently became a citizen. But in 2009 he moved to Singapore, which he was, of course, perfectly free to do. Then in September he renounced his U.S. citizenship, which, again, is his right. It was all good until Friday’s windfall.
Singapore doesn’t tax capital gains. The United States does, at a rate of 15 percent.
So Schumer and Sen. Bob Casey (D-Pa.) are convinced Saverin gave up his U.S. citizenship for the sole purpose of avoiding that tax. They’re sponsoring legislation to smack him with a 30 percent tax and bar him from coming back into the United States unless he pays up or convinces the IRS that he had some reason other than tax avoidance for leaving. Just how he’s supposed to prove purer motivation isn’t exactly clear. What is clear is the IRS isn’t likely to be a sympathetic judge.
The Ex-Patriot Act (Expatriation Prevention by Abolishing Tax Related Incentives for Offshore Tenancy) would apply to anyone with a net worth of $2 million or more, or an average income tax liability of at least $148,000 over the five years before they renounced citizenship. Anyone fitting the profile would be presumed guilty if Congress goes rogue and passes this bill. It shouldn’t.