When Facebook co-founder Eduardo Saverin renounced his U.S. citizenship shortly before Facebook’s IPO, legislators in Washington went nuts. Saverin made his move in order to save millions of dollars in taxes. Immediately, Democrats and some Republicans thought there should be legislation to prohibit such actions. But take a look at what happens every single year within our own borders. Residents are pulling a “Saverin” all the time.
As noted in the Los Angeles Times, Facebook’s Eduardo Saverin said goodbye to the U.S. and hello to the land of Singapore. Why? Because Singapore does not have a capital gains tax, and the Facebook IPO was set to cost him millions in additional taxes.
Democrat Sens. Chuck Schumer (NY) and Bob Casey (PA) are calling Saverin a “tax dodger,” and they want to prevent this type of action for occurring again.
Saverin renounced his U.S. citizenship this year and is living in Singapore, a country with no capital gains tax. Sens. Charles E. Schumer (D-N.Y.) and Bob Casey (D-Pa.) denounced him Thursday as a tax dodger and introduced legislation to punish anyone who gives up citizenship to duck big tax bills.
“This is a great American success story gone wrong,” Schumer said. “Mr. Saverin wants to de-friend the United States just to avoid paying taxes, and we’re not going to let him get away with it.”
Saverin, 30, who helped found Facebook with Mark Zuckerberg when they attended Harvard University, has a 4% stake in the company, according to the “Who Owns Facebook?” website. The stake could be worth about $4 billion after the IPO.
Schumer said Saverin could save $67 million to $100 million in U.S. taxes on those shares because he renounced his citizenship.
But here’s a question for you. It is the one being posed by the Tax Foundation: Is Eduardo Saverin Any Different From Rich New York Snowbirds?
As pointed out in the report, over 1/2 million people moved from New York to Florida between 2000 and 2010. Those people took with them “nearly $20 billion in adjusted gross income, after adjusting for inflation.” In Pennsylvania, 208,784 people did the same thing, taking $8 billion with them.
According to our migration calculator, Florida is the number one destination for Ohio citizens. Between 2000 and 2010, some 208,784 Ohioans renounced their citizenship and became residents of Florida, taking more than $8 billion of Ohio’s tax base with them. Ironically, one of these tax avoiders was former Ohio Senator Howard Metzenbaum – a lifelong advocate of the estate tax.
The Schumeer/Casey bill would place a surtax on any U.S. citizen who left the country for tax reasons and bar then from reentering the U.S.
Would these lawmakers dare apply that same standard to the thousands of snowbirds who left their high-tax states for Florida’s friendlier tax climate? Would they really tax granny’s savings and hold her hostage unless she could prove that she had a legitimate reason for moving to Florida other than for tax reasons?
To see some of the state by state migration trends and the money transfered in the process, check out the Tax Foundation’s Migration calculator.
As usual, the politicians have it wrong. They never seem to look for a cure, but rather a perceived quick fix. Rather than blasting Saverin, how about asking a couple of “why” questions.
Why did Saverin do it? Why are residents leaving states like New York and Pennsylvania? What about California, too?
When legislators ask “why,” then they will find the answers. Taxes are too high. None of this would be happening (except for escaping cold weather) if taxes were lower. Some states have a good system, some don’t. Guess where the people are going? The same thing applies to America as a whole.