Wednesday, May 23, 2012
|U.S. Senators Chuck Schumer and Bob Casey|
With Pavlovian predictability, this action triggered the anti-monetary freedom Senator Chuck Schumer to proclaim that "Saverin has turned his back on the country that welcomed him and kept him safe, educated him, and helped him become a billionaire." Remember, it was Schumer last year that decried the ability of free people to transact in a medium of exchange of their choice such as bitcoin. Just as Schumer seeks to lock Americans into a depreciating U.S. Dollar, he now seeks to lock ex-Americans in his tax prison if they want the right to visit the U.S. in the future.
Schumer and Casey’s proposal is called the Ex-PATRIOT Act or the backronym "Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy" Act. Two additional senators are co-sponsors of the bill. According to the summary of the bill, the Ex-PATRIOT Act would require the IRS to make a determination regarding "tax avoidance intent" for certain persons renouncing U.S. citizenship.
Under the proposal, any expatriate with either a net worth of $2 million or an average income tax liability of at least $148,000 over the last five years will be presumed to have renounced their citizenship for tax avoidance purposes. Unless the individual can convince the IRS that they haven't done so for tax purposes, the IRS will prospectively impose a capital gains tax of 30% on the individual’s future investment gains, no matter where he or she resides.
If the individual continues to avoid these taxes, they would be inadmissible to the United States forever, thereby closing the loophole that currently exists for renounced U.S. citizens to visit the United States for 60 days per year without any tax responsibility. As Senator Schumer pontificated during a press conference, "they would be barred from returning to the United States. Period. They could not set foot in this country again."
Banishing individuals because they are successful and because they freely seek countries with reduced taxation appetites sends the wrong message to the remaining U.S. citizens still stuck on the 'reservation.' It says that you are only as good as the tax revenue that you produce. It's also horribly vindictive because other people who were never U.S. citizens can still visit the country as tourists. A record number of 1,780 people gave up their U.S. passports in 2011 — a dramatic rise from the 235 persons who did so in 2008. I expect many more. However, what is more harmful is the chill that it sends to both U.S. entrepreneurs and non-U.S. entrepreneurs considering the United States for residency.
Do you seriously think that Saverin would ever reinvest in the U.S. if he is barred from even visiting as a tourist? Wisely, he will take his investable capital and launch projects in other parts of the world creating quality jobs along the way as other wealthy individuals have done. Vast opportunities await in the non-U.S. rest-of-world category and those investment opportunities tend to provide greater returns with fewer regulatory hurdles. Add to that the fact that U.S. citizens have become pariah on the international banking system because of the overbearing worldwide tax compliance demanded by the IRS from financial institutions that accept U.S. customers and, ironically, Saverin will be more free.
Not only will he be free to execute a multi-jurisdictional strategy on the world stage, he won't have to complete those annual Report of Foreign Bank and Financial Accounts (FBARs) to the IRS. Saverin is savvy and unfortunately the senators are nothing short of myopic in their world vision.
For further reading:
"Facebook Cofounder Eduardo Saverin Begins the Atlas Shrugged Exodus", Robert Ringer, May 23, 2012
"Eduardo Saverin’s citizenship renunciation is not about taxes, it’s about American imperial overreach", David Kuenzi, May 18, 2012