Eduardo Saverin, who became a billionaire as a co-founder of Facebook, has renounced his American citizenship and instead become a citizen of low-tax Singapore.
The decision means that Saverin will save at least $67 million in federal taxes; by some accounts, his long-term tax savings may be several times that much. Naturally, that decision has brought harsh criticism both of Saverin’s opportunism and of existing law that encourages such tax-driven citizenship transfers.
Maybe I’m old-fashioned, but I don’t think of citizenship as something that ought to be so fungible. Just as you don’t run off to Canada to avoid the draft, you don’t run to Singapore to avoid your taxes. You meet your obligations.
But even if that doesn’t bother you, even if you want to judge the situation in strictly business terms, Saverin and others in his situation are taking financial advantage of this country and its citizens. Out of our sense of self-interest, we ought to take steps to defend ourselves.
Under the current system, you can come to the United States and take advantage of all it offers — its legal system, its education system, its markets, its infrastructure, its creativity — and become rich, then flee elsewhere when it comes time to pay taxes on that wealth. In Saverin’s case, he could not have helped to create Facebook had he lived in Singapore at the time, or in his native Brazil. The hugely successful company is an American creation that could only have happened here, on American soil.
Mark Zuckerberg, Saverin’s co-founder and the man with the vision, did not live in Singapore. He grew up in White Plains, N.Y.
Harvard University, where Saverin and Zuckerberg met, does not exist in Singapore, nor does its educational equivalent. Singapore has no history of innovation in software comparable to that of the United States. Singapore did not have the hundreds of thousands of Internet-connected college students who became Facebook’s initial customer base. Perhaps most importantly, with its strict censorship of media outlets, including bloggers and others posting on the Internet, Singapore lacks the free-wheeling creative American spirit that made Facebook possible.
In fact, in its most recent rankings of countries by competitiveness in the IT industry, the Business Software Alliance again ranks the United States as the best place in the world to do business, expanding its large lead from the 2009 rankings. In that ranking, the United States easily outpaces Singapore in every category, from human capital to best business environment to government support for IT industry development.
What Singapore offers, on the other hand, is a haven for capital that is earned elsewhere but transferred to Singapore. It’s a sweet little niche for the city-state of 5.1 million, which is roughly the size of metro Atlanta. The question is whether U.S. law ought to continue to tolerate that arrangement.
Two Democratic senators, Charles Schumer of New York and Bob Casey of Pennsylvania, have proposed legislation to discourage citizenship-shopping for tax purposes. Those who choose that course would pay higher taxes and be barred from returning to this country. House Speaker John Boehner has also expressed support in a general sense, saying it is “absolutely outrageous that somebody would renounce their citizenship to avoid paying taxes.”
However, I have a suspicion that Boehner will soon be backing away from what ought to be a common-sense, patriotic position. The Wall Street Journal editorial board has already come out against Schumer proposal, and many of Boehner’s fellow conservatives are in effect arguing that the United States is simply getting what it deserves for not cutting taxes on the wealthy even lower than they are today. In some eyes, Saverin has even been hailed as a hero for his decision.
And then there’s Grover Norquist, who likened Schumer’s proposal to laws that were passed by Nazi Germany in the 1930s that stripped German Jews of their wealth if they dared to flee the persecution and concentration camps.
“(Schumer) probably just plagiarized it and translated it from the original German,” Norquist told The Hill.
Two final points:
– The caricature of the United States that many conservatives like to draw is simply false. We cannot be a country in which it is possible to create a behemoth such as Facebook and also be a country in which regulation and overtaxation have made it impossible to succeed. Both things cannot be true.
This country continues to draw more foreign investment than any other country on the planet because they know that it is a great place to live and to do business. Last year alone, 3,800 rich foreign investors in effect “bought” their way into the United States by agreeing to invest at least $500,000 in a project that creates American jobs. In return, they got a much-treasured green card.
And according to at least two surveys, more than half of Chinese millionaires are planning to or have already taken steps to leave that country and take up residence elsewhere, with the United States the most popular destination. It was cited almost three times more often than Singapore. None of that supports the conservative condemnation of this country’s business environment.
– We already live in a system in which money flows freely across borders and in which international corporations feel no loyalty to or civic responsibility toward communities or nations. As former ExxonMobil CEO Lee Raymond memorably put it, “I’m not a U.S. company, and I don’t make decisions based on what’s good for the U.S.”
What we’re seeing now is the natural extension of that sentiment, with private citizens placing greater value on money than on country. From a strictly financial and selfish point of view, that’s perhaps understandable. What is less understandable are supposedly patriotic Americans who applaud and celebrate people who chose money over citizenship.
– Jay Bookman