I’ve been in contact with a columnist who asked me what I thought about Eduardo Saverin’s expatriation. I respond as follows:
Eduardo Saverin has exercised his unalienable right to renounce his US citizenship. This right is enshrined in the Declaration of Independence of the United States, the Ninth Amendment of the United States Constitution, the Expatriation Act of 1868, the Freedom of Emigration in East-West Trade, and the Universal Declaration of Human Rights, which for its part declares (Article 15, 2):
No one shall be arbitrarily deprived of his nationality nor denied the right to change his nationality.
Yet for exercising a fundamental right, some in the media have vilified Eduardo Saverin. I suppose because he is rich, and the rich today, because of class warfare, are open targets of abuse and defamation. But I understand why Saverin expatriated. I am not rich, but I sympathize, nay I identify with his desire to shed US citizenship. I have done it too.
Saverin remains a citizen of his native Brazil. Brazil doesn’t tax Saverin’s world-wide income; yet the United States was doing that, even though he now lives in Singapore. Did you notice whether he also renounced his Brazilian citizenship? Not a chance. But with US citizenship comes (1) onerous tax filing requirements; (2) invasive bank account reports; (3) the possibility of being locked out of business deals because foreigners don’t want to be partners with an American on account of invasive filing requirements; (4) inheritance tax claims by the IRS when you die and a foreign spouse may have to deal with this unjustly (I think of my own wife). The only benefit of citizenship to an expat is the right to move back to the United States whenever you want. But if you omit doing your filings, then you feel like a fugitive anyway. I will worry about this until the IRS finally decides that my filings are adequate. It is a chilling feeling that a tax bureaucracy has the final say on whether I am welcome or not in the United States. A guy like Saverin can afford the tax professionals–most of us can’t–for an increasingly complicated and oppressive set of rules for those who live outside the borders of the United States. But why bother to continue doing these filings if you don’t really plan to live in the United States again?
Another question we should ask is, “Why did Saverin move to Singapore?” Perhaps it is because the United States expects the rich to pay all the taxes. According to a 2010 chart, the top 1% of taxpayers in the United States paid 40.4% of all income taxes. I wrote about this, comparing it to the tax burden in Canada. The problem is that the 1% pay a disproportionate amount of the taxes while the top 50% of wage earners pay only 3% of the taxes. Most Americans pay no federal taxes at all. Jim Rogers also lives in Singapore and speaks frequently to the US media with his Southern US accent. Why do billionaires live in Singapore? Perhaps it’s because billionaires are welcome in Singapore. They sure are welcome in the United States too, provided they pay 40% of the total tax burden.
So Saverin moved to Singapore and the United States pursues him there too. He’s got to be thinking that his country of birth, Brazil, didn’t do this to him, why should an adopted country place such burdens on him? And for what? The right to move back to the US? That’s a lot to pay when the United States is just one country and not even the best if you are an investor or entrepreneur.
America didn’t make this man rich. He came from a wealthy Brazilian family. He didn’t need the United States. The United States needed him. He was the one who made Mark Zuckerberg rich with his investment to set up the original servers for Facebook. Americans like foreign capital. That’s why there is zero capital gains on foreign investment in the United States. The tax code is set up such that foreign investors will invest, make their money, and pay no capital gains. Increase the capital gains on foreign investors, get less of their investment. See the conundrum?
The question of why Saverin renounced his US citizenship is easy to answer. The response of his spokesman, Tom Goodman, should be accepted as the truth. I certainly do:
“Eduardo recently found it more practical to become a resident of Singapore since he plans to live there for an indefinite period of time,” Goodman said. Saverin still does hold Brazilian citizenship, Goodman said.
This is also the reason that I relinquished my citizenship: it is more practical to be resident of Canada without US citizenship. I plan to live here for an indefinite period of time.
I became a US citizen at birth. I had no choice in the matter. My question is why Saverin became a US citizen in the first place. Many wealthy investors are asking now whether they should become a citizen or Green Card holder and are responding, “No thank-you.” The tax consequences of such an act has now made becoming an American citizen unattractive. And the media rhetoric doesn’t help either. Now that the press has decided to excoriate Saverin with the 1% rhetoric, the US can start kissing foreign investors good-bye forever. An example the media’s response is the LA times piece by Yale law professor Bruce Ackermann. Ackermann wants to turn the United States into the worst place in the world to be an ex-citizen–placing a permanent ban on those who relinquish their citizenship; it is a vindictive, populous article, that doesn’t even take into consideration the ramifications of what it says. It is the same sort of attitude that caused Britain to fight against the colonists who declared their independence–i.e., such measures would be tyrannical, and it is chilling that a law professor, who is supposed to be a smart guy, would write such a piece of demagoguery, and thus wish to curtail the right to expatriate.
Ackermann’s proposal is a direct contradiction of the Expatriation Act of 1868 which recognizes the right of expatriation as a fundamental principle of the United States government, insisting that naturalized citizens be treated as native-born citizens. To be sure, this is a rebuke of nations that mistreated naturalized Americans, but now Ackermann wants to abuse those who become naturalized citizens of other countries. Thus, according to US law and international law, the United States must be consistent towards Saverin and all other emigrants, treating them as all other native-born citizens of their respective countries. To do otherwise is to abridge “a natural and inherent right of all people, indispensable to the enjoyment of the rights of life, liberty, and the pursuit of happiness.”
I saw a reader comment accusing Saverin of being like the rats leaving a ship. The analogy is perfectly suited to explain the corrupt, fiscally unsound ship of the American economy which is sinking into a deep abyss. But it is unjust towards Saverin. He is no rat. He has exercised a fundamental right. He is a citizen of Brazil. And he is now what Obama once claimed to be, a citizen of the world. He has only shed his citizenship of the United States because it is an excessive and unreasonable burden upon his freedom as a citizen of the world.
I believe that the American media would do well to take the high road, and instead of rebuking Saverin, they should wish him well and explain to him that if he ever wants to come back again and create another multi-billion dollar company, that he would be more than welcome to do so. Important investors around the world are watching to see how Americans react. Don’t screw it up.
This is a cross post from the Righteous Investor.