All across the nation, cities and states compete with each other partly on the basis of taxes.
Should a senator — Democrat Chuck Schumer of New York, for instance — introduce a bill to use the tax code to punish businesses and individuals that move out of high-tax states to low-tax states where personal incomes will grow faster and business investments go farther?
Should states put punishment provisions in their tax codes for anyone who moves to a state with lower taxes?
Should the laws prevent persons or businesses from ever again setting foot in the states they’ve left, even if they’d merely be visiting friends or family or just passing through?
Imagine how high taxes would go if they could do these things!
If you agree these would be bad things to do, you should oppose Schumer’s “Ex-Patriot Act.” If you disagree and think governments should punish people who move to places with lower taxes, hear me out.
The “Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy” Act, which Schumer recently introduced with Sen. Bob Casey (D-PA), is umbrage put to paper. The senators are angry Facebook cofounder and Brazilian-born Eduardo Saverin gave up his U.S. citizenship a few months ago.
Saverin retains his Brazilian citizenship and for several years has lived in Singapore. Facebook recently became a stockholder-owned company, and Saverin has become a billionaire as a result of his $30,000 Facebook startup investment. His Brazilian citizenship and Singapore residence will save him tens of millions of dollars the U.S. government would have tried to take from him as a result of Facebook’s success.
Schumer and Casey are so irked at this — and so fearful more people with money may follow Saverin’s lead — they are trying to impose a 30 percent tax on capital gains earned by anyone who gives up U.S. citizenship. Their bill also would bar these people from ever again entering the United States.
This bill would do nothing but harm. Saverin earned that money by helping create something that a billion people around the world voluntarily use and enjoy. Schumer and Casey apparently believe the government they help run should have first claim to the fruits of Saverin’s creativity and labors, and to the fruits of anyone else’s creativity and labors.
The United States currently has the highest corporate tax rate in the industrialized world: 35 percent at the federal level, with most states imposing another corporate tax on top of that. Singapore has no corporate tax — a rate of 0 percent, you could say.
Saverin says he decided to move to Singapore in 2009 because he sees the greatest market growth opportunities in Asia and he wants to be close to that market. He doesn’t plan to sit on his money. He plans to use it to bring products and services to millions more people who will be free to choose whether to buy them. They’ll base that decision on whether they believe the purchases will make their lives better.
The more money Saverin keeps, the more lives he can help make better. Schumer and Casey, however, would greatly diminish Saverin’s life-improving impact.
Worse, they want to make him — and potentially all of us — financial captives and outcasts by never letting us re-enter the country if we give up citizenship.
If it would be wrong for states to do this, as I suggest above, it’s wrong for the feds to do so.
Money constantly crosses borders — local borders, state borders, national borders. Bills like the Ex-Patriot Act would ensure less money comes into this country as investors worry that once in, they’ll never be able to get out unless they leave a big chunk of their money — and lives — behind.