Disloyalty as a Tax Strategy

Semper fidelis is the motto of the Marine Corps - always faithful. The opposite of this is what we see amongst some of the wealthy elite in this country.

Samuel Huntington from Harvard published an excellent book in 2004 entitled Who Are We? The Challenges to America's National Identity. One of the challenges that he identified was that wealthy corporate elite were beginning to identify more as "global citizens" than as Americans. They apparently don't stop to think that there is no such thing as a "global citizen" - just the other economic elites that they jet through life with - but the practical effect is to loosen their loyalty and patriotism for this country. This is now being taken to a new extreme with an increasing number of the super-rich renouncing their U.S. citizenship for tax reasons. In 2008 there were 235 people who did so, but last year 1,780 people made the jump. One of them is one of the co-founders of Facebook, Eduardo Saverin

Facebook is about to come out with an IPO and a number of people may become very wealthy. Saverin may make as much as $3.84 billion. The tax bite on this is enormous and instead of biting the bullet, he is renouncing his American citizenship and heading off to Singapore with its more hospitable income tax policies. I think he is wrong.

I understand his motives - taxes are too darn high! Even Jon Lovitz agrees. This is already causing wealthy people to move out of high tax states and to states with lower tax rates. Maryland thought it was going to hit the mother lode when it jacked up taxes on millionaires but revenues actually went down substantially. Why? Maryland's wealthy citizens moved to other states. This has happened in Oregon too. People who are getting ready to move a big block of stock can simply move up to Camas or elsewhere in Washington for a few years and avoid Oregon's 11% income tax rate on heavy hitters and enjoy our neighbor to the north's 0% rate. On a $10M sale that $1.1 million, which isn't chump change.

Renouncing citizenship, though, is a whole different level of this game. There is more to life than taxes; things like trust, loyalty and similar concepts. These are the concepts that motivate folks like the U.S. Marines when they come and pull American citizens out of harm's way. So Mr. Saverin, you are free to leave, this is after all is a free country. But it is not the likes of you who made it that way. And by the way - if you ever get your rear-end in a sling, I hope you can count on the Singapore Marines to get it out wherever in the world you may be.

finance.townhall.com/columnists/danieljmitchell/2012/05/12/facebook_billionaire_gives_up_citizenship_to_escape_bad_american_tax_policy