Facebook co-founder Eduardo Saverin's decision to renounce his U.S. citizenship came just prior to that company's announcement of its initial public offering. With that move he can escape the minimum 15% capital gains tax in the United States. Saverin can take his expected $67 million in savings to Singapore where he now resides since it has no capital gains taxes.
Saverin's tax avoidance strategy has raised the dander of Democratic Senator Chuck Schumer. He fumed "Mr. Saverin says he's a global citizen, but it just so happens that the country where he has chosen to reside has no capital gain tax. This tax avoidance scheme is outrageous."
Two Democratic senators proposed their "Ex-Patriot Act" in the Senate. In an effort to discourage the exodus of the wealthy, this legislation by Sen. Chuck Schumer and Sen. Bob Casey will require "high-earning" Americans who renounce their American citizenship to pay a heavy capital gains tax. "High-earners" according to this proposal are those with a net worth of at least $2 million or a taxable income of at least $148,000.
The most pernicious piece of this legislation is that it places the burden on the one renouncing citizenship to prove he did not do it to avoid taxes. Those who fail to prove their "innocence" will be punished with a 30% capital gains tax.
If the bill becomes law, ex-Americans who renounce their citizenship to avoid taxes will be barred from ever reentering the United States.
What these Democrats are trying to do is to erect a virtual Berlin Wall to prevent wealthy people from taking their money out of the United States.
The Berlin Wall was erected in Berlin by the German Democratic Republic in 1961. The horrible political and economic conditions in East Germany inspired many brave lovers of liberty to risk their lives for the freedom in the West and to bask in its economic success.
To stem the tide of emigration, the East German Socialist Unity Party published a propaganda pamphlet in 1955 titled "He Who Leaves the German Democratic Republic Joins the Warmongers." The pamphlet read:
How should one evaluate those who leave the German Democratic Republic?
There can be only one answer. - Both from the moral standpoint as well as in terms of the interests of the whole German nation, leaving the GDR is an act of political and moral backwardness and depravity...
Is it not an act of political depravity when citizens, whether young people, workers, or members of the intelligentsia, leave and betray what our people have created through common labor in our republic to offer themselves to the American or British secret services or work for the West German factory owners, Junkers, or militarists? Does not leaving the land of progress for the morass of an historically outdated social order demonstrate political backwardness and blindness?
When propaganda did not work, the GDR built the Berlin Wall.
Sen. Schumer said something similar to the Socialist Unit Party's propaganda sheet. "Saverin has turned his back on the country that welcomed and kept him safe, educated him and helped him become a billionaire. This is a great American success story gone horribly wrong."
How exactly did it go "horribly wrong" and for whom? Schumer will, no doubt, ignore that the policies he favors of high corporate and personal taxes play a large role in the exodus of Americans along with their money. As America has the highest corporate tax rates in the world, the policies of Schumer's political philosophy discourage foreign investment here.
The real problem is that Schumer sees Saverin's American success story going horribly wrong for government. If an American renounces his citizenship and takes his money so Congress cannot tax him, Schumer sees that as a betrayal of the country. Vice President Biden believes paying taxes to be the rich's patriotic duty.
Like the East German communist propaganda, the liberal propaganda and rhetoric have failed to change people's financial decisions. Now Schumer and Casey want to erect a Berlin Wall of legislation to keep the wealthy from defecting. The policies from their liberal political philosophy have created the conditions that drive people to want to leave America with their own money.
Schumer isn't upset that Saverin renounced his citizenship and left America. He is angry that Saverin took his money with him.
So, if you renounce your citizenship because you haven't been proud of your country in your adult life, that's fine; but, if you leave to protest heavy taxation you must pay a penalty? What Schumer is proposing is essentially a Free Speech tax based on the content of that speech.
This legislation is another glaring example of the difference between liberalism's greed and envy and conservatism's love of liberty. Schumer sees a wealthy person's legal avoidance of taxes as theft of public money and an act of political and moral depravity. A conservative believes in the inalienable, God-given right to one's own property.
Schumer's political philosophy leads to the erection of virtual "Berlin Walls." Ronald Reagan's conservative philosophy tears them down. That senators with Schumer's political philosophy continue to be elected is truly the "great American success story gone horribly wrong."