Facebook’s IPO is tomorrow and one of its early founders, Eduardo Saverin, has renounced his U.S. citizenship before the stock goes public in order to save himself $67 million in taxes. The general consensus is that this makes him a traitor of Benedict Arnold proportions. I think this is oversimplifying, and worse, missing the point.
Eduardo Saverin was born rich and he’s getting richer. The son of wealthy Brazillian parents, he moved to the U.S. in 1992, received U.S. citizenship in 1998, and six years later co-founded a company out of a Harvard dorm room which after a legal battle with Mark Zuckerberg is about to make him a billionaire.
Saverin enjoyed U.S. citizenship for 14 years. While he’s invested in companies in Asia, Europe and America, it’s his involvement in Facbeook that’s making him insanely wealthy. Would it have been the right thing to do—the patriotic thing to do—to pay his fair share of taxes to the country that made him a billionaire? Of course. That’s the subtext behind the “Ex-Patriot Act” Chuck Schumer is presenting today, the title of which is obviously intended to be a jab at being “unpatriotic.”
But let’s face it: what Saverin is doing is exactly what all wealthy patriotic Americans do every year—pay as little in taxes as humanly possible.
The U.S. tax code is set up to allow the wealthy to pay much less in taxes than the average joe. The higher up, the more extreme it becomes. Thus you get multi-hundred-millionaires like Mitt Romney paying a 15% tax rate while the middle class pays in excess of 30%. Barack Obama’s “Buffet rule” was created so that Warren Buffet pays at least the same tax rate as his secretary, who currently pays a higher rate than he does.
You can’t really blame individuals for trying to keep as much of their money as possible—it’s human nature. You can, however, blame a system that stacks the deck and encourages people to manipulate loopholes to avoid paying taxes.
And this isn’t even really limited to the wealthy: For every freelancer who’s ever fudged a few deductions to bring their tax bill lower, it would have been more “patriotic” to play it straight and pay your keep. But that’s not how people work. If you tell someone they can pay you three dollars or seven, they’re going to go with three. And while rich people like Mitt Romney or Eduardo Saverin should know better and can afford to not cut corners, that’s also unfortunately not how people work.
Should Chuck Schumer’s “Ex Patriot Act” get passed to impose taxes on those who renounce citizenship? Absolutely. Obama’s “Buffett Rule” should get passed, too, because if you give people an option to pay less taxes, they will always take it.
Yes, Saverin renouncing his citizenship was a scumbag move. But so is allowing our wealthiest citizens to pay the least in taxes and then gripe constantly about the national debt. Blame Saverin, sure, but even more so blame a system that encouarges this kind of behavior. It’s too tempting to avoid, which is why we have laws in the first place. When it comes to taxes, we just need better ones.