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Dear ,
Eduardo Saverin-Some Say Betrayal, But Betrayal by Whom?
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Did your mother ever tell you that there are two sides to every story? Well I'd like to look at the other side of this story. Much has been written last week about the fact that Eduardo Saverin renounced his US citizenship. Many feel that it was a betrayal of the US. There are a couple of aspects of this event that I'd like to comment on. First let's look at the issue of betrayal.
Mr. Saverin was born in Brazil and moved to the US in 1992. He was educated at Harvard where he met Mark Zuckerberg and helped found Facebook. In 1998 Saverin became a US citizen. In 2009 he moved to Singapore where he has been living and intends to keep living for some time. In 2011 he filed the paperwork to officially renounce his US citizenship.
Now when he came to this country, what do you think he was told? We are the land of opportunity. You can achieve anything you can dream in this country. The sky is the limit. Just think about all of the great stories he has heard about. Ray Kroch and McDonalds. Fred Smith and Fed Ex. Microsoft. Apple. The list goes on and on.
As a Brazilian citizen in this country he watched it all come true and so in 1998 he became a US citizen. He helped found a company that provides thousands of well-paying jobs. He helped create a company that brings enjoyment to hundreds of millions of people around the globe. He has always paid his taxes and met all of his legal and financial obligations in this country, and what did he get for doing all of that?
His country and his government have turned on him. His government casts him as one of those evil rich people. Instead of celebrating his achievements, his government attacks him. Instead of his government asking what it can do to help him create even more jobs, his government tars him as not paying his fair share and takes even more of his money in the form of taxes. Do you think he might be feeling a bit betrayed by his adopted country?
Ever hear the phrase "I know where I'm not wanted"? This seems to be a trend that is developing. The practice of renouncing U.S. citizenship is up 16% from 2010 and is up nearly 800% since 2008. In this competitive global economy that we now live in, wouldn't it make more sense to have policies that attract the successful instead of repel them? Why is it that many of our best and our brightest like Mr. Saverin are deciding that there are better places to live?
Taxes is one issue. Singapore doesn't have a capital gains tax. The capital gains tax right now in this country is 15% but it is set to go over 30% in 2013 and the current administration would like it to go even higher. Now no matter how much you love your country, what justifies them taking twice as much of your money in taxes? Especially if you are wealthy and can just pick up and move?
But it is more than that. The regulatory environment in the US has deteriorated to the point that if you are a US citizen living abroad, many banks will no longer let you set up a bank account with them overseas. Why not? Because they simply don't want to have to deal with all of the new regulatory BS that comes with dealing with US citizens.
One of the reasons that Mr. Saverin moved to Singapore back in 2009 is that there are a lot of investing opportunities around the globe. Unfortunately his adopted country, the US, makes it so difficult to invest around the globe that it was easier to move abroad. Just one more government policy that is pushing some of our most successful to leave.
The other issue that I would like to address is this issue of punishing people that decide to leave. One of the most galling and misleading statements in my opinion came from Sen. Bob Casey of PA.
In a statement, Casey said that actions such as Saverin's are an insult to middle-class Americans. "We simply cannot allow the ultra-wealthy to write their own rules," he said. "Mr. Saverin has benefited greatly from being a citizen of the United States but he has chosen to cast it aside and leave U.S. taxpayers with the bill."
My first question is what the heck is he talking about "writing their own rules"? Mr. Saverin didn't write any rules. He simply played by the rules that are on the books. Secondly this bit about "leave the US taxpayers with the bill". What bill? Mr. Saverin may have benefited greatly by being a US citizen but it would be my contention that the US also benefited greatly by having Mr. Saverin as a citizen for these 13 or 14 years.
How? By founding and growing a company here that employs thousands and has made over 1000 employees millionaires. Those people will continue to pay taxes here if they decide to stay which I'm guessing most will because most were born here. In addition Mr. Saverin has to pay an exit tax of approximately 30% which is higher than the capital gains tax he would have paid if he stayed here and cashed out this year. The only thing the US loses out on is future tax revenues because Mr. Saverin is no longer a citizen, but whose fault is that? So again I ask, how is that sticking tax payers with the bill?
One of the most troubling things to me is that you have people calling for more punitive measures on people that leave. You even have some people suggesting that there should be laws forbidding people to leave and take their wealth with them. When I was growing up it was the US that allowed their citizens complete freedom of movement and it was countries like the Soviet Union, Cuba, and China that restricted if and when their citizens could leave the country. My how times have changed!
Take a look at this chart!
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Until next week , Protect Your Wealth!
Sincerely,
  
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