Eduardo Saverin joins the stateless billionaires
The United States is the only country in the world which applies the same tax regime to all its citizens, regardless of where they live: nowhere else are nonresidents charged the same federal tax rate as residents. And this makes America’s plutocrats qualitatively different from every other country’s super-rich.
If you wanted to sum up Eduardo Saverin in three words, you could do a lot worse than Very Rich Eurotrash. He didn’t become a Facebook billionaire because of his hacking skills or because Mark Zuckerberg happened to be his roommate in college; he became a Facebook billionaire because he had cash, and Zuckerberg needed cash to get Facebook off the ground. Zuckerberg provided the valuable labor which went into creating Facebook; Saverin, for all the ideas he had, was basically needed for his money, and his ideas ended up going nowhere. Today, now that he’s dynastically wealthy, he says things like “it’s a misperception, especially the playboy. I do have a Bentley. I do go out.”
Saverin might have more money than the Italian boys with cashmere sweaters draped over their shoulders who flit from one global Cipriani outpost to the next. But when he talks of himself as “a global citizen”, he’s not lying: he’s just displaying a mindset which he shares with any number of well-heeled international jet-set types. They’re easy to find: just get on a plane to Cannes or Sao Paulo, turn left at the first Tyler Brûlé, and you’ll find them picking at a $30 salad while wearing shoes which cost substantially more than the waiter’s weekly income. They live a pampered and sheltered experience: they even have their own social network, to keep them from being forced to rub digital shoulders with the masses.
In January 2011, after moving to Singapore, Saverin decided that he wanted to give up his US citizenship. He didn’t live in the US, he was going to have lots of income going forwards, and he felt that there was no good reason for him — a citoyen du monde — to pay 35% of that income to the USA in particular. Not to mention estate and gift taxes for when he finally passes on his wealth to someone else.
If Saverin hadn’t been a US citizen, all of this would have been a non-issue: simply moving to another country suffices to relieve you of most of your tax burden in your country of nationality. But because he was a US citizen, he took the drastic step of renouncing that citizenship; the move became official in September. And then, in a fit of extraordinarily bad timing, from a PR perspective, the news came out just as Facebook was about to go public, and, faster than you can say “press conference”, Chuck Schumer decided that he was going to introduce something called the Ex-PATRIOT Act. (Geddit?) Under the act, people like Saverin renouncing their US citizenship for tax purposes would face fines so huge that they’d be better off not doing so at all.
The rhetoric, here, is that Saverin’s success is attributable to his American citizenship, and that therefore America deserves to be able to receive its condign tax revenues. And I half buy it, although frankly there’s nothing stopping any rich Brazilian kid from going to Harvard and funding a startup. Saverin didn’t need US citizenship to do what he did.
This is an issue which pops up occasionally: it’s already very onerous to give up US citizenship. Kathy Kristof had a good overview of the history of such laws in 2008: a 1996 law, for instance, forced former US citizens to continue paying taxes on their worldwide income for at least five years, and in 2004 that was extended to 10 years. In 2008, a new law forced people like Saverin to pay capital gains taxes on the assumption that they liquidated all their property the day before they renounced their citizenship. And indeed, that’s what he did.
Still, Saverin can still be considered to be saving taxes here, since Facebook now is worth substantially more than it was worth in September. At the same time, he’s facing a nightmare at US immigration — entering the country might well be impossible, and it could be extremely difficult just to change planes here. He’s not just another Brazilian any more: he’s the lowest of the low as far as US immigration is concerned, and they will never treat him with any respect at all. Since he doesn’t have much in the way of rights any more — he gave most of those up with his citizenship — he’d be well advised to avoid the USA pretty much for the rest of his life.
From a public-policy perspective, this is the kind of US exceptionalism I can get behind. There’s a corrosive class of global plutocrats, living by choice in tax havens like Singapore or Switzerland, and paying vastly less in taxes than Mitt Romney or any US billionaire. If you’re not an American citizen, and you become incredibly wealthy, there’s a good chance that you will choose to become a tax exile — thereby depriving your home country of the income taxes it should expect to be able to raise from its richest citizens. It’s a country-of-residence tax arbitrage which makes the ultra-rich feel no civic duty at all to their countries. And somehow the US has managed to avoid that problem: American billionaires, as a rule, remain American billionaires, as do their children and their children’s children. They — along with the Chinese — are pretty much the only billionaires in the world who don’t live a stateless existence. And even the Chinese ultra-rich are rapidly breaking free of their home country.
So yes, it’s a little bit unfair to Saverin that he’s suffering so much opprobrium right now when he would be getting none of this were it not for the accident of his US citizenship. But I can’t really feel sorry for him. And if the US succeeds in making an example of him, it will have managed to pull off something very important — which is to keep its billionaires part of the tax base. Very few other countries can say that.