Right on Don!

Sen. Robert Casey (D-PA)
Sen. Charles Schumer (D-NY)
Capitol Hill

Dear Sen. Casey and Sen. Schumer:

Irked that Facebook co-founder Eduardo Saverin has renounced his U.S. citizenship, you propose, with your “Ex-Patriot Act,” to punitively tax and to permanently bar from ever again entering America men and women who, to reduce their tax liabilities, renounce their citizenship in the U.S.

The very fact that sitting U.S. senators issue such a proposal – the sick reality that representatives of an allegedly free people act as if individuals are serfs bound to a master – the noxious yet proudly paraded assumption by American government officials that a peaceful man’s or woman’s freedom of movement can properly be restricted by a government jealous that it misses the opportunity to seize a huge chunk of that man’s or woman’s earnings – does nothing other than to confirm the wisdom and justice of Mr. Saverin’s decision.

Donald J. Boudreaux
Professor of Economics
George Mason University
Fairfax, VA 22030

Freedom, at least in part, consists of the freedom to exit.

22 thoughts on “Right on Don!”

  1. Even the pre-socialist Jean-Jacques Rousseau with his “Social Contract” accepted the concept that if you didn’t like it you could bugger off somewhere else.

    In the modern day blogosphere, this has transformed into the refrain “if you don’t like paying taxes, go to Somalia and see how you enjoy it” (or similar).

    However the US disguises it they have since the 1960’s treated all Americans as tax serfs – the ever decreasing (in real terms) foreign earnings exemption has been the thin veil preventing a lot more Americans with foreign residency from renouncing US citizenship.

    With the ever increasing demands of the US Government and draconian enforcement of the IRS and its mandatory filings (FATCA, FBAR, etc.), what sane person would put up with this continued harassment except someone programmed through state propaganda, sorry state education?

    The queue for the exit has grown very long indeed as those who wish to save their wealth from the IRS attempt to flee.

    Figures for Renunciations:
    2008 222-235
    2009 731-743
    2010 1485
    2011 1781

    Although the numbers aren’t large, these tend to be the very wealthiest that have to go through at least 2 interviews with consular officials and submit numerous documents and sworn statements.

    However, these numbers only reflect those US Citizens that have gone through the formal process, the vast majority of escaping serfs, just move their money ashore and don’t leave a forwarding address for the IRS.

    Land of the Free – I don’t think so.

  2. Strange how nearly all Americans insist on displaying their middle initial, and all seem to have only one.

    Bit Off topic, admittedly.

  3. Rob, the story goes that the S in Harry S Truman doesn’t stand for anything at all, he just wanted people to think he had a middle initial like everyone else. A kind of inverted snobbery, as it were.

    No idea if this is apocryphal. Haven’t bothered to Wikipedia it.

  4. I thought Ulysses S Grant had two grandfathers with Christian names beginning with S. Therefore so as not to favour one over the other he was given S only.

  5. I’m not surprised to see Chuck Schumers name on this, he’s an odious man. Don Boudreaux is awesome however.

  6. “to permanently bar from ever again entering America men and women who, to reduce their tax liabilities, renounce their citizenship in the U.S.”: that’s an elementary right of a sovereign state, isn’t it?

  7. US citizens might not like paying US taxes when they live in France/wherever. But being able to go back to the US if the shit hits the fan is about the best insurance policy you can have. No-one will invade them, and if the US goes bust, everywhere else is stuffed, so who cares?

    I can’t decide if someone who decides to give this up (a) should face no penalty because they’re giving up such a valuable asset or (b) deserves to be banished for all time, because they’ve had this “insurance” for years, and give it up when convenient.

    I think the latter – if and when there is a catastrophe, they’d all go running back to the US.

  8. PS, meant to say that because US citizenship i s such a good insurance policy, the US can get away with taxing its citizens abroad.

  9. @Luke: on that basis no non-US citizen should ever be given the right to live in the US without first signing up to taxation of their worldwide income in perpetuity (or at least until they renounce their right of residency in the USA). It seems rather unfair that a non-US citizen from birth has better rights than a US citizen who renounces his or her citizenship.

  10. Jim, a good point (but best keep it to yourself – I can see the us thinking -“great idea…” and we might get jobs there one day).

  11. @Luke:

    I actually agree with you that there is some measure of value as essentially insurance for if the whole world goes to hell in a hand-basket.

    In actual fact I would put the value of that at about $200,000-$500,000 US Dollars.

    This is based upon the fact that I can essentially buy a passport from numerous countries across the world for this amount of money, either by buying a property above a certain value or by making commercial investments of a certain value.

    This is not universally true, but it is true for most countries – even the US.

    Equally, renunciation is not a one-way street and people who have given up their US Citizenship can have it restored (as Lee Harvey Oswald apparently did after his return from the USSR).

    The difficulty then lies in the US valuing US Citizenship at a far greater value (in terms of a lifetime of taxes) than those actually holding the citizenship.

    Once you get into the realm of having income and/or capital gains in the millions each year it becomes a difficult matter.

    The list of names that is released each quarter is being pounced upon by journalists looking for so called “Tax Dodgers” to pour vitriol upon.

    If I was in Mr. Saverin’s position, I would have probably changed my name to John Smith before renouncing US citizenship.

  12. Any greencard holders leaving after seven years are also subject to the exit tax. Presumably this will, at the margin, discourage people from moving to (or at least remaining in) the US.

  13. MMJ

    The 7 year exit tax must be new – I gave up my GC in 2005 (family turned off by the TSA) and the US was very nice about it.

    Barring the TSA, I’d still be there, probably a citizen. Excellent place.

  14. @MMJ

    I did just that. Lived in the US for over a decade. I saw the exit tax coming, realized it would take a 30% bite, around $100k, directly out of my retirement savings in unrecoverable double-taxation, and left and gave up the GC before the law passed. Not a day goes by that I’m not hugely grateful to have got out when I did. I now have no desire to return, ever.

  15. Jim // May 18, 2012 at 5:09 pm

    Anyone considered as having the right to reside in the US has the same obligations : GC holders included, even if resident abroad.

  16. Edward, Oxonymous, Shinsei67 (#3,4,5)

    No, Truman is the one with 2 grandfathers named S.

    Grant’s name was initially a mistake, but he decided that it could stand for United States or Uncle Sam.

  17. Luke (#9,10,12)

    US citizenship is a crap insurance policy. The US won’t even let some of its own citizens return to the US because they are on the no-fly list.

    The UK and Canada do much more for their citizens who get in trouble abroad. PRChina even helps out people from Taiwan.

    In any case, no other country in the world (except Eritrea) purports to tax citizens who don’t live in their country.

    Jim (#11)

    If this law passes, they will be signing up to be taxed on their worldwide income forever.

  18. John Galt (#13)

    1. Lee Harvey Oswald never became a Soviet citizen (his application was rejected), so he just reapplied for a US passport.

    2. If the world “goes to hell in a hand basket”, how will US citizenship help you? You’d be better off with citizenship of a place which is sheltered from those effects, perhaps Brazil or New Zealand.

    3. The only country you can buy a passport from with money is St Kitts and Nevis. The others also require a time investment, usually 5-10 years (resulting in a taxation liability). If you are going to do that, just get married to a Canadian and you can become a citizen in 3 years for about C$2000.

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