When a story is being spun wildly in more than one direction, it’s important to start with facts: One of Facebook’s initial investors, Eduardo Saverin, has renounced his American citizenship in favor of Singapore, where he had already been living as an American ex-patriate. Because Singapore has no capital gains tax, making the switch before Friday’s Facebook IPO may have saved Saverin many millions of dollars.
Apparently he made the switch in September, but it wasn’t widely known until his name appeared on a government ex-citizens list on April 30. That made Saverin the central figure in stories that Right and Left had been writing before they knew he was involved.
The Right’s story. The growing numbers of citizenship renunciations (up about fourfold from the Bush administration average, but still just 1800 in 2011) was already being trumpeted as cause for alarm on April 23 by the Wall Street Journal’s William McGurn. As far as I know, no one has checked who all these 1800 are or asked them why they don’t want to be Americans any more, but McGurn is sure they are rich people fleeing oppressive American taxes.
when it comes to the global inefficiencies of our tax code, these 1,800 ex-Americans are canaries in the coal mine. Our tax code—and especially the onerous reporting requirements that come with it—is turning U.S. citizens into economic lepers.
His conclusion is that the U.S. needs to become “more competitive” by not taxing money that American citizens make overseas. This is related to another popular conservative talking point, but the U.S. should declare a tax holiday to allow American corporations to repatriate profits made overseas either tax-free or at a reduced rate.
On May 8, Bruce Bartlett addressed the ex-citizen issue in the NYT, doubting that any large number of the renunciations were due to taxes, but agreeing that there is a problem. Again, Saverin did not come up.
If you’re having trouble follow that logic — how exactly does declaring that you’re not an American any more make you an American hero? — Tamny explains:
Saverin’s decision will starve the feds of revenue they would almost certainly waste, it will force a rethink of a tax code that penalizes income and investment success, and the unconsumed dollars kept from the hands of government will reach today’s and tomorrow’s businesses. Let’s raise a glass to Eduardo Saverin. He’s a true American hero.
Tamny hopes this will lead us to see the folly of the income tax, abolish the IRS, and institute a consumption tax instead (because apparently you get out of a recession by spending less and saving more, contrary to anything those stupid economists might tell you).
And if the tax is regressive or hits low incomes at the same percentage as high ones, all the better.
And if the world loses faith in the U.S. government’s ability to meet its obligations, that’s good too.
That Saverin has chosen to avoid supporting the Leviathan is a heroic act that will hopefully make investors a little bit more gun-shy about investing in U.S. debt.
Because every patriot wants to see his government default, I guess.
The Left’s story. For the Left, Saverin put a face on the Unpatriotic Rich, who (if they are loyal to anything beyond themselves) identify with their class rather than their country. The Nation’s Ilse Hogue:
[Saverin] has made himself the poster child for the callous class of 1 percenters who are all too happy to use national resources to enrich themselves, and then skate, or cry foul, when asked to pay their fair share.
Saverin’s wealthy Brazilian family moved to Miami when 13-year-old Eduardo’s name turned up on a list of kidnap-for-ransom targets. America kept him safe, and then let him into Harvard, which was generous enough to assign him a roommate with a $100-billion idea. (I wonder who he’d have roomed with at University of Singapore.)
I’m sure Saverin will be eternally grateful for those and many other favors America did him. But gratitude is a mere sentiment, and who thinks sentiment is worth tens of millions? (Did I mention that Singapore has no capital gains tax?)
A quick segue will take you to bankers who spout libertarian rhetoric about food stamps but demand that there be no strings attached to their bailout, or industrialists who want government subsidies to help them move American jobs to China. The rich only care about America if they can make money off of it. If not, bye-bye.
Of course, switching your loyalty for money is not new — it’s what Benedict Arnold did. We used to have a name for such people: traitors.
That’s the sentiment behind Senator Schumer’s proposal to levy a punitive capital gains tax on citizenship-renouncing Americans.
To sum up the liberal point: If we’re going to continue being the kind of country where people can get rich — a country with roads and schools and courts and police and a viable currency and salmonella-free food and a communications system and medical care and sidewalks clear of emaciated corpses — rich people are going to have to pay taxes. If they regard that as an imposition rather than a duty, they’re just proving how unpatriotic they are.
Saverin may illustrate that story, but we were telling it already.
Market society. I think a more interesting conversation comes from another pre-Saverin story: Michael J. Sandel’s “What Isn’t for Sale?” from the April Atlantic.
The most fateful change that unfolded during the past three decades was not an increase in greed. It was the reach of markets, and of market values, into spheres of life traditionally governed by nonmarket norms. To contend with this condition, we need to do more than inveigh against greed; we need to have a public debate about where markets belong—and where they don’t.
There’s a pretty broad consensus that America should have a market economy. In other words: The price of potatoes and beachfront property and replacement car batteries should be determined by supply and demand rather than set by a bureaucrat. A century ago, intelligent people could disagree about whether a centrally planned economy might work better. But after the bad example of the Soviet Union, we’ll stick with markets.
The problem, Sandel says, is that more and more we have not just a market economy, but a market society, a place where everything is for sale and everything is judged by market values. The problem with selling, say, transplantable kidneys, isn’t whether the price will be determined by markets or regulated by the government; the problem is selling them at all.
Some things just shouldn’t be part of the market economy. But what things?
Let’s suppose that Saverin didn’t just fall in love with Singapore one day, but that his accountant calculated that Singapore offered him a better deal than America. Is it wrong for him to take that deal? Why, exactly? What is the proper boundary between things that ought to be for sale and things that ought not?
Sandel sees that boundary sliding and thinks we need to have a serious conversation about how far it will go. Should first class passengers have a faster TSA line or not? Should rich prisoners be able to buy a cell upgrade or not? Should you be able to hire a surrogate womb to carry your fetus or not? Should parentless babies be auctioned off or not?
Consider privatized juvenile prisons. A decade or two ago, no one would even have suggested such a thing. A decade or two before that, no one would have suggested pushing sugary drinks or fatty sandwichs in public high schools in exchange for funding from Coke or Burger King. Of course you’ve always needed money to run a school or a prison, but schools and prisons weren’t about money. Today, some of them are.
Moving from a drafted citizen army to a professional army was a step towards market society. Moving from a professional public army to a contracted private army would be another. How far should we go?
Once we named parks and arenas for heroes. Now we auction naming rights off to the highest bidder. What values get reinforced every time we go to AT&T Park or Sports Authority Field (both of which I had to correct after remembering their “old” names of Pac Bell and Invesco)?
Economists often assume that markets are inert, that they do not affect the goods being exchanged. But this is untrue. Markets leave their mark. Sometimes, market values crowd out nonmarket values worth caring about.
When we decide that certain goods may be bought and sold, we decide, at least implicitly, that it is appropriate to treat them as commodities, as instruments of profit and use. But not all goods are properly valued in this way.
Is citizenship one of those goods? Why or why not?