Thu May 17, 2012
Senators Propose Barring Those Who Drop Citizenship From Reentering U.S.
Originally published on Thu May 17, 2012 1:39 pm
Facebook co-founder Eduardo Saverin, who renounced his U.S. citizenship, is now facing backlash from politicians: Two U.S. senators are proposing a plan that would prevent people like Saverin from reentering the country.
As we reported yesterday, by some estimates Saverin may save $67 million in taxes by giving up his citizenship.
"We simply cannot allow the ultra-wealthy to write their own rules," Sen. Bob Casey, the Democrat from Pennsylvania said in a statement. "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. Renouncing citizenship to simply avoid paying your fair share is an insult to middle class Americans and we will not accept it."
Casey and Sen. Charles Schumer, a Democrat from New York, said their plan — which they've called the Ex-PATRIOT Act — would re-impose taxes on expatriates and they would not be allowed to reenter the country until they settled their tax bill.
Through his spokesman, Saverin has said he didn't give up his citizenship for tax purposes. Tom Goodman, his spokesman, told The Wall Street Journal, Saverin renounced his U.S. citizenship because of the investment restrictions placed on Americans.
"U.S. citizens are severely restricted as to what they can invest in and where they can maintain accounts," Goodman told the Journal. "Many foreign funds and banks won't accept Americans. This was a financial rather than a tax motive."
That statement didn't stop Schumer from issuing some scathing words.
"Mr. Saverin has decided to 'defriend' the United States of America just to avoid paying his taxes," Schumer said in a statement. "We aren't going to let him get away with it so easily. It's infuriating to see someone sell out the country that welcomed him and kept him safe, educated him and helped him become a billionaire."
From the Casey's press release, here's a bit more detail on their plan:
"Under the proposal, any expatriate with either a net worth of $2 million or an average income tax liability of at least $148,000 over the last five years will be presumed to have renounced their citizenship for tax avoidance purposes. The individual will then have an opportunity to demonstrate otherwise to the IRS by meeting specific IRS requirements. If the individual has a legitimate reason for renouncing his or her citizenship, no penalties will apply. But if the IRS finds that an individual gave up their passport for substantial tax purposes, then it will prospectively impose a tax on the individual's future investment gains, no matter where he or she resides. This would eliminate any tax benefit and financial incentive from renouncing one's citizenship. The rate of this capital gains tax will be 30 percent, in keeping with the rate that is already applied on non-resident aliens for dividends and interest earnings."
Update at 4:38 p.m. ET. Statement From Saverin:
Reuters obtained this statement from Saverin:
"I have paid and will continue to pay any taxes due on everything I earned while a U.S. citizen. It is unfortunate that my personal choice has led to a public debate, based not on the facts, but entirely on speculation and misinformation."