Rich Americans Renounce Citizenship to Evade Taxes
It turns out, the U.S. government doesn’t like it if you renounce your citizenship to avoid paying taxes — even more than people don’t like paying taxes. At least, that’s what Facebook co-founder Eduardo Saverin discovered after he announced that he was giving up his U.S. passport, just days before he was set to make millions from today’s Facebook IPO. Saverin, though, is not alone. Ever since the U.S. government began to crack down on tax evasion four years ago, nearly 2,000 wealthy Americans living overseas have decided to give up their citizenship to avoid paying taxes.
Why Rich Americans Want to Leave
The U.S. is the only nation in the Organization for Economic Cooperation and Development that taxes citizens wherever they live, which means that rich Americans can’t avoid paying taxes by moving to, say, Switzerland. Now, with concerns about the budget deficit clogging up Congress, the government is going after tax cheats with a vengeance. This means that many wealthy expatriates, especially those who live in Switzerland, started facing pressure from banks abroad, who didn’t want to risk being charged with aiding tax evasion. Instead of coughing up the tax money they owed, many rich expats decided that holding a U.S. passport was more trouble than it was worth.
Some say that the government assumes that any American living abroad are there for “nefarious” reasons, but in reality many are there for business or leisure. However, the fact remains that many Americans do live abroad in order to evade U.S. taxes, because they apparently agree with Mitt Romney’s friend and former Bain colleague, Edward Conard, who believes that dramatic income inequality is in everyone’s best interest — so government policy should cater to those of extraordinary wealth.
The Hyper-Wealthy Shouldn’t Pay Taxes?
Earlier this month, Conard explained to the New York Times’ Adam Davidson that vast sums of money held by a small elite benefits all Americans because these elites use only a small fraction of their wealth to support themselves. The rest, he said, finance investment and innovation that keep the economy running. The idea is that the financiers of Microsoft or Eli Lilly and Company, for example, created for more benefit for the world than if that money had gone to taxes. The wealthy are, therefore, entitled to their money. After all, the rich always know best — even if they have invested in JP Morgan.
Davidson is quick to eviscerate Conard’s argument, explaining, “If a Wall Street trader or a corporate chief executive is filthy rich, Conard says that the merciless process of economic selection has assured that they have somehow benefited society.” This sense of entitlement and superiority — Conard spits that anyone who does not seek fabulous wealth as a financier is an “art-history major” — is what is at the root of the exodus of wealthy (former) tax payers.
If only they could see one step back from the benefits that corporations bring to the world — how corporations got there in the first place. As Senate candidate Elizabeth Warren reminds us, “nobody in this country got rich on his own,” because government intervention, paid for by tax dollars, creates a business- and innovation-friendly environment in the first place.
Photo Credit: sandstein