AN OPEN LETTER TO EDUARDO SAVERIN

The following is a guest post by reader Ross Thomas.

“Is the rich world aware of how four billion of the six billion live? If we were aware, we would want to help out, we’d want to get involved.” – Bill Gates

Dear Eduardo Saverin (if I may call you that),

You were, as I’m sure you’re aware, born in Brazil to a wealthy family, and were moved to Miami when you were a child. To America, the land of opportunity. And boy, did you ever have a lot of opportunities. Your parents sent you to Harvard, where according to Wikipedia you “took advantage of Brazil’s lax insider trading regulations and made $300,000 via strategic investments in the oil industry”. Well played! I bet that made your parents proud. In 2004 you were vaguely instrumental in setting up Facebook – a thriving startup which you helped turn into the world’s most overvalued company – and in 2009 you moved to Singapore. In 2011, just before Facebook’s IPO, you renounced your US citizenship, once again to exploit loopholes in international law for your own personal gain.

You are the worst kind of capitalist. You’re the kind of capitalist who shows up in a new country and sees only spoils to be pillaged, other people’s property to make your own. The opportunity you see is for yourself and yourself alone; you fail to realize that every opportunity comes with a cost. Your goal – as Marx observed of the obnoxious pseudo-capitalists of his own day – is to accumulate, accumulate, accumulate. But you don’t even have the chutzpah to stick around: you run away with your loot to a rather dull little tax haven in the South China Sea, sticking your former countrymen with your bills.

Real capitalists build nations. They understand they can only profit if society does too: that society enables them to profit in the first place by providing political stability, a system of finance for raising capital, security from our enemies, courts of law in which to settle disputes, roads on which to transport goods and workers, Internet links through which to channel data, and on and on. Real capitalists tend, nourish, and grow their communities so that they may reap an even greater harvest of profits next year, to everyone’s mutual benefit. You raided the vegetable garden.

You give capitalism a bad name, and I no longer wish to be associated with you or your company. Thus I have deactivated my Facebook account and switched to Google+. I hope your American customers understand that because of your oh-so-clever legal maneuverings you will be paying less tax on your billions, and they will have to make up the difference. And I hope next time you visit America you’re made to feel as welcome as you deserve.

You, Mr Saverin, are no Bill Gates.

Ross Thomas

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  • ES

    Frankly, Americans such as author need to have tone down their rhetoric since they have clearly no personal experience with the issue. US is the only country in the world ( well, maybe there a couple obscure ones) that taxes world-wide income. I have Russian and American citizenships. I live in the US and pay US taxes. I pay nothing to Russia since I don’t use their services. If they wanted me to pay taxes and comply with difficult filing requirements while I don’t use their services I’d be upset. But if I wanted to go back and live in Russia, I would have to pay not only their taxes but also disclose all my accounts, all my transactions and pay US taxes on top of it. And good luck getting documents that would be recognized by US authorities from a country such as Russia. They could care less about US requirements. In fact, they would think it is a good sport to defy Americans since they would rightly think that US has no business meddling into other soverign country affairs. And you see nothing wrong with that? Well, I do. And every American expat I know feels the same way.

  • Ross Thomas

    The author is a citizen of the EU and Canada.

  • SS

    Saverin is not an expat. He did not choose to leave his home country to work in a foreign country where he could make a greater income. He chose to stay in the USA. But he bailed when the tax bill came. It’s not the same as being an expat or having dual citizenship. This scum bag set up dual citizenship in advance so he could keep more money. That’s all. He played the system, benefited from the system and when the system asked for something in return he stiffed it.

  • SS

    +1. Well done Ross!

  • ES

    Where does the author resides – in the US or Canada? If the author resides in the US, then he only needs to file US taxes the same way I do. But in case of living in Canada I’d be intrested to know who prepares the US tax returns as TurboTax is no longer an option. And how does the author feel about the Canadian VAT taxes not being dedutable on the US tax return.

  • Ross Thomas

    The author resides in Canada.

    But the author is growing tired of referring to himself in the third person ;)

  • ES

    As I understand he got his citizenship through parents who applied. Then how is his case different from all other Americans born in the US denouncing their citizenship because it is too hard to maintain while not living in the US? How is he more of a scumbag in your view than the rest of them. Because he is richer?

    I was born in the USSR, where we couldn’t live the country at all. Not only that we couldn’t actually move to another city without a permission. We were supposed to stay and work where the party felt we are the most useful. I am very sensitive to the issues of freedom and as far as I am concerned everyone should be able to chose their citizenship as long as they are following the laws. He didn’t break any laws so I honestly don’t understand what everyone is mad about. That he dared to take his money out of the country? Isn’t is his money?

  • ES

    Lol. Ross, then who files and figures out the US taxes and what Canadian taxes are deductable or not?

  • Martin

    This is a Brazilian living in Singapore.
    Why should he pay taxes to the US and not to Brazil or Singapore?

    If I, as a Norwegian, buy Facebook shares and sell them with a profit, I only have to pay taxes to Norway. Dividends is another matter, because of US withholding taxes.

    A good capitalist always try to make himself as large as profit as possible – after tax. If this Saverin guy have found a way to save taxes, good for him. Then he don’t support the criminal activities done by the US government.

    Yes, it’s the governments of the world that are our enemies, not capitalists like Saverin. The governments, sponsored by the corrupt financial system, keep it’s people down in powerty by taxing them more and more and more.

    Singapore is an excellent country by the way, and not dull at all.

    If you’re disappointed with this tax loop hole, you should lobby to get US tax rules changed. The US tax code is just ridiculous and only benefits the lawyers, the accountants and the ultra rich.

    More people should do like Saverin. A lot more. Then maybe the US government would be forced to clean up the tax code. Countries like Bulgaria have 10 % flat tax. Simple, efficient and fair.

    Your own reaction is ridiculous. Google is the masters of the world when it comes to tax evasion. They hardly pay taxes anywhere, by using tax heavens and constructions like the Dutch Sandwich etc.

    Google it.

  • Dunce Cap Aficionado

    Well said Mr. Thomas.

  • Ross Thomas

    I’m not sure what you mean. I only pay tax in Canada :)

  • ES

    You don’t file a US tax return? Well, you are supposed to as a US citizen. You must be joking.

  • Ross Thomas

    “Why should he pay taxes to the US and not to Brazil or Singapore?”

    Because he became an American citizen and made his fortune in America by launching an American publicly traded company while using America’s public resources.

  • Ross Thomas

    I think you might need to read over my comments again.

  • http://www.pragcap.com Cullen Roche

    I think the critique is regarding the fact that he made his money in the USA in a US based company and decided to flee the country to avoid the taxes. If he’d helped create the company as a citizen of Singapore or established it as a company in Singapore then I don’t think there’d be a problem.

  • http://www.pragcap.com Cullen Roche

    He is not a US citizen. As he said….

  • Ross Thomas

    “Isn’t is his money?”

    Not all of it. That was my point.

  • http://www.pragcap.com Cullen Roche

    And it’s his right to do so. There’s nothing illegal (as far as I can tell) in what he did. But he’s not going to win any awards for courage and integrity for his actions. It’s purely a selfish motivation despite having been given much by benefiting from the utilization of the resources made available to him in the country where he has decided to flee from….Take, take take. Not so much give.

  • ES

    I misread it, – you said EU and Canada. I read it as US and Canada. If you are not a US citizen, then you don’t have the experience with the US double-taxation laws, just as I suspected orginally.

  • http://www.pragcap.com Cullen Roche

    This is not a case of double taxation. He did not reside in Singapore prior to making his billions. He moved to Singapore specifically so he could establish citizenship and the avoid the US taxes which he would owe. If he’d been a dual citizen BEFORE making his billions in Facebook then I doubt Ross or I or anyone else would have a problem with what he’s doing.

  • Anonymous

    This is kind of odd to me, especially in MMR world. If Eduardo contributed to the success of Facebook, then that’s more than most people will contribute to the U.S. And as we know, we don’t need Eduardo to pay taxes for the health of our economy.

  • ES

    We are all selfish. USSR was born on the idea that people would do the right thing regardless of everything else. In the end it turned into a horrible totalitarian state because some people will always attempt to take advantage of others unless there are laws preventing that and these laws are enforced. People will do the right thing if incentives are aligned so. US tax laws distort incentives and push people towards the wrong things. US tax laws are unjust and we cannot expect people act fairly while following them. In the end, people will only will do the right thing consistently if they feel they are treated justly and not punished for doing so.

  • Ross Thomas

    Right.

  • ES

    Exactly. Our taxes don’t finance anything as we all agreed (after 2 years of heated discussions). Taxes only control money supply and also punish some and reward others as per US laws, as the US Congress sees fit.

  • http://www.pragcap.com Cullen Roche

    Lax tax collection is a great way to let the money supply get out of hand. MMR certainly doesn’t advocate no taxes. Taxes might not “fund” spending, but that doesn’t mean taxes aren’t a crucial element in sustaining the monetary system.

  • Ross Thomas

    “And as we know, we don’t need Eduardo to pay taxes for the health of our economy.”

    Sorry, but I think you’re completely wrong. Taxes don’t finance anything, it’s true, but they do control inflation, and they are a way of giving back to society. It’s a shame that MMT tends to view taxes only as a monetary operation and not as a social one.

  • http://www.pragcap.com Cullen Roche

    Do you feel that Saverin has been treated “unjustly”? From what I know about all of this, he basically did some consulting work in the early days of Facebook, helped establish the company, made billions from a minority role in the company and is now jumping off of yachts off the coast of Singapore. It sure sounds like his experience has been unjust and traumatic! If only we could all go through such gut wrenching experiences as working part-time for a few years only to be rewarded for things that we did not build on our own! :-)

  • http://www.pragcap.com Cullen Roche

    Agreed there. Taxes help bind our entire society. MMR needs to emphasize this more.

  • Martin

    And he used the American tax system to not pay the taxes.

    As most other ultra rich Americans would do and does. As most sensible people would do, if they have the opportunity and they’re not blind of patriotism and socialism.

    What public resources are you talking about? This is not a mine or something.

    As far as I know, no foreigners have to pay US taxes on gains on public stocks in the US. It’s the same over the most of the world, which is exactly why the US have a low tax rate on capital gains compared to most countries.

    An American investing in Norway ends up much richer than a Norwegian investing in Norway, because you have no wealth tax and a much lower tax rate on capital gains.

    This guy is not central in Facebook at all. He just happened to be at the right place at the right time.

    He’s clearly not stupid, which he proves by saving a lot of taxes and by moving to a dynamic country in a very exiting region which is not becoming more and more sosialistic and freedom hating every day.

  • Ross Thomas

    “We are all selfish.”

    Neoliberal nonsense. If we were truly a selfish species we wouldn’t have gone from Game of Thrones to the UN within the blink of a geological eye.

  • ES

    He was born to rich parents, yes? This is who paid to Harvard (not the US taxpayers) and who gave Facebook starting capital. There are plenty of americans born to rich parents who live even less productive lives. Should I hate them? Frankly, I just don’t care. They don’t concern me. They are all set and good with their trust funds. The Saverin’s problem is that he actually wants to do business, and he wants to do business outside of the US. If he just stayed in the US and enjoyed his billions without lifting a finger for the rest of his life, everyone would just love him and praise him as a “job creator”. He is no less of a “job cretor” while working in Singapore. So, yes, I think this witch-hunt is very unjust and I wouldn’t want to be on the receiving end of it.

  • Martin

    > awards for courage and integrity for his actions. It’s purely a selfish motivation

    So, what is capitalism about then? Maybe I’ve misunderstood the whole thing, because I though that selfishness was the very foundation of capitalism.

    Luckily there are many alternatives for those that hate capitalism, you can try out Cuba or North Korea if you’re looking for an opposite.

  • Effem

    How is this any different than corporations who aggressively manage tax exposure (basically all of them)? Take a company with lots of IP who sets up an off-shore division in a tax haven and places its key patents there. They benefit from the lower tax rate. Have they made the money in that jurisdiction? Not if you ask me – they developed the IP in the US and then moved it to save money.

    I think the author is just jealous that that Eduardo is in Singapore dating models. After all, if you really cared about fair taxation there are MUCH, MUCH bigger fish to fry (like the entire S&P 500).

  • ES

    > If we were truly a selfish species we wouldn’t have gone from Game of Thrones to the UN within the blink of a geological eye.
    —————————————-
    UN was born out of the horrific WW2 experience. It took unimaginable suffering of millions of people to get to that point. Humans finally understood that if they don’t want to self-destruct they have to work together. But this lesson has to be reinforced over and over or it is soon to be forgotten. US wasn’t really affected by WW2 that much and is actually not a very good at playing nicely with others. In the end, our need for survival and happiness is also selfish. But this is too much into philosophy.

  • Rich

    I think the ultimate end point for this is something like venture capitalist Paul Thiel’s floating libertarian island…where there is no government, or taxes of any kind…

    http://theweek.com/article/index/218393/libertarian-island-a-billionaires-utopia

    Of course, I would look forward to their emergency distress calls to the U.S. Navy when others didn’t recognise or respect their sovereignty, and decided to help themselves to whatever they felt like.

    Hmmm…what to do…what to do…???

    I know…how about starting your own Navy and taxing your citizens to pay for it…But, Dang!…then you’re just back to where you started from.

  • http://www.pragcap.com Cullen Roche

    If you misunderstand capitalism then yes, that’s a good definition. If you understand capitalism then you understand that it works best when you are working WITH your society to provide mutually beneficial goods and services in the pursuit of profit. But some people take advantage of capitalism, misunderstand it, rape and pillage their society and then ALL the capitalists get blamed for the bad apples….

  • PB

    He has every right to flee the US with his money. Pay those extra money in taxes for what? Fighting wars? food stamps? Spying on US Citizens? Besides, he has made it clear enough that it was not a tax move. If you think it was tax evasion, try going after him!! Who’s stopping?
    If Singapore/HongKong were not the place to be in the coming decades, he would have certainly stayed. Entrepreneurs think ahead. Today’s news is already old stories for them. The real loss is not the tax dollars. It’s that an co-owner of a $100B phenomenon will be launching his next venture elsewhere. The fact that he decided to do so.

  • http://www.pragcap.com Cullen Roche

    Of course he has every right to leave. But he wouldn’t have built that $100B phenomenon if his family hadn’t moved him to the USA where they took advantage of the advanced legal system and development to avoid Saverin’s potential kidnapping in Brazil (he had been placed on a kidnapping list by local gangs – the reason for his family’s move). He also wouldn’t have met Zuckerberg had he not benefited from his American education at Harvard. But as soon as it was convenient for him to shun the nation that potentially saved his life and gave him everything he has, he got out of dodge. Of course that’s his right. He might not think he owes anything to the USA. And he doesn’t have to stick around to pay his dues and give thanks to a country that gave him a lot. But he certainly doesn’t deserve admiration.

    Maybe he’s riding the next economic wave in Singapore. Personally, I find it a little hard to believe that it’s not a tax move when he just built a $100B company here and happens to be saving 75MM or so from this maneuver. Does he seriously think he’s going to do the same in Singapore where the resources are far from comparable? That’s like leaving the NY Yankees for the Miami Marlins because they’re the “team of the future”. Come on. Be honest, you left NY because you didn’t like the taxes and the weather. Same difference with Saverin!

  • Ross Thomas

    “And he used the American tax system to not pay the taxes.”

    I didn’t say he broke the law. I said he’s a selfish jerk.

    Minimize taxes, yes. Evade them, no.

  • Bravo

    Brazil was colonized……what’s so surprising that Ed is more or less doing same thing? US has basically been colonizing Latin America in one form or another the last few hundred years.

    This open letter spiel…just a simpleton who can write a pretty good letter…

  • VII

    I could play both sides of this one.

    I’m staying out of this one. I just wish I could party with him in St. Tropez

  • Ross Thomas

    “How is this any different than corporations who aggressively manage tax exposure (basically all of them)?”

    So your argument is that it’s okay for Saverin to be an antisocial looter because other people are doing it?

  • Anonymous

    very poor grammar.

  • Anonymous

    Yeah, but he left the country, so you don’t have to worry about his demand contributing to inflation.

  • Anonymous

    So I think you are logically inconsistent, Ross.

  • http://www.covel.com Michael Covel

    “Dear Eduardo Saverin (if I may call you that), You were, as I’m sure you’re aware, born in Brazil to a wealthy family, and were moved to Miami when you were a child. To America, the land of opportunity. And boy, did you ever have a lot of opportunities. Your parents sent you to Harvard…”

    How much more has to be read to know where this player hating missive is headed?

  • Anonymous

    “but they do control inflation, and they are a way of giving back to society.”

    Don’t separate the two. Controlling inflation IS the way that taxes give back to society. But Eduardo left the country, so his money was effectively taxed ALL away. And as I said, if you believe he made a meaningful contribution to creating Facebook, then he gave back to society more than most. So it’s unclear how this criticism is logically consistent.

  • Ross Thomas

    Any tax he doesn’t pay by renouncing his citizenship must be paid either by other people as taxes or by everyone as inflation.

  • Anonymous

    You’re completely wrong, Ross. We worry about taxes if demand exceeds supply. Too much money chasing too much goods. Eduardo ended up taking all of his money out of the American economy. If anything, this was a deflationary force. But as Cullen says, I don’t think we have to worry about deflation in the U.S. economy – we know how to fight that.

  • Ross Thomas

    I don’t believe Facebook has made much of a contribution to society, as a matter of fact. And anyone who thinks it’s really worth more than McDonald’s or Citigroup must be smoking something.

    When I refer to taxation’s social function (aside from its monetary function) I’m referring to the notion that everyone should pay a fair contribution to the society that enables them to prosper — and, just as importantly, everyone must *know* and *trust* that everyone else is contributing. If you want to equate “giving back to society” with “controlling inflation” then I think you’re missing an important point.

  • Ross Thomas

    “We worry about taxes if demand exceeds supply”

    You may, but as I said, you’re thinking of it purely in monetary terms.

  • Anonymous

    This is standard fare. Inflation is prices rising. It results from too much demand. Are we making the giant leap to hyperinflation now?

  • ES

    Well, one hopes that ship will actually pretect their borders instead of being sent to the Persian Gulf. We have all kinds of troops everywhere but our own border with Mexico is not protected.

  • Ross Thomas

    All of it, hopefully. That’s what I tend to do: reserve judgement until I know all the facts. Your approach is interesting, though.

  • http://www.pragcap.com Cullen Roche

    1. You’re not anonymous.

    2. This isn’t about controlling inflation.

  • http://breedinginstability.com Mountaineer

    very poor capitalization. not a complete sentence.

  • ES

    What I also find funny is the repeated mention of Harvard by everyone. Harvard is a for profit institution, it was paid for the education the guy received. The argument would’ve held more water if he went to a public university.

  • DanH

    The dollars don’t get destroyed just because he leaves the USA. It’s not like the dollars were shot into outer space. They filter back to buying US denominated goods and services because that’s all they’re good for. Saverin will exchange them for local currency to someone who will utilize the dollars. They don’t leave the system permanently just because he flies them over to Singapore.

  • jaymaster

    Any American living abroad is practically forced to do this now. Because of the Patriot Act and now FATCA reporting issues, it is almost impossible for American citizens to open a bank account in a foreign country.

    http://www.nytimes.com/2010/04/26/us/26expat.html?_r=1

    This has caused problems for some employees of the company I work for who take temporary assignments overseas. The only work around we’ve found is to pay them in cash in local currencies.

  • VII

    You must be knew here.
    Let me introduce myself. My name is VII and I have the worst grammar on this site. I’m surprised by how bad it is sometimes.
    Just pretend your at a bar and you drank too much..you’ll find it easier to read me.

  • DanH

    Harvard is a non-profit.

  • wh10

    Sorry – I got a new computer at work, so your website didn’t auto remember my info.

    My point is a better argument needs to be articulated than the one that is being made. Because right now it doesn’t make too much sense on rigorous grounds.

    “I don’t believe Facebook has made much of a contribution to society, as a matter of fact. And anyone who thinks it’s really worth more than McDonald’s or Citigroup must be smoking something.”

    If Facebook meets the bar for criticism, then you could write a letter to most people in the U.S. Eduardo gave Facebook to the U.S. for free, and cashed in on a valuation that the U.S. chose to make, at least in part based upon expectations of future business, and I doubt it depended on Eduardo staying in the country.

    “When I refer to taxation’s social function (aside from its monetary function) I’m referring to the notion that everyone should pay a fair contribution to the society that enables them to prosper — and, just as importantly, everyone must *know* and *trust* that everyone else is contributing. If you want to equate “giving back to society” with “controlling inflation” then I think you’re missing an important point.”

    “Pay a fair share.” “Know that everyone else is contributing.” Look, taxes enable moving resources from the private to public sector while controlling for inflation. At the end of the day though, it’s about controlling for inflation. Otherwise, we can still move resources from the private to public sector if inflation is not a concern. And Eduardo leaving does not make inflation a concern; if anything, it makes deflation a concern. And he’s not taking anything from the U.S. If anything he gave the U.S. a real resource.

    Look at it this way. What if Eduardo died? Would you still criticize him? Him taking all of his money to another country is roughly the same thing economically.

    And you can’t seriously come back and say, “well he should of stayed, to further contribute!” Because if that is the case, go write a letter to every emigrant from the U.S.

    And if you don’t think he contributed much anyways, then there is no loss.

  • wh10

    Whether it’s people leaving the country or importing etc, we typically think of this as a demand drain with MMR. So this is effectively very similar.

  • brazzo

    All the tax discussion is great! I love this website.
    Regarding mine (as a Brazilian) and yours countryman Eduardo I believe exacerbated patriotism is blinding some of your opinions. Facebook to start with it’s a global phenomenon created in America, and the biggest beneficiary of its existence will be America. 150 million users are in USA and 55 mm in Brazil (second place) followed by India and Indonesia are also a great part of the value of this company. By taking his options that the legal systems allows Eduardo Saverin is no Villain, he made his choices and a if America it’s the Land of the free people must respect it.

    Bill Gates mentioned the other 4 billion, well Americans are not a part of this contingent and we just can’t know what Eduardo might do with his wealth for Indonesians and Brazilians where he surely knows more about how this People live than most of you.

  • Ross Thomas

    “Look, taxes enable moving resources from the private to public sector while controlling for inflation.”

    No. And that is precisely what is wrong with modern “capitalism”. People have forgotten what the word really means.

  • wh10

    What about all the people who take advantage of the US’s great education system and then leave the country to do business or public service work in developing nations? Should they be criticized for leaving the US?

    Is the difference that Eduardo helped make Facebook and reap a profit? Well he left the US a sustainable business. Why is it his duty to continue leaving the US with real resources?

  • http://www.pragcap.com Cullen Roche

    1. I personally don’t think Facebook is a useless tool. I use it. I benefit from it. I think it’s wonderful because it’s helped me socialize and network with people I would have never met or kept in touch with. So I find it very useful. It’s a great resource.

    2. My problem with Saverin’s action is the blatant tax avoidance. It’s his legal right to do so. But I don’t think it’s a very admirable thing to do. You pay your taxes because you know you’re paying into something bigger than you, something that gave you something to begin with. The only reason you pay taxes is because you reaped a benefit from the society established around you. No one ever made their wealth on a secluded 1 person island all by themselves. Now, if you totally hate that thing and want to reject it then fine. That’s your choice. Lots of people renounce citizenship because they really hate this country and don’t believe in it. But most of those people don’t do it because they just received a massive profit from the many benefits the country provided them. It’s a contradiction to claim that America just doesn’t work for you when you’re leaving $1B wealthier. So it’s a moral issue. Plain and simple. It’s selfish move in my opinion. It’s fine to be selfish. I’m not the beacon of virtue that all should look up to. But if I made $1B in the USA I’d pay my taxes, say thanks Uncle Sam may I have another. But that’s just me.

  • http://www.pragcap.com Cullen Roche

    Any student who graduates from a US institution should be granted immediate citizenship. It’s a stupid policy to educate these kids and send them packing.

  • Ross Thomas

    I hope he does help Indonesia. I’ve been there; it’s a beautiful and fascinating place, and very poor.

    But I’m not very hopeful, given his track record.

  • VII

    Ross Thomas-

    Man your blowing up the thread! Seems you hit a nerve. Wait until Fox News get’s a hold of this. All you need now is a good Conservative leaning libertarian and one of those good hollywood/ New York City Hampton Housewife liberals to get into it and I say you break the TPC all time thread. I know how to get the minyans on the left and right worked up. So let me help and play devils advocate.

    It’s his money what do you care? Why should he use his wealth to finance our wars?(that should do it)

  • EconFan

    I too think that the reflex here is more due to the colonization aspect. since many of the 1% (include Romney) use offshore tax havens , what does author have to say about them. Or about Apple and other companies which locate their servers offshore (or shell companies in tax favored states) to evade/reduce taxes.

  • Old Dog

    Just more crony capitalism.

    ALL of our leadership is on the same side of the same table – and it ain’t the people’s side.

    Good letter, good points, but it all comes down to whose ox will be getting gored when the tax laws are finally made fair. It certainly will not be the rich who pay the bills just like they are never the ones on the battlefield protecting their candy asses.

  • wh10

    I’m not talking about capitalism. I am talking about taxes. And that is the social function of taxes. If you believe the act of paying money to the IRS imparts some important sense of contribution BEYOND allowing for resources to be moved from private to public sector (social security, medicare, etc etc) while controlling the price level, then you need to make that argument more clearly.

  • http://www.pragcap.com Cullen Roche

    SAverin’s a genius. Good for him. No one is hating on the fact that he made a boatload of money. Great for him. He deserves it. But that doesn’t mean he didn’t benefit from the system and society established around him that laid the foundation for him to be able to achieve this. It’s fine to say you don’t want to pay back into that system that rewarded you so enormously, but it’s also a contradiction.

  • Ross Thomas

    Quite right. It’s absolutely a moral issue, and it needs to become a national debate. We complain and complain about the societies which give us so many tremendous opportunities, and applaud a man whose ethical integrity is highly questionable. Something is very wrong here.

  • Ross Thomas

    If you gain personally from the benefits of living in a modern, safe, democratic society then you are morally obligated to give back (and to be seen giving back) something to that society.

    That’s about as clear as I can make it.

  • Ross Thomas

    “Many of the 1% (include Romney) use offshore tax havens , what does author have to say about them.”

    Take a guess.

  • http://www.pragcap.com Cullen Roche

    Money is a social construct. And all money is debt. The man who provides society with great benefits will be rewarded with money. But he will also be indebted to his society and asked to pay back into that society in order to help sustain the society that so greatly benefited him. Saverin’s tax avoidance is a form of moral bankruptcy in my opinion.

  • wh10

    Cullen, I’ll admit I am playing devil’s advocate here. Trust me, I am not one to run the defense to ruthless capitalists.

    But I am really trying hard here to justify why this is morally wrong. To do that, I need a reason for why what he did will harm the U.S. And what I see is that he left the U.S. with a real resource that will generate tons of commerce going forward. Him leaving the country and not paying taxes is not going to hurt the U.S. at all. Now could it inspire future tax evasion that could become problematic? I guess that’s an argument, but a tenuous one at that.

    Selfish? I see what you’re saying, but he already helped give the U.S. Facebook. That’s giving a lot.

    There are also lots of people who benefit greatly from the U.S., particularly its education system, and then leave the country to go do business or public service work in developing nations. Do they really deserve criticism for leaving the U.S.? The only difference between many of them and Eduardo, is that Eduardo made a lot of money. But Eduardo also arguably helped give the U.S. something big. Why not view him as contributing to the development of the rest of the world, in countries that have favorable tax regimes for the exact purpose of attracting talent? If he acts unethically there, that seems like a better ground for criticism.

  • Ross Thomas

    Inflation has two possible sources: too much demand (demand-pull inflation), or too little supply (cost-push inflation).

    And as you’ll notice if you review my letter and comments, I didn’t once mention hyperinflation. It is not the same thing as inflation.

  • ES

    Sorry, I meant “private”. I understand the distinction as it applies to the US colleges . Elsewhere it would be called “for profit”.

  • Ross Thomas

    “Money is a social construct. And all money is debt. The man who provides society with great benefits will be rewarded with money. But he will also be indebted to his society and asked to pay back into that society in order to help sustain the society that so greatly benefited him. Saverin’s tax avoidance is a form of moral bankruptcy in my opinion.”

    Very nicely put! I’m stealing that and moving to Singapore.

  • http://www.pragcap.com Cullen Roche

    Students who obtain a US education don’t have a choice. They aren’t citizens. Their visas expire and they get kicked out.

    I know this is a touchy subject and I certainly don’t have all the answers, but I think it’s morally bankrupt to benefit from a society, be paid by that society, and then bail on the taxes that help bind that society.

  • ES

    > So your argument is that it’s okay for Saverin to be an antisocial looter because other people are doing it?

    ———————-
    An important distinction here is that Saverin is no longer a US citizen while all the corporations legally pursuing tax avoidance are still HQed in the US.

  • Ross Thomas

    “To do that, I need a reason for why what he did will harm the U.S.”

    It harms the US by damaging the already-weakening social cohesion of the nation; by causing resentment and anger; by setting an example to young entrepreneurs that the “take what you can get and run” mentality of modern finance is a laudable thing to do; by corrupting the meaning of the word “capitalism” in so many minds that it is now almost synonymous with failed laissez-faire neoliberalism; and by causing a tremendous public relations nightmare for the American company he helped found, right before it goes public.

  • Michael Covel

    Instead of using a Facebook founder to disguise personal politics of the confiscatory variety…

    CA announced in Jan 12 it had a 9B shortfall. In May 12 they announced it was 16B. What will it be 2 months from now? A choice has to be made: tax more or cut more (and the consequences are clear either way). However, the real issue? Stop pretending the system of massive welfare, both corporate and personal, is wonderful, and perhaps question the wisdom of trying to stuff a finger in the leaky hole just to get back to supposedly good times (i.e. more fleeting bubbles).

    Saverin will not be alone. If the system looks like a shakedown, people will walk. Maybe instead of demonizing those who walk away from the shakedown, ponder the wise reasons he walked away from the party.

  • bahar

    Why all this hue and cry over a jerk renouncing his US citizenship? Good riddance. A rich spoilt brat who brought nothing to the table except his father’s money. It’s not like US lost a brilliant mind. US should actually PAY and encourage parasites like these to renounce their citizenship and move somewhere else. It’s better to grant citizenships to “illegals” working the US farms. In reality, they contribute much more.

  • wh10

    I don’t think you guys are being logically consistent.

    “If you gain personally from the benefits of living in a modern, safe, democratic society then you are morally obligated to give back (and to be seen giving back) something to that society.”

    You need to be more specific about how Eduardo can give back instead of talking in vague terms. I presume you mean by paying taxes? Why is that giving back? What is his paying taxes enabling that couldn’t have otherwise been enabled? I already took care of the inflation argument. How about your argument “to be seen as giving back?” Well, he helped give Facebook in the first place. And his not paying is not going to lead to inflation nor prevent provision of the public good. So why else should being ‘seen’ matter ***in this specific case.*** Seems like some superstitious belief behind what taxes do or a pathetic and selfish need for a meaningless source of motivation on the part of people who need to ‘see’ it.

    “Money is a social construct. And all money is debt. The man who provides society with great benefits will be rewarded with money. But he will also be indebted to his society and asked to pay back into that society in order to help sustain the society that so greatly benefited him. Saverin’s tax avoidance is a form of moral bankruptcy in my opinion.”

    Cullen, can you clarify what “pay back into that society in order to help sustain the society that so greatly benefited him” functionally means? How would Eduardo paying his taxes do that? Because Eduardo leaving the country and not paying his taxes does not hurt society, except to the extent that Eduardo could have further contributed to US commerce and society. But I don’t think the latter is a fair argument, because 1) you could argue tons of US residents make no more a contribution to the U.S. than Eduardo did, or even negative; 2) many people leave the US all the time, not just because they don’t like it, but because they either like other countries more OR want to help those countries succeed; 3) you could criticize people on the basis of their life spans, which implicates their healthiness, etc

  • ES

    If it was so simple we could pay all people on welfare, all retirees, all unemployed to emmigrate elsewhere. The problem is, nobody wants them. The other countries are smart. They only grant citizenship where they see financial benefit to themselves. And so is the case with Singapore.

  • brazzo

    Facebook will greatly benefit America for much longer and in greater scale, will help sustain the country. We are making a moral judgment, is this what this is about? What happened to the 14th amendment.

    His movement might hurt the pride of many americans, but it’s o non event dispite the fact that it tells us about how facebook generation is.

  • wh10

    Okay, I’m buying some of that.

    What if he goes to Singapore, and then starts a foundation like Bill Gates’? Would he still be worse than Bill Gates?

    Or what about the people I mentioned to Cullen who move to other countries to help them develop? Are they also in the wrong? Not all of them have to be concerned about visas expiring.

    I don’t think it’s morally bankrupt to contribute to one part of the world, leave, and then help contribute to another (if that’s what you actually do). We are part of Planet Earth, not just the U.S.

  • Ross Thomas

    Haha. Thanks! I think this topic needs more attention.

    “It’s his money what do you care? Why should he use his wealth to finance our wars?”

    Well, I don’t agree with everything the govt does, by any means. But as I said above, only *most* of it is his money. A portion of it is supposed to be set aside for reinvesting back into the country. Taxpayers don’t get to pick and choose what they fund (though perhaps one day they’ll be able to, using the Internet), but they do get to choose their govt. If you don’t like how the people’s representatives are spending your money then vote them out. You can’t just not pay taxes because you disagree with how they spend it, no more than you can demand to pay 20% lower service fees at your bank because you think their executives are overpaid.

  • wh10

    ” but I think it’s morally bankrupt to benefit from a society, be paid by that society, and then bail on the taxes that help bind that society.”

    My problem his that his bailing on his specific taxes aren’t taxes that help bind that society. He left that society, so his taxes don’t mean anything to that society. The only argument I buy so far is the one Ross made below, that this sets a bad example for future generations. But I think this is further complicated by bringing in the rest of the world. Another country has gained more resources and capital, a country that probably needs them more than the U.S. You can even view it as the US as a whole relinquishing resources to that country. Is that morally bankrupt?

    It’s complicated IMO.

    2 years ago, I would have agreed completely, because I would have seen Eduardo leaving as meaning we couldn’t pay as much SS, Medicare, unemp benefits, schools, roads, etc etc. But now I know his leaving doesn’t mean that. It’s a question of real resources, and I see Eduardo as giving the US real resources and taking his abilities to another country.

  • Ross Thomas

    “We are making a moral judgment, is this what this is about?”

    Yes!

    “What happened to the 14th amendment.”

    I don’t see anything in the 14th Amendment forbidding making moral judgements, but IANAL.

  • wh10

    I stand corrected on leaving out cost-push, but I did so because I didn’t see its relevance here. And I don’t see how demand push is relevant, because all the demand that would be associated with Eduardo is being removed from the U.S. economy (which is why I see it as a deflationary act).

  • Ross Thomas

    Confiscatory? No. Socialist? Yes.

    The solution for CA is direct funding from the federal govt. See Warren Mosler.

  • Ross Thomas

    Inflation isn’t relevant at all. I only mentioned it because someone got all monetary on my ass ;)

    My concern is with the ethics of the thing.

  • VII

    Ross-

    I see both sides of this argument. My father would say..”your hearts in the right place”. That’s my take away from your letter.

  • Leverage

    Sort of off-topic but worth it’s own thread:

    Any student who graduates from a US institution should be granted immediate citizenship. It’s a stupid policy to educate these kids and send them packing.

    Completely agreed, sadly this is what is happening in Spain and is fucking pain to see.

    More painful is to see all the old idiots (most of them uneducated btw) who looted the country encouraging it, some of them parents of these ex-pats. Only because young people can’t create wealth there any more.

    People being forced to migrate after being highly educated because of unemployment and looting is an human catastrophe.

  • Double Eagle

    Marx didn’t believe that the silent compulsion of the market we have today was any better than the primitive accumulation of old. And I agree. Your notion of a “real capitalist” is naive. Capitalism has only solved the production problem, nothing more. To prescribe higher motives to market relations is wishful thinking. That said, I support capitalism wholeheartedly!

  • Jimmy

    The worst kind of capitalist, the one who thinks taxes are a net positive. He was chased out by scum who wanted to steal his capital. If a country gives successful people a reason to leave, the country is making the mistake.

  • BB

    “Real capitalists tend, nourish, and grow their communities so that they may reap an even greater harvest of profits next year, to everyone’s mutual benefit.”

    What!? Since when do capitalist grow communities? Don’t they grow businesses?

    “You are the worst kind of capitalist.”

    According to wikipedia, Facebook had over 3000 employees in 2011. We need more of these “worst kind of capitalist”.

    How much tax revenue will the state of California receive from all of these employees in the tax year 2012?

    How much has Eduardo Saverin paid in taxes due to his income from Facebook and how much will he pay even after he saves the approx. $75m?

  • BB

    “sticking your former countrymen with your bills.”

    What bills are you referring to?

  • Ross Thomas

    Oh, grow up. Nothing in life is free. Buy an island and set up your own community, if you really think that’ll work. Stop using US dollars.

    That’s the problem with Rand’s ridiculous utopia: she had to invent some magical force field to protect them from outsiders, and neglected to mention any legal system, or the fact that there weren’t enough of them to avoid monopolies. If you think all taxation is theft and you don’t want to pay for the society from which you benefit then don’t. Go someplace else.

    Are you suggesting America wasn’t successful in the time of Carnegie, JP Morgan and Rockefeller? Were they chased out by the horrors of having to share some of their profits with the nation?

  • Ross Thomas

    “To prescribe higher motives to market relations is wishful thinking.”

    Market relations are social relations. We prescribe higher motives to social relations all the time: things like morality, dignity, respect, integrity. Why does it have to be dog eat dog?

  • Ross Thomas

    “What!? Since when do capitalist grow communities? Don’t they grow businesses?”

    That’s what they do now, yes. When they’re not destroying them for personal profit.

    The philanthropy of Andrew Carnegie:

    http://library.columbia.edu/content/libraryweb/indiv/rbml/units/carnegie/andrew.html

  • Ross Thomas

    The tax bill that he’s not paying. That’s fairly clear if you read to the end of the letter.

  • Ross Thomas

    Wouldn’t it be nice if more people’s were?

    Why do we have to sit back and say “well, that’s just how it is”?

  • Ross Thomas

    “What if he goes to Singapore, and then starts a foundation like Bill Gates’? Would he still be worse than Bill Gates?”

    I’m not complaining about his future actions, I’m complaining about his past actions. Perhaps he’ll go to Singapore and give all the money he “saved” to charity. I hope so. But I rather suspect not.

  • Double Eagle

    So what greater motives do you attribute to violent suppression of labor strikes or the raping of the planet for its resources or record numbers of Americans on food stamps, the existence of homelessness alongside millions of empty homes? The market is powerful and unfeeling. It doesn’t care about you and it only values you for what you can buy.

    Capitalists don’t build nations. You said it yourself they rely on society for roads and internet, security and law.

    The market is of course the greatest force for prosperity in our time but there’s something missing from it. Of which income inequality, the occupy protests, etc. are a symptom. What’s missing from the market is humanity.

  • Ross Thomas

    I wasn’t very clear here. What I meant to say is that $75m (enough to pay for 1,500 new high-school teachers) should have gone to the nation. That was the deal when he utilized the nation’s copious resources to build his company. That money is now in Saverin’s slik-lined pocket, and will either have to be taxed from someone else, borrowed, or printed. I don’t mean Bernanke got a phone call in the middle of the night from Geithner demanding he use his iPrint app to make up the difference right away. But the difference is still there, revenue is still reduced, and someone, somewhere (or everyone) will pay for it.

    I didn’t mean to say it will cause *significant* inflation. Of course it won’t. But inflation is also a tax, no matter how small the amount compared to the money supply.

  • Andrew P

    Is he really avoiding all that much tax? He has to pay exit taxes and pay US income taxes for another 10 years after leaving. If you take Saverin’s word for why he is leaving, it is the increasingly onerous US reporting requirements for foreign investments, and not the amount of taxes per se. And besides, I get the feeling that Saverin was never committed to this country anyway. He was not born here, lived here only for convenience, and is now living where he really wants to be – at least for the moment. He probably sees himself as a “citizen of the world” and is not committed to any country. The real cost he could pay in the future is he could find himself stuck in a small island that suddenly goes south on him, and find himself unable to return to the USA or any other good place. Everybody has to live somewhere, and if the world enters a new age of political turmoil, even a rich guy like Saverin could find himself being a stuck pig with nowhere to go.

  • Ross Thomas

    “What’s missing from the market is humanity.”

    Cool! Then we agree.

  • Cowpoke

    Read up on Milton S. Hershey:
    http://en.wikipedia.org/wiki/Milton_S._Hershey

  • Ross Thomas

    Brilliant! Thanks.

    “Hershey envisioned a complete community around his factory site. He built a model town for his employees that included comfortable homes, an inexpensive public transportation system, a quality public school system and extensive recreational and cultural opportunities. Hershey avoided building a faceless company town with row houses. He wanted a home town with tree-lined streets, single- and two-family brick houses, and manicured lawns. He was concerned about providing adequate recreation and diversions, so he built Hershey Park (now rendered “Hersheypark”), which opened on April 24, 1907 and expanded rapidly over the next several years. Amusement rides, a swimming pool, and a ballroom were added. Soon, trolley cars and trains were bringing thousands of out-of-town visitors to the park. Hershey established a sugar mill in Havana Province, Cuba. There they built a town with schools, church, etc. In addition a railroad between The cities of Havana & Matanzas was constructed to facilitate the transportation of sugar to the ports and be shipped to the US. As a service to those communities passengers train were offered which ran 60 miles using electric operated cars. After 1959, with Castro in power, the Hershey’s properties were nationalized.”

    *That* is a real capitalist.

  • Ross Thomas

    “If you take Saverin’s word for why he is leaving, it is the increasingly onerous US reporting requirements for foreign investments, and not the amount of taxes per se.”

    I hear accountants and lawyers are good at that kind of thing.

  • Cowpoke

    Yep, and he was all about the dream. his is a great story. from triumph to tragedy to triumphs to tragedy a great American story in old man Hershey..

  • BB

    Ross Thomas,

    “In Saverin’s case, he won’t get off tax-free. When someone renounces U.S. citizenship, the soon-to-be ex-American must pay what amounts to an exit tax on the capital gains from their stock holdings, even if they don’t sell the shares. Of course, his future tax bills might well be lower, but Uncle Sam is getting a parting piece of Saverin’s wealth pie.”

    SO HOW MUCH IS HE GOING TO PAY IN TAXES?

    If he is paying as the above article mentions, I guess he is not sticking our former countrymen with our bills.

    http://www.bankrate.com/financing/taxes/facebook-tax-expatriate-strategy/

  • BB

    his former countrymen with his bills

  • BB

    Here is another article stating that he will be paying taxes. According to the below quote it looks like 15% of a valuation that the IRS has to agree with.

    “So Mr. Saverin’s decision to leave could have been a wager that the cost of an exit tax now — 15 percent of whatever valuation he could get the Internal Revenue Service to agree to — would be far less than the 35 percent or more in estate tax his heirs would face on his holdings when he died.”

    http://www.nytimes.com/2012/05/17/technology/a-facebook-cofounder-reflects-on-the-path-forward.html

  • Huckleberry

    CR, Thanks for posting this.

  • Michael Covel

    If you are serious with that view…time to bow out.

  • BB

    Ross Thomas,

    One more post and then I am done. I think.

    If the above article that I linked is accurate, it seems to me that he might actually be doing his former countrymen a huge favor by essentially paying capital gains taxes now rather than over time as he sells some his shares.

  • Jeff Dewhurst

    Saverin is a hero! He owes nothing to “Society”, nor to any level of the “Government”. Neither the “Society” nor the “Gov” “gave” him anything. While here in this country he lived by the laws, customs and mores of the country and applied his talents to provide goods/services that other individuals wanted/needed and were willing to pay for in freely negotiated transactions/ contracts established by the “Society/GOV” for the purpose of ensuring every citizen’s right to life, LIBERTY, and the pursuit of happiness. Citizens do not exist to serve the state “Gov/Society”. Saverin’s critics/accusers on this thread have not identified a single, solitary instance of Saverin “taking” anything which wasn’t paid for. While here did he not directly/indirectly pay sales taxes, real estate taxes, income taxes, tuition, utility bills, personal consumption bills, tuition bills,etc., etc.? Did he commit fraud, breach of contract, theft or any other financial crime? There is no compelling legal or moral obligation on any citizen to “give something back” to “society”(whatever that is) or government other than compliance with the laws of the society. The reason laws (in particular contract/tax laws) are created is to clarify as precisely as possible before hand what is permitted/prohibited, the duties, rights, obligations, of individuals are so that they can conduct their lives accordingly. The alternative is chaos and tyranny as the rules would be made at the Whim of the Sovereign or in this Saverin case a mob of bloggers. Anyone who claims that another citizen has an obligation to “give something back” is a proto tyrant. They do not truly believe in the rule of law, nor do they truly believe in the individual’s right to life , liberty and the pursuit of happiness. They are ready and willing to condemn, criticise and castigate an individual for acting in full accordance with the laws to secure his own happiness. Shame on them!

  • http://www.pragcap.com Cullen Roche

    Well, that would settle that, wouldn’t it?

  • Ross Thomas

    Well, as long as he was doing it for the good of the nation then I retract everything I previously said.

  • Jeff Dewhurst

    “2. My problem with Saverin’s action is the blatant tax avoidance. It’s his legal right to do so. But I don’t think it’s a very admirable thing to do. You pay your taxes because you know you’re paying into something bigger than you, something that gave you something to begin with. The only reason you pay taxes is because you reaped a benefit from the society established around you.”

    No! You pay your taxes because they are the specific price for the specific goods and services provided by the duly established (by consent of the citizens) taxing entity.

    “No one ever made their wealth on a secluded 1 person island all by themselves”

    Did Saverin earn his wealth on a secluded island? What specific government entity, or individual “gave” Saverin his wealth?

    “Now, if you totally hate that thing and want to reject it then fine. That’s your choice. Lots of people renounce citizenship because they really hate this country and don’t believe in it. But most of those people don’t do it because they just received a massive profit from the many benefits the country provided them”.

    So, it’s a morally acceptable choice to renounce citizenship out of hatred but not morally acceptable to renounce citizenship for economic reasons? At what level of wealth does this transition occur?

    ” It’s a contradiction to claim that America just doesn’t work for you when you’re leaving $1B wealthier. So it’s a moral issue. Plain and simple. It’s selfish move in my opinion. It’s fine to be selfish. I’m not the beacon of virtue that all should look up to. But if I made $1B in the USA I’d pay my taxes, say thanks Uncle Sam may I have another. But that’s just me.”

    Saverin PAID ALL TAXES HE WAS LEGALLY REQUIRED TO PAY!!!
    Your problem is that you really don’t believe in the unalienable right to life, liberty and the pursuit of happiness. In your scheme as soon as some one accumulates a certain amount of wealth (what is that $number?) you are prepared to levy a special, nebulously (if at all) defined, tax/obligation/duty, whimsically designed ad hoc by a mob of bloggers, deny him the legal right to renounce his citizenship, and emigrate to his country of choice to pursue happiness! Is that your definition of a free society and the rule of law?

  • EL-GRECO

    You are right Mr Roche, the bad capitalism he represents to you? he it picked up in the USA; it’s the education and business culture of your country.

  • Martin

    > If you gain personally from the benefits of living in a modern, safe, democratic society then you are morally obligated to give back (and to be seen giving back) something to that society.

    Singapore is more modern and a lot safer than the US. Wouldn’t it be better that he supports this society, then?

    If we talk about morals, wouldn’t it be better that he gives the money to the poor in Africa than giving them to the American government? What do you know about how this guy is going to spend his money? Maybe he’s going to invest them in Asian business and bring millions of Asians out of powerty, instead of propping up the American military/financial industrial complex which his money would be used at if he taxed to America?

    BTW, he doesn’t pay taxes before he sells the shares. If forced to live in the US, he may never had selled the shares, and the US wouldn’t get the taxes before he died or something.

    I don’t think you are the right one to talk about moral obligations. You criticize an individual which you have never met publicly in a very harsh way, instead of generally criticizing the system.

    The system – however – is morally wrong. As is much of the politics of the government you want Saverin to support.

    This guy has done nothing wrong. Not legally, and not morally. I would do the same, if I could.

  • The Cynic

    There is a difference between selfishness and self interest

  • Jerry

    This is what is done when you have the means to do it.

  • Ross Thomas

    No, I think it’s a global phenomenon. Easy credit makes people crazy. Always has, always will. The problem is that the currently bursting bubble has been so long in the making that it’s all most people can remember, so they take it as normal. It’s not.

  • Ross Thomas

    Such swings from failure to success and back again seem to be common amongst people who are (ultimately) very successful. As Keynes said, he lost two fortunes in his lifetime, but was lucky enough to have made three of them.

  • Ross Thomas

    I guess your suggestion would be to enforce pro-cyclical austerity, like in Europe?

  • Michael Covel

    Someone else will play that game with you, but did have one question about Saverin. You state: “Dear Eduardo Saverin (if I may call you that)…”

    Is there something wrong with his name or something that he did for you to say: “if I may call you that?” Serious question. Wasn’t sure if there is some fact I missed that caused you to say that.

  • Ross Thomas

    “Your problem is that you really don’t believe in the unalienable right to life, liberty and the pursuit of happiness.”

    Ah, yes, I forgot about the Founding Fathers. They certainly would have approved of Saverin’s behavior, if what they said and did is anything to go by.

  • Ross Thomas

    “Citizens do not exist to serve the state ‘Gov/Society’.”

    Or, in the immortal words of John F Kennedy: “Ask not what you can do for your country — ask what your country can do for you. And, if you’re not satisfied with the answer, flee the country with your loot.”

    The govt and the private sector should cooperate. They should care for and protect each other. It’s not a competition. The establishment of the nation state led to the single most profound reduction in violence that has occurred in all of human history. Are you really sure you want to undo that?

  • Ross Thomas

    “What do you know about how this guy is going to spend his money?”

    And people have been calling me naive.

    I judge people by what they actually do, not what they might hypothetically do in the future if they have a complete personality change.

  • http://independentstockanalysis.com/ JJ Butler

    “Real capitalist build nations.” Actully, real capitalists provide goods and services to their fellow man. Mixing capitalism and nationalism leads down a really scary path…

  • Ross Thomas

    Quite right. But there isn’t a difference in laissez-faire neoliberalism. That’s why the neo-cons like it so much.

  • Ross Thomas

    Where did I say “nationalism”? You’re introducing a straw man, which is highly irresponsible given that allergy season is coming up.

  • Ross Thomas

    You mean like Bill Gates and Warren Buffett did?

  • http://www.takeareport.com Takeareport

    Imagine there’s no countries
    It isn’t hard to do
    No tax to pay or stay for
    And no allegiance too.

  • Ross Thomas

    “Sen. Chuck Schumer, D-N.Y., has a status update for Facebook co-founder Eduardo Saverin: Stop attempting to dodge your taxes by renouncing your U.S. citizenship or never come to back to the U.S. again.”

    And it begins.

    http://abcnews.go.com/blogs/politics/2012/05/senators-to-unveil-the-ex-patriot-act-to-respond-to-facebooks-saverins-tax-scheme/

  • Ross Thomas

    I was referring to the “dear” part ;)

  • Anonymous

    cr said:

    saverin “took advantage of the advanced legal system” and helped build this company

    lol, r u kidding me?

    a legal system that is simply out of your way so a person can build a company is an “advanced” legal system? that he should pay for? as opposed to the “unadvanced” legal systems in the rest of the world that are so byzantine that nobody can do anything?
    you have to pay to keep the guv off your back?

    this would be funny if there weren’t people who actually believe and act on such stupid notions.

    you people are so nuts that it is beyond belief

  • Ross Thomas

    “as opposed to the ‘unadvanced’ legal systems in the rest of the world that are so byzantine that nobody can do anything?”

    What “rest of the world” are you talking about, specifically?

  • Huckleberry

    Sometimes these discussions about “bad” Capitalism and “good” Capitalism remind of the way Communists used to argue about this or that deviation from whatever they thought Communism was supposed to be, a Communism which had, of course, never existed.

    At the risk of being branded a heretic: I wonder, might Saverin-ism just be yet another outgrowth of Capitalism, and a natural one, insofar as the incentives for Saverin appeared to have been built into this system by other self-interested parties? Where is is actually written that Golem-Sachism, Sorosism, or Greenspanism are ideologically corrupt and verboten?

  • wh10

    My perspective is that it is a great thing we can send bright minds to drive positive change elsewhere in the world.

  • http://www.takeareport.com Takeareport

    Huckleberry – Money is not everything. Seriously, it’s not.

    Saverin gained citizenship (which meant very little, apparently) and then renounced it for a tax advantage. No one was persecuting him, his extraordinary wealth would have stayed intact.

    I suppose international tax dodgers are something of an outgrowth of capitalism, but not as disgusting as Facebook’s $100 billion valuation. That’s capitalism at it’s ugliest. Or at least it will be.

  • GCTIII

    And yet you still use his services. The thing to do if you disagree is stop using his services. I did. Yes he made a financial decision over a moral decision. Schumer calling the kettle black was good for laughs.

    I do not agree with his decision but it is his to make.

  • Pierce Inverarity

    “Did Saverin earn his wealth on a secluded island? What specific government entity, or individual “gave” Saverin his wealth?” I wouldn’t say the government *gave* Saverin his wealth, but the internet is largely a U.S. government creation. Without it, Saverin wouldn’t be in the rarefied financial stratosphere he’s in now.

    It’s naive to leave out the context within which one achieves success.

  • Pierce Inverarity

    You don’t think Harvard benefits dramatically from those historical and current opportunities provided to its students by being located in the USA?

  • http://www.pragcap.com Cullen Roche

    Encouraging great minds to leave the country for whatever reason is a great way to destroy an economy. I am all for the health of the global economy, but not at our expense.

  • Ross Thomas

    “Sec. 212. [8 U.S.C. 1182] details general classes of alients ineligible to gain entrance into the United States. And the law specifically references people in Saverin’s category …”

    http://www.businessinsider.com/banned-from-the-usa-billionaire-facebook-cofounder-could-be-barred-from-america-after-renouncing-citizenship-2012-5

  • Ross Thomas

    I disagree. I think it’s an outgrowth of laissez-faire neoliberalism.

  • Ross Thomas

    If you read to the end of the letter you’ll notice I did actually deactivate my account.

  • Ross Thomas

    Exactly. And I would say that in an important sense America *did* give Saverin some of his wealth, in that it enabled him to accumulate it in the first place.

  • InvestorGuy

    Let me get this straight….Eduardo was a US citizen for ten years. Made a lot of money. Paid the EXIT TAX for denouncing his citizenship. Paid more in tax than most Americans ever pay in their life and everybody is mad at him?

    I think he is a great citizen. Moving to the US at 13 meant that he probably consumed very little services. His parents paid taxes in the US while he was there. He is leaving before he becomes a burden on society. Imagine every American made a wack of money and left before they collected social security and medicade?

    Warren Buffett complies with the tax law to MINIMIZE the taxes he pays. How about an open letter to Warren asking him to take a salary higher than $1 and stop robbing the government.

    “I’m not a tax expert,” he said. “We complied with all the known laws. There was an exit tax.” That tax is based on the assets held by a citizen leaving America. The exit tax was designed to make sure the departing wealthy paid something before they decamped.”

  • InvestorGuy

    The ROI America got with Eduardo is off the charts. Only if more citizens would contribute so much but consume so little.

  • InvestorGuy

    Bill Gates and Warren Buffett donated most of their wealth to charities to avoid paying taxes. What terrible citizens. Living in the US for longer than 10 years. Consuming services and then using the law to avoid paying higher taxes. Ross is an open letter to Bill Gates in the works demanding that he sell the shares of Microsoft he donated. Pay the cap gain tax on them and then use his money for charity?

  • IRS Spokesperson

    Note to entrepreneurs…before you start a business make sure you renounce your US citizenship and incorporate the company in Vancouver, Canada. This way you can avoid being in the press for not wanting to pay a life time annuity to a country you may not live in.

  • Ross Thomas

    “Warren Buffett complies with the tax law to MINIMIZE the taxes he pays.”

    Warren Buffett did not flee the country. He stayed and invested in great businesses, making his shareholders richer and employing lots and lots and lots of Americans.

    “I hereby declare, on oath, that I absolutely and entirely renounce and abjure all allegiance and fidelity to any foreign prince, potentate, state or sovereignty, of whom or which I have heretofore been a subject or citizen; that I will support and defend the Constitution and laws of the United States of America against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; that I will bear arms on behalf of the United States when required by the law; that I will perform noncombatant service in the armed forces of the United States when required by the law; that I will perform work of national importance under civilian direction when required by the law; and that I take this obligation freely without any mental reservation or purpose of evasion; so help me God.”

    Did Saverin “bear true faith and allegiance” to the Constitution and the laws of the United States, in your opinion? He may have had no “purpose of evasion” when he was naturalized, but that was then and this is now.

  • Ross Thomas

    “Ross is an open letter to Bill Gates in the works demanding that he sell the shares of Microsoft he donated. Pay the cap gain tax on them and then use his money for charity?”

    I don’t really understand your question. Bill Gates donated a huge amount of money to charity through his foundation. I would define that as “giving back to society”, wouldn’t you?

  • Drhotdog

    I find it hard to believe adults have Facebook accounts. Kind of pathetic if you ask me.

    I like Jim Chanos quote on why he does not have a facebook account “Well, I have a life, I don’t have a Facebook.”

    Facebook is all about living in the past. People’s status updates are solely intended to generate attention from those you do not see very often. I find the idea of so many people on Facebook quite pathetic. I never realized how insecure the world is.

    Then again I had 3 university degrees by the age of 21, so I am slightly different in my way of thinking.

  • Ross Thomas

    Yes. Move to a city with little in the way of significant economic activity except that which is housing- and China-related when the Canadian housing bubble is bursting, and property prices in Vancouver are down 10% yoy, sales down 30%, and when the Chinese economy is flatlining.

    That’s great advice, entrepreneurs! I’d go for it, if I were you.

    (And by the way, I already do live there.)

  • Ross Thomas

    That was @IRS Spokesperson.

  • Drhotdog

    So if Ross spends his money on charity his avoiding his US tax bill will be okay?

  • IRS Spokesperson

    @Ross…I live in the British Properties in West Vancouver. I own 2 restaurants (one in West Van and one on Broadway). I sit on the board of three mining companies. My phone rings off the hook. I disagree there is no business activity going on.

  • Ross Thomas

    I do spend my money on charity (at least some of it), and I don’t avoid US taxes because I don’t pay them because I don’t live in the US and I’m not a US citizen. Apart from that, excellent question.

  • Ross Thomas

    People who think they’re richer than they are eat out a lot more than they should.

  • IRS Spokesperson

    You have the answer to everything. I wish I could offer you a high paying job, however you just told me to batten the hatches and prepare for the storm so I guess I will not be expanding. Too bad I could have used a know it all on my staff.

  • Drhotdog

    I meant if Eduardo spent his money on charity, avoiding the maximum US taxes would then be okay?

    That is what Buffett and Gates did.

  • Ross Thomas

    But that’s not what he did. I’m talking about the Eduardo Saverin who actually exists in the real world, not some upstanding, admirable, philanthropic Eduardo Saverin in some alternative dimension.

  • Ross Thomas

    I think battening down the hatches is excellent advice.

  • Kevin

    What I do not understand is since the US controls its own currency, why does the Government collect taxes? Why wouldn’t they just issue currency that devalues the value of the USD by the percentage that the government wants to raise in taxes and give “refunds” to lower income people to offset their declining purchasing power.

    Wouldn’t printing money (inflation cost) be about the same as the collecting taxes + interest expense on issued bonds be about the same?

  • Ross Thomas

    Well, taxes *increase* the value of the dollar (all else being equal) because it takes some out of circulation.

    But the main reason is that using inflation as a tax would be highly regressive: the marginal utility of each additional dollar is less with each dollar you already have. In other words, an inflation tax of (say) 10% would affect poor people to a much greater degree than rich people. Taxes are designed to redistribute income. This is a good thing in moderation, because it avoids situations like America finds herself in now vis a vis income inequality.

  • Drhotdog

    Eduardo died today? Or he must have told you what he plans to do with that money.

    Gates and Buffett were never forced to sell early on. If Eduardo could have held on to his “unbooked” capital gains maybe he would not have given up his citizenship and then in the future donated it like Buffett and Gates to avoid paying taxes.

    I am not sure what the problem is. Eduardo paid $298 million in taxes to the US for the ten years he lived there. Only if all citizens were such cash cows.

  • Ross Thomas

    “Or he must have told you what he plans to do with that money.”

    My point was he didn’t tell either of us what he’s going to do in the future. And even if he did, I’d be unlikely to believe him.

  • Drhotdog

    Saverin only avoids taxes if Facebook’s value increases. If the value of the his holdings decreased he would end up owning more than he would if he had deferred the sale of his shares.

    “So it’s not immediately apparent that Saverin has saved a great deal of tax by renouncing his US citizenship. He’s crystallised the tax bill on his current profits, has to pay that whatever happens in the future, and he’s only reducing his tax bill if Facebook shares increase. If they fall, his renunciation will in fact have increased his final bill, not reduced it.”
    http://www.forbes.com/sites/timworstall/2012/05/17/eduardo-saverins-current-tax-saving-67-million-and-it-could-be-a-tax-loss-in-the-end/

  • Drhotdog

    So basically Ross you are having a temper tantrum because ES only contributed $298 million in taxes instead of the possible $365 million in taxes.

  • Ross Thomas

    If that’s your takeaway from my letter and comments in this thread then I have serious concerns about your reading comprehension.

  • Kevin

    If taxes are to redistribute wealth and inflation is regressive and harms the lower class, would it not be silly to have an economy that consists of both?

    If inflation is regressive does that mean the 2% (which devalues the purchasing power of your currency by 50% in 36 years) inflation target by the Fed is designed to benefit the 1% and harm the 99%. Is the Fed the source of inequality?

  • Concerned Accountant

    It should be noted that Saverin will not avoid paying taxes by renouncing his US citizenship. The US has something called the exit tax which requires any US citizen or lawful permanent residents who renounces their us citizenship to pay tax on any unrealized gains on all assets. Essentially, you are deemed to have sold your assets on the day you renounce your citizenship.

    Chuck Schumer and others are simply trying to gain politically by giving the appearance that they are for a “fair” tax system. If they really want to fix the problem, they should be lobbying to overhaul the entire tax system in order to encourage businesses and high net worth individuals to keep their money and businesses in the US.

    1700 people renounced their US citizenship in 2011, 1485 in 2010, 743 in 2009, and 230 in 2008. Notice the trend. As soon as the democrats took control of the white house and congress the numbers started rising.

  • Ross Thomas

    Yes, both is better. Taxes help avoid people living in tents in parks (as I saw in Seattle not so long ago) while bank CEO’s commute to work by helicopter (I’m looking at you, Dick Fuld). Inflation (*low*, consistent inflation) encourages spending and investment into higher-yielding assets. I would say that we need to massively reeducate the public on how to manage their money so that inflation isn’t such a concern for poor people (cf. Arab Spring).

  • http://www.pragcap.com Cullen Roche

    Thanks for clarifying. I was not aware of that. I had read several articles saying he would avoid $70MM or so in taxes…If that’s wrong then I stand corrected on the comments I’ve made here…..

  • Ross Thomas

    “As soon as the democrats took control of the white house and congress the numbers started rising.”

    So it wasn’t anything to do with a rapidly deteriorating economy, then?

  • Ross Thomas

    “The US has something called the exit tax which requires any US citizen or lawful permanent residents who renounces their us citizenship to pay tax on any unrealized gains on all assets.”

    Ah, but it’s harder to find out about someone’s real income/assets when they live in a tax shelter, isn’t it?

  • Ross Thomas

    And, finally, I believe the exit tax applies to unrealized gains when he renounced his citizenship, not gains made subsequently. He thinks Facebook is going to the moon, hence his move to a city-state with no capital gains taxes. So yes, I’m afraid his plan was to screw the country by skipping off to Singapore. To understand his motives you have to put yourself in his head, if you can bear the thought of doing so.

  • Concerned Accountant

    Saverin cannot hide his facebook holdings from the US government by moving to Singapore. And yes, the exit tax applies to unrealized gains at the time of renunciation. So in this particular case, he would definitely save money and there is no doubt that that is his intention. I am not supporting Saverin or his decision.

    My point is that Chuck Schumer is not giving all the facts. He is attempting to gain politically by using Saverin’s individual situation to pass a new law that will in no way address the real problem. The real problem is our tax system, it pushes businesses and high net worth individuals out of our country. Eduardo Saverin is a sideshow. Unfortunately, our politicians are more concerned with exploiting these types of situations for their own political gain than they are with fixing the actual problem.

  • Ross Thomas

    I gladly defer to your expertise on the tax details — my point was only that he *thinks* he’s going to gain. That’s enough. Establishes the mens rea, as it were.

    “My point is that Chuck Schumer is not giving all the facts. He is attempting to gain politically by using Saverin’s individual situation to pass a new law that will in no way address the real problem.”

    What else is new?

    “The real problem is our tax system, it pushes businesses and high net worth individuals out of our country.”

    The tax system is grotesquely complicated and needs to be sorted out. I’m tired of the loopholes and the arguing and the social distress it causes. Figure out a simple, fair way of doing it (maybe a tax on the area of the Earth’s surface you take up, or something else progressive and consumption-based).

    “Eduardo Saverin is a sideshow.”

    I disagree. He’s the main event wrt tax avoidance. He happened to make a very poor decision at a very bad time while in a very high-profile position. I have a hunch he’ll regret it someday.

  • BB

    Ross,

    You didn’t really respond to Drhotdog.

    Do you believe that it may be possible that ES pays more in taxes due to renouncing his citizenship?

    “I hope your American customers understand that because of your oh-so-clever legal maneuverings you will be paying less tax on your billions, and they will have to make up the difference.”

    It doesn’t sound like you do.

  • Ross Thomas

    “Do you believe that it may be possible that ES pays more in taxes due to renouncing his citizenship?”

    Yes. His exit tax was on unrealized capital gains he made when he renounced his citizenship. If the value of his shares rise then the subsequent capital gains will be tax-free. I believe that was his intention, and that’s why I don’t like it.

  • Ross Thomas

    Sorry, I meant to say “I don’t know if he’ll pay more, it depends on the share price going forward”. But his aim was to pay less. That much is clear to all but the most naive of observers.

  • Nils

    They aren’t going to pay a lot of taxes either, relative to their wealth.

  • PB

    Your wish has been granted or could be granted pretty soon. The Ex-Patriot law, if passed will do the trick. If that resolves the moral values question about Saverin being a tax opportunist, can we now put NATO forces back into Libya and stay there until the society is rebuilt? Since we left a vacuum there after bombing and killing their leader and moved on? Who exactly is the jerk here? And please don’t tell me “We” and NATO are 2 different entities.

  • Ross Thomas

    My letter wasn’t just about taxes. It was about giving back. You cannot seriously be equating Bill Gates and Warren Buffett with Eduardo Saverin. Are you really? You really think that’s going to stand up to the briefest of research into their histories and their writings and their philanthropy and their decades of service to America as true-blood capitalists?

    If you really want to go there, I’m game.

  • Ross Thomas

    I think you’re mixing up the case of Eduardo Saverin and his tax avoidance with NATO military actions in Libya. One involves a single Brazilian jackass weaselling his way to slightly greater riches through loopholes in international law, and the other is a completely different topic entirely.

  • Ros Thomas

    Just to let you know I rioted when my Canucks lost the Cup. I was owed more than what the team gave me.

  • Ross Thomas

    Look, everyone! It’s the reincarnation of Jonathan Swift.

  • Jeff Dewhurst

    Still waiting to see specific facts/evidence that ES broke a specific law.

  • Anonymous

    “Is the rich world aware of how four billion of the six billion live? If we were aware, we would want to help out, we’d want to get involved.”

    So why not to raise tax on rich American?

  • moral standard

    What is the standard of guilty-in-moral?

    If a rich people never do charity can we say he is guilty in moral?

    If your investment consultant help you make a lot of money and suddenly you find that he is rich but never do charity, will you terminate his consulting service?

  • Apple is guilty

    Apple(and a lot of other US company) does not wire back overseas profit to save tax money.

    Is Apple guilty in moral?
    Do you still want to buy/use Apple’s products?

  • Anonymous

    Singapore is not a dull little tax haven.

  • Double standard is moral guilty

    Double standard is moral guilty.

  • Ross Thomas

    Why not indeed? Or at least on bankers. Taxes serve to redistribute income, which is necessary if you want a stable society.

  • Ross Thomas

    I have a problem with tax avoidance in general. Saverin’s case was grotesque enough — renouncing his *citizenship*! That’s not something you play around with — that I felt compelled to vote with my wallet and close my Facebook account.

    I have principles, but I have my limits, just like everyone else. I’m not really sure what point you’re trying to make.

  • Ross Thomas

    Well, when I was there it was dull. Nice and shiny with some cool architecture, but not very interesting. Maybe I went to the wrong places, or maybe you have to be a billionaire international playboy to fully appreciate its charms.

  • Ross Thomas

    Then you’ve missed the point entirely.