Andrew Garfield as Eduardo Saverin in The Social Network
Young billionaire Eduardo Saverin has always had clever lawyers. He famously sued his Facebook co-founder Mark Zuckerberg to win official co-founder status. Now, just ahead of Facebook’s IPO and the expected pop in the value of his shares, Saverin has renounced U.S. citizenship. On advice of counsel, he’s established residency in Singapore, where there is no capital-gains tax.
If Facebook had a Dislike button, Saverin’s wall would be overrun.
He’s been excoriated, online and off-line, since his renunciation became public on May 11. The U.S. — its schools, technology, capital markets and courts — made him rich. As Farhad Manjoo notes, the U.S. gave Saverin not just his money but also his life: when Saverin was 13, his wealthy family emigrated from Brazil to the U.S. in response to kidnapping threats. And now Saverin’s jilting us.
(MORE: Facebook Co-Founder Gives Up U.S. Citizenship — Is He Ungrateful, or Heroic?)
Yet as much as this young man without a country or moral compass may deserve condemnation — he does have some defenders — Saverin is emblematic of a bigger problem. I don’t mean the roughly 1,800 people who last year renounced their U.S. citizenship, although those numbers are on the rise. I mean the far greater number of Americans who, in deed and mind-set, are shedding obligations to their country: wealthy individuals who park income in offshore havens, U.S. corporations that use paper subsidiaries to book profits in foreign jurisdictions. All these forms of opting out feed a norm that says, in effect, America’s for suckers.
That norm is toxic for at least three reasons. First, it cheapens citizenship by commodifying it. What happens when choosing to be (or not to be) a citizen of the U.S. is just a matter of administrative convenience and net-benefit calculation, like an oil tanker deciding what flag to fly or a Wall Street bank opting to incorporate in Delaware? What happens when that choice seems available only to the moneyed? The social compact falls apart.
Indeed, the Saverin kerfuffle should make us wonder why renunciation isn’t a two-way street. When people and companies go to great lengths to evade taxes, they evade citizenship itself. They skirt their share of responsibility for the common good, treating membership in the community simply as a right to extract. Shouldn’t we, the community, be able to renounce them?
This brings us to the second danger of the opt-out ethic: the way it reinforces a warped conversation about taxes in which we are taxpayers but not tax getters. Some are quick to criticize how tax dollars get spent when they go to so-called welfare queens. But what about welfare kings like Saverin and the corporate “persons” who behave like him? They have been subsidized at every turn: indirectly by the rule of law and the existence of world-class universities and infrastructure; directly by the loopholes and special treatment they write into law.
(MORE: Liu: Don’t Pick on Immigrants: Re-Americanize Everyone)
It’s true that renouncers have to pay an “exit tax” on their wealth when they quit America. But a truly just exit tax would cover the lifetime accrual of benefits — call them social investments, subsidies or welfare — that enabled those persons to accumulate wealth in the first place. And the same moral principle, in a healthy society, would make any wealthy American citizen feel embarrassed evading taxes and mooching off a multigenerational legacy of national sacrifice.
In the end, however, this isn’t a moral matter. It’s about what’s smart. Hence the third problem with citizenship evaders. They think they are being rational — and in a sense, they are: if hedge-fund operators, say, can lawfully mask their wages as “carried interest” and pay a lower tax rate, it seems smart to exploit that loophole. But this kind of free-rider behavior helps the individual while weakening society. It’s penny-wise, and pound-foolish.
To be sure, our tax code is too convoluted and requires reform. And certainly the making of great fortunes is a great thing. America is uniquely suited to foster such success — but only when we cultivate trust, mutuality, an ethic of contribution before consumption. Without such things, as in many other countries, the talent and ambition of an Eduardo Saverin might enable a young man only to be an excellent gangster (or his target).
Bill Gates Sr., the father of the father of the first great high-tech fortune, often points out that there is no such thing as a self-made man. We need a country where the dream isn’t to escape to a tax-free island but to be like the elder Gates: responsible, reciprocal, and a citizen of the United States.