May 16, 2012
Payback for a Facebook Tax Refugee—A Commentary by Bruce Ackerman ’67
The following commentary was published in the Los Angeles Times on May 16, 2012.
Payback for a Facebook Tax Refugee
By Bruce Ackerman ’67
Is citizenship a commodity, to be bought and sold when the price is right?
Eduardo Saverin, co-founder of Facebook, thinks so. After becoming an American 14 years ago, he has traded his citizenship in the country that helped make him rich for the low-cost Singapore product. According to the New York Times, he denies making the switch for pecuniary reasons, but it's hard to believe. He stands to gain $4 billion from Facebook's imminent public offering, which has to make Singapore tax laws enticing.
Rather than paying back, he is moving on.
Saverin is not unique. The number of Americans renouncing their citizenship grew from 238 in 2008 to 1,534 in 2010. This sixfold increase no doubt includes a hefty portion of super-rich cosmopolitans. Citizens of Davosland, they can look with disdain upon the struggling 99.9% who believe that a commitment to their country is a lifetime affair.
Their number will increase. Current law reserves 10,000 green cards annually for foreign entrepreneurs willing to invest at least $500,000 in a business that will create or preserve 10 full-time jobs. Once they become citizens, some will make it into the big time and say goodbye to the country that made their success possible.
This dynamic creates a dilemma in national self-definition. We should not close our doors to thousands of entrepreneurs yearning to realize the American dream. This is, after all, the land of opportunity. But citizenship is more than an ordinary market transaction. It is a personal commitment to the nation and its welfare. This core principle is threatened when relative newcomers, along with some native sons, follow Saverin to the exits in search of tax havens.
It would be a mistake to overreact to these troubling acts of political estrangement. Americans fought the War of 1812 to defend each individual's right to renounce his or her citizenship, and this principle is deeply entrenched in our legal tradition.
Nevertheless, the right to repudiate can now be exercised at too low a price. At present, Saverin and his followers can renounce the U.S. and then return at will on short-term visas as tourists or business travelers. So long as they can flit in and out, they will enjoy many of the benefits of citizenship while evading their fair share of federal and state taxes.
Congress should end this practice. Once Americans renounce their membership in our national community, they should be allowed to return only under exceptional circumstances — in response to the call of a child in a hospital or a mother on her death bed.
These hardship exceptions should be strictly limited. Otherwise, the super-rich will hire teams of high-priced lawyers to manipulate the loopholes to allow them to enter and leave as they like. They may have to pay high legal fees for this privilege, but the bill will be a lot lower than the taxes they would owe if they had remained Americans.
The key point is to reject the cynical notion that citizenship is just another marketplace commodity. If an American wishes to separate himself from this country and its people, he is taking a step of deep significance. He should not be able to easily return and brag to his friends about the billions he is making by evading civic responsibilities.
My proposal is consistent with America's traditional appeal to immigrants as a land of opportunity. Up-and-coming entrepreneurs won't be deterred by the distant prospect that they may become so rich that repudiation will be tax-savvy. Nor will the new rule drive lots of native-born citizens to emigrate early in their careers to establish roots in low-tax lands.
We will simply be telling our wealthiest fellow citizens that they confront a life-defining choice: They either remain Americans or they repudiate their homeland forever. They can't have it both ways.
This message is especially important at a time when we are debating the Dream Act and other measures offering illegal immigrants a pathway to legal residency or citizenship. These reforms deal with people who are eager to assume the full responsibilities of membership in our community. Are we willing to turn them down while allowing the super-rich to flaunt their disdain for the place they used to call home?
Bruce Ackerman is a professor of law and political science at Yale University and the author of "We the People."