September 22, 2020

Cayman Islands blamed again for US “tax millions only for suckers”

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This editorial appeared in the Concord Monitor concerning Facebook’s co-founder Eduardo Saverin’s decision to renounce his American citizenship. It is “fair game” for the Cayman Islands to be ridiculously linked to this but we are the flavor of the month(s) at the moment. Read on:

The choice of words in the news reports was inevitable: Facebook co-founder Eduardo Saverin, who became worth nearly $4 billion as a result of Friday’s public offering of Facebook stock, “de-friended” the United States and renounced his American citizenship.

Through a spokesman, Saverin said that the far lower tax rate in his new home of Singapore played no role in his decision. But then, that’s what they all say, all the mega-millionaires and billionaires who renounce their U.S. citizenship to live in low-tax havens like Ireland, Belize, Hong Kong, Singapore and the Cayman Islands. Because the United States taxes the assets of wealthy Americans who renounce their citizenship, Saverin did have to pay roughly a half-billion dollars in taxes on his assets. But by one estimate, because Singapore does not tax capital gains, he escaped paying between $68 million and $364 million in taxes that he would have owed had he remained an American.

Saverin’s defection was particularly galling because he came to the United States as a refugee from Brazil. Many of the new “Facebook millionaires” will legally escape a fortune in taxes by setting up trusts. And Facebook co-founder Mark Zuckerberg reportedly plans to use perfectly legal strategies to pay no taxes at all on some $23 billion of Facebook stock. This news should accomplish several things:

• The majority of Americans, who pay rates of 10 to 35 percent on their income, should feel like suckers. That, in turn, should increase the pressure on Congress to reform the nation’s morally bankrupt tax code.

• Saverin’s decision should lead to changes in U.S. policy toward wealthy Americans who renounce their citizenship to escape taxation. Some 1,781 Americans renounced their citizenship in 2011, many for tax reasons. That number is expected to increase if the Bush tax cuts expire, as it appears they will, or if the Buffet rule that levies a 30-percent effective tax rate on millionaires becomes law.

Yale law and political science professor Bruce Ackerman suggests that people who renounce their American citizenship for tax purposes should be allowed to return only in cases of extreme hardship, not for visits. That’s an idea worth considering, since it would serve to deter others who make a fortune from then trying to escape their duty to the land that made the acquisition of their wealth possible.

• The great Facebook tax avoidance scheme should also focus attention on people who retain their U.S. citizenship but avoid taxation by parking their money offshore. One of those people, Mitt Romney, is the presumptive Republican presidential nominee.

The Romneys closed their Swiss bank account in 2010 in preparation for the presidential campaign. But they have, according to news reports, tens of millions of dollars in accounts in the Cayman Islands, plus money stashed in Ireland and Bermuda.

“I can tell you we follow the tax laws,” Romney said while on the campaign trail in New Hampshire earlier this year. “And if there’s an opportunity to save taxes, we like anybody else in this country, will follow that opportunity.”

That’s not true. Most Americans file Form 1040s and have no significant ability to reduce their tax liability. Some are happy to pay all they owe, and others, out of gratitude for the opportunity this nation afforded them, pay a bit extra. Even among the truly wealthy, sheltering money in foreign tax havens is the exception, not the rule. We’d like to believe that that’s because there’s something un-American about not paying your fair share, especially when the nation is at war and mired in debt.

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