Charles Schumer and Bob Casey, the two U.S. Senators behind the Ex-PATRIOT act — a proposal to go after early Facebook backer Eduardo Saverin and others like him that have renounced U.S. citizenship and are getting out of paying capital gains tax on stock windfalls — have now revealed the details of their plan. We first wrote about it earlier today when the offices of the two senators first announced their intentions.
It’s pretty big: any ex-pat with either a net worth of over $2 million, or an average income tax liability of at least $148,000 over the last five years, “will be presumed to have renounced their citizenship for tax avoidance purposes.”? The ex-pat will have to demonstrate to the IRS that this is not the case if it is not. If there is a “legitimate reason”? for that person living outside the U.S. no penalties will apply. But if the IRS finds that someone gave up their passport for tax purposes, they will impose a tax on that individual’s investment gains “no matter where he or she resides.”?
The rate of that capital gains tax will be 30 percent — the same that non-resident aliens currently pay on dividends and interest earnings.
The tax detailed this act, if approved, will backdate for 10 years after its approval.
Get a load of Chuck Schumer's quote:"Eduardo Saverin wants to de-friend the United States of America. Sen. Casey and I have a status update for him: Pay your taxes in full or don't ever try to visit the U.S. again." (Emphasis mine.)
Wow, check out that rapier wit. It would seem that these ridiculous laws are being concocted by depraved children.
Also, I'm also a bit confused as to how this is Constitutional. Article I, Section 9 of the Constitution prohibits ex post facto law: "No Bill of Attainder or ex post facto Law shall be passed."
I'll never forget the time when Schumer was a NY State Senator and his chauffeur double-parked his limousine as he went in to dine at a local Brooklyn restaurant, in the process, blocking in other cars on the street. One of those cars belonged to my girlfriend's parents...her mom used a wheelchair. They couldn't get out of their parking spot because of Schumer's limo and my gf's dad went back inside the restaurant and asked everybody, including Schumer's party, if they owned the limo and if they could move it. Schumer's limo never budged until they were done eating.
Reub wrote:
I'll never forget the time when Schumer was a NY State Senator and his chauffeur double-parked his limousine as he went in to dine at a local Brooklyn restaurant, in the process, blocking in other cars on the street. One of those cars belonged to my girlfriend's parents...her mom used a wheelchair. They couldn't get out of their parking spot because of Schumer's limo and my gf's dad went back inside the restaurant and asked everybody, including Schumer's party, if they owned the limo and if they could move it. Schumer's limo never budged until they were done eating.
Geez, that was nice of him! I guess this is the sort of thing you get to do when you are better than everyone else. Must be nice!
I am surprised you didn't want to stick around the restaurant anyway to experience his delightful personality. He could have regaled you with more hilarious "jokes" like those he used to describe his plan to mug Eduardo Saverin and all those other "ex-PATRIOTs" whose money would be better spent by Chuck Schumer.
I can respect the strategic move, and actually limiting someone's ability to renounce their citizenship is excessive on the part of the government, no doubt... oh, and Schumer seems like a real d-bag.
That said, I'm going to go devil's advocate... I don't think it'd be unreasonable to amend the tax code to step up peoples' investments to FMV and have them pay tax on the gain as a result of choosing to pack their bags. This doesn't seem excessive to me.
Another thing I'd like to know is what Eduardo's plan is... is he planning on moving to a lower tax western country? Which one (if there are any)? To me, it'd be worth $65 million in taxes to enjoy the other $380 million or so in the country where my friends/family are.
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."
moda0306 wrote:
I can respect the strategic move, and actually limiting someone's ability to renounce their citizenship is excessive on the part of the government, no doubt... oh, and Schumer seems like a real d-bag.
That said, I'm going to go devil's advocate... I don't think it'd be unreasonable to amend the tax code to step up peoples' investments to FMV and have them pay tax on the gain as a result of choosing to pack their bags. This doesn't seem excessive to me.
Another thing I'd like to know is what Eduardo's plan is... is he planning on moving to a lower tax western country? Which one (if there are any)? To me, it'd be worth $65 million in taxes to enjoy the other $380 million or so in the country where my friends/family are.
It was a pretty obvious tax dodge, moving to Singapore right before the IPO, which has no income tax. However, it's perfectly legal to do so and absolutely ridiculous of politicians to try to use it as an obvious political stunt. In any case, if I was going to make several million next year and was capable of working from a no income tax country and getting citizenship there, I'd surely consider it. I hear Singapore is a very beautiful (if somewhat authoritarian) country.
"I came here for financial advice, but I've ended up with a bunch of shave soaps and apparently am about to start eating sardines. Not that I'm complaining, of course." -ZedThou
Nobody is dodging taxes. Think how much in tax revenue Facebook contributes in terms of jobs/salaries, equipment purchases, etc. by being in the US. Also, the guy leaving will already owe an "exit tax" on his stocks that was passed several years ago. Uncle Sam will get their pound of flesh out of it.
Anything Charles Schumer advocates I am against on principle. His motives are always duplicitous. These kinds of laws, if ever passed, will guarantee be modified in the future to affect everyone. That's just how it goes.
Last edited by craigr on Thu May 24, 2012 3:25 pm, edited 1 time in total.
Just because there will be tax revenue generated from economic activity doesn't mean there's taxes being "dodged" or "avoided" or whatever you want to call it. I really don't blame the guy, and I don't like the nature of this law, but let's be honest here, this guy made hundreds of millions of dollars without paying any form of income tax, where us regular folk are regularly paying marginal rates into taxes well-into the 30-40% range when all income & payroll taxes (on the transaction of our labor itself... not the implied revenues of the economic activity we create) are finally paid in.
I agree, though... there's too much potential evil worked into the initial language of this bill to be worth trusting. Just work a basis step-up and capital gains tax at departure into the tax code and keep it clean... IMO.
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."
moda0306 wrote:
I agree, though... there's too much potential evil worked into the initial language of this bill to be worth trusting. Just work a basis step-up and capital gains tax at departure into the tax code and keep it clean... IMO.
There already is an exit tax that was passed in 2008. It steps up the cost of the shares to the fair market value and the tax applied as if you sold those assets. It likely applies to this individual already. All Schumer is doing is making the tax substantially higher and trying to generate media buzz for himself (Bob Dole remarked on him once: "the most dangerous place in Washington is between Charles Schumer and a television camera").
Schumer is a putz and anytime a country is seriously talking about laws to limit moving money out should be very concerning. He is just adding more taxes onto an already existing law. One day the tax may be 100% so be careful what you ask for!
Last edited by craigr on Thu May 24, 2012 4:10 pm, edited 1 time in total.
Ok, then what was this guy's play? Leave the country and pay taxes he would have had to pay anyway?
I think I'm missing something here...and yeah I'm a tax accountant (needless to say I've never come accross this issue).
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."
moda0306 wrote:
Ok, then what was this guy's play? Leave the country and pay taxes he would have had to pay anyway?
I think I'm missing something here...and yeah I'm a tax accountant (needless to say I've never come accross this issue).
I suppose the play was to renounce while the shares were not IPO so he could claim a lot lower fair market value. With the shares private it would give him a lot more room to validly claim they were not worth as much. In start-ups you get this because you could be issued shares at very deep discounts (pennies each) and the company then grows. But as the company grows the shares are worth more, but the valuation is very murky. So are they worth the 0.05 you paid are are they really worth $1? Or $10? Of course the IRS always wants it as high as possible to take the most taxes and you want as low as possible. But if he renounces and pays an exit tax on the shares he could argue they are worth, for instance $5 each when he renounced and that is what the exit tax applies to, not what they are trading for now. At that point it's a debate for lawyers to work out if the IRS disagrees.
Last edited by craigr on Thu May 24, 2012 5:13 pm, edited 1 time in total.
Yes, a "putzhead" as former Senator Alfonse D'amato referred to him, to be exact. Schumer had such outrage at being called a putzhead that he practically qvetched his way into office in the ensuing election.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
Judge Learned Hand wrote:Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands.
Nuff said.
It is the settled policy of America, that as peace is better than war, war is better than tribute. The United States, while they wish for war with no nation, will buy peace with none"James Madison
Since Eduardo Severin was born in Brazil and spent half of his life there, maybe Sen. Schumer should send half of that tax money to Brasilia in gratitude for nurturing such a prodigious talent. Fair is fair, right?
A country like the US which imports a large portion of its hi-tech brainpower from overseas should not go on record as being opposed to economic migration. Folks from abroad might get the message and stay home to make their own countries richer. Come to think of it, that's just what happened in Singapore. No wonder it's such an attractive destination for talented people.
