Sens. Charles Schumer and Bob Casey today unveiled legislation intended to stop Americans from dodging taxes by dropping U.S. citizenship.
The move comes after Facebook co-founder Eduardo Saverin renounced his U.S. citizenship ahead of the company's IPO, which could enrich him by several billion dollars.
Saverin currently lives in Singapore, a country that doesn't tax capital gains. But Saverin told the New York Times that the move to drop U.S. citizenship had nothing to do with avoiding U.S. taxes.
"I was born in Brazil, I was an American citizen for about 10 years. I thought of myself as a global citizen," Saverin said.
Schumer and Casey, both Democrats, apparently don't agree.
"Mr. Saverin has decided to 'defriend' the United States of America just to avoid paying his taxes. We aren't going to let him get away with it so easily," Schumer said. "It's infuriating to see someone sell out the country that welcomed him and kept him safe, educated him and helped him become a billionaire. This is a great American success story gone horribly wrong. We plan to put a stop to this tax avoidance scheme. There should be no financial gain from renouncing your country."
As a result, the senators have introduced the Ex-PATRIOT Act. Under the bill, any expatriate with either a net worth of $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.
If they disagree, the individual will have to prove their case to the IRS. If the agency finds that the move to renounce citizenship was tax-related, it would impose a 30 percent tax on the individual's future investment gains, no matter where he or she resides. This, the senators said, is keeping with the rate that is already applied on non-resident aliens for dividends and interest earnings.
"We simply cannot allow the ultra-wealthy to write their own rules," said Sen. Casey. "Mr. Saverin has benefited greatly from being a citizen of the United States but he has chosen to cast it aside and leave U.S. taxpayers with the bill. Renouncing citizenship to simply avoid paying your fair share is an insult to middle class Americans and we will not accept it."
In 2011, there were 1,780 people who gave up their U.S. passports, up from 235 in 2008. But no one has ever been banned from the U.S. for jumping ship due to tax reasons.
"Without an immigration bar of re-entry, those thousands of individuals who renounce their US citizenship can simply return to the United States for 60 days per year, without any tax responsibility," the senators said. "The Ex-PATRIOT Act would end this loophole, and close the doors of the U.S. forever to individuals like Mr. Saverin if they continue to avoid paying their taxes."
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