I love Billy Joel’s music. So when I heard that Eduardo Saverin, co-founder of Facebook, renounced his US citizenship in
order to get around paying taxes on his income from Facebook’s IPO I immediately thought of Billy Joel’s song “I’m Moving Out”. To see the entire song’s lyrics, go here, but I want to show you one stanza to drive a point home:
You should never argue with a crazy mind
You oughta know by now
You can pay Uncle Sam with the overtime
Is that all you get for your money?
It seems such a waste of time
If that’s what it’s all about
Good luck movin’ up cause I’m movin’ out.
Moving out – or rather renoucing his US citizenship – is exactly what Saverin is doing. Saverin
has been getting grief about circumventing the US tax code but I’ll stand up and defend him.
First, he helped found a company that has taken off to Microsoft or Apple powerhouse status. As a result, Saverin, Zuckerberg and others have made a whole bunch of money. Isn’t that why people start businesses
in the first place? To make as much money as possible while seeing your company
expand? Did I mention that unlike Microsoft and Apple, Facebook doesn’t charge
you money to use their service?
Second, Saverin is emblematic in my mind of other individuals and companies moving to escape oppressive tax regimes.
Take the election of socialist Francois Hollande as the new President of France as an example. The rich are already looking across the English Channel because Hollande has stated he rejects austerity measures in France and is looking to
raise taxes on the wealthy to pay for the unsustainable government programs and pensions.
California now has a budget deficit of $16 billion, part of which is an estimated $2 billion in missed revenue from California’s income tax. This shortage of income tax revenue comes from one or two ways – either people are earning a
great deal less because of the economy and/or the rich have moved to more favorable tax climates. California’s solution? Raise taxes again.
We see the “moving out” in other states whether it’s New York City losing its rich because of high taxes or businesses moving out of Illinois because of high taxes. People and businesses – that have the means to do so – are moving to Texas, Tennessee or Florida where there is no state income tax, are Right to Work states and/or less regulatory. On a national level, we have seen companies “move out” their company or their investments to other countries with more favorable tax structures – hence GE paying no US corporate taxes on their profits the last two years.
A government cannot tax an economy into prosperity. A government cannot spend itself into prosperity either. However,
states like California, Illinois and New York seem to think otherwise. As a result, we see continued budget shortfalls and calls for higher taxes rather than the opposite.
From a business standpoint, if your competitor is offering similar services at a better price, you don’t raise your prices in
hopes of getting more revenue. Instead, you will do your best to match your competitor’s prices in hopes of luring customers to your company’s product rather than risk losing current and potential customers to your competitor.
Likewise, states – especially Illinois – need to operate on the same level. If Indiana is more favorable to business – and thereby the
wealthy who own most businesses – then Illinois needs to become more competitive to keep what business Illinois has and to allure more business to start or move to Illinois.
Saverin renoucing his US citizenship on the surface seems like a greedy move but when you get below the surface, you see a problem with redistributive taxes and an overregulated economy. We shouldn’t curse Saverin and businesses for doing what they have done. Instead, we should be cursing those that have promised unsustainable pensions, created massive government programs/agencies and have created a hostile business environment.
Those that we should be cursing – Democrats in power in Springfield as an example – remind me of a debate I had with a student during Law Day a short while ago. The student was stating that he believed the 2nd amendment should be out of the Constitution because “guns are dangerous and kill people” and “it would help stop the wars we are in now”. I was quick to remind him that a loaded gun sitting on a table is not dangerous and won’t kill anyone until the gun is picked up and fired by a person. I also stated that if you don’t like US foreign policy, don’t blame the guns, blame the people we elected that decide
and carry out our foreign policy.
It works the same way with Saverin, et al. Don’t blame them for moving out. Blame those that have caused them to move