Senator Chuck Schumer, D-N.Y. and Senator Bob Casey, D-Pa. have proposed a 30% exit tax for any United States Citizen who denounces citizenship likely to avoid taxes. The proposal is aimed at Facebook co-founder, Eduardo Saverin. He's one of the pretentious nerds not played by Timberlake in the movie named after the corporate behemoth. Saverin renounced his citizenship in favor of Singapore (which doesn't have capital gains taxes) several months before Facebook stock went public. Saverin publicly says that the U.S. is just imagining things.
As with any legislation that is targeted at one person, the proposal goes way too far. It introduces an intent element which puts the burden on the renouncing citizen to prove that they are not denouncing to avoid taxes. If the taxpayer can't prove the opposite, they are subject to a 30% exit tax and are barred from re-entry to the U.S. Ex-patriots already face a 15% exit tax, which operates for capital gains purposes as though you just sold all your property at the time of exit. The new proposal just opens up more snooping into our private lives, (as though Facebook has not done enough to degrade our privacy already)! Luckily, this one only applies to rich folk-those with net incomes in excess of $2 million. There is nothing new under the sun, and this proposal is no exception. The IRS already tried this and the test for expatriate tax avoidance (i.e. intent) was thrown out altogether in 2004 because it was too easy for the taxpayer to show political, family and business ties to the migration country of choice. My question from a practical standpoint is if this ever passes again in some form or another, how is the IRS going to collect this money?
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