Facebook co-founder Eduardo Saverin

I like EconTalk, so I subscribed to Russ Robert’s blog. Part of the problem with that decision, however, is having to read some of the stuff posted by his co-blogger/co-GMU Professor Don Bordreaux, who has most of the smug, self-righteous Austrian libertarianism of Roberts with none of his humility, inquisitiveness, or good humor. Case in point, he endorses this thing naming Facebook co-founder Eduardo Saverin as an “American hero” for renouncing his US citizenship:

Considering the capital gains that Saverin will shield from the federal government, this too is heroic. Indeed, we have a bloated, wasteful federal government today precisely because it collects way too much in the way of revenues.  Also, deficits that supposedly keep liberals and conservatives up at night are easy to finance at low rates of interest precisely because investors know our Treasury has an endless supply of wealth creators to fleece for dollars.

That Saverin has chosen to avoid supporting the Leviathan is a heroic act that will hopefully make investors a little bit more gun-shy about investing in U.S. debt. And if the loss of Saverin’s millions means fewer government programs will achieve funding, U.S. taxpayers will make up for the Saverin shortfall in spades given the seeming inability of Congress to “sunset” any program.  The seen here is what the Treasury will “lose” for Saverin going elsewhere; the unseen the exponentially greater gains that taxpayers will enjoy for Congress not having Saverin’s millions to spend in the first place.

Of course from a near-term economic and investment perspective, what Saverin is doing is stimulus personified. That’s the case because there’s quite simply no realistic way that he’ll be able to spend his looming windfall; one that will come in the form of dollars. And because Saverin won’t be able to spend all that comes his way after the IPO, it means he’ll save that which he doesn’t consume.

Bordreaux echoes this, heralding “Eduardo Saverin’s sensible move to keep more of what he’s earned – to justly protect his now-substantial property from U.S. tax collectors.”

This is all, of course, dumb-headed nonsense no matter how you slice it. So let’s slice it lots of ways because I haven’t blogged in a while:

Eduardo Saverin’s family was importedinto the United States precisely because its government viewed his father as the kind of wealthy, entrepreneurial person from whom mutual benefit could be derived through relocation. He attended (and met Mark Zuckerberg) at Harvard University, a giant tax-exempt hedge fund that connects privileged and high-potential individuals to scarce economic opportunities and each other for the purpose of securing future contributions to their fund. Despite knowing essentially nothing about computers, programming, or the internet, Saverin’s inherited money and knowledge about money got him in the door early at what ended up being the right firm at the right time which ended up dominating an emerging market. For this, Saverin made billions of dollars. Rather than give up 15% of the $4b he stands to make this Friday, he instead renounced his citizenship to the nation whose prosperity, institutions, and policies made his own wealth possible. Essentially, $3.4b was just not enough for him; the next $600mm was so important to him he didn’t want to be an American citizen anymore, nor allow his future potential children to have that benefit.

Facebook co-founder Eduardo SaverinEduardo Saverin is now a resident of Singapore. Singapore is a city-state merely four times the size of the District of Columbia with an abysmal record on basic human rights. Anyone who really cares about freedom probably shouldn’t be celebrating anyone who renounces the United States for Singapore.

Saverin’s one-time payment to the federal government in capital gains taxes would be worth, roughly, .017% of the annual spending of the federal government. The idea that this will somehow affect the path of federal spending, most of which is mandatory or politically sacrosanct, is ludicrous. More likely, the government will simply issue an additional $600mm in treasury bonds.

Notably, this John Tammy does name a single actual program of the government he’d like to see cut. While Saverin’s additional $600mm may indeed create valuable investment dollars somewhere, this avoids the real, fundamental questions: a) what should the government do? and b) is monetary policy correct? a) is important because if you think the government should be doing what it’s doing, you should want to fund it, and if you don’t, it’s not clear how tax avoidance will do anything but shift the balance between revenue-funded and debt-funded spending. b) is important because the Federal Reserve is killing investment by paying interest on reserves and keeping money too tight, and this has a lot more to do with whether we develop more capital than whatever Eduardo Saverin does.

Lastly, if Eduardo Saverin himself thinks America’s capital gains taxes are such an awful thing, he should vote for Republicans and use his vast, vast fortune to support anti-tax candidates and help protect future investing job-creating rich people like himself. However, what he’s doing is not taking advantage of Citizens United but instead just de-citizening altogether. This implies, to me, that he is not acting out of the slightest shred of principle but is instead a selfish quitter who would rather be a billionaire in a tiny police state rather than a slightly-less-wealthy-billionaire in a vast nation of freedom and possibility.

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