Sunday, May 13, 2012

That Place Where Capitalism And Democracy Collide

Eduardo Saverin, the billionaire co-founder of Facebook, renounced his U.S. citizenship before an initial public offering that will value the social network at as much as $96 billion, a move that may reduce his tax bill - reduce not eliminate. His stake is about 4 percent, so at 30 years old, he is worth about $3.84 billion. He is hardly alone. Rather, Saverin joins a growing number of people giving up their U.S. citizenship. Indeed, renunciation of citizenship by Americans is up 500% in 3 years, i.e., the number of Americans renouncing their citizenship rose to 1,781 in 2011 from 231 in 2008. Some experts claim the number is much higher, it being intentionally under reported by the US government. Anecdotally, there is some support for that proposition with some US Embassies backed up more than 6 months to grant an appointment to renounce. The concept is foreign to most, but understanding the rationale is important. Here is one theory. . . flight is the natural order of things in a late stage democracy, to-wit: "At certain points in a democracy, it can function reasonably well... which is to say that most people will be mostly okay with the ways things run. In a late-stage democracy, however, things are rarely quite so tidy. To be more blunt, when you have a government that as a result of trying to suck up to "We the people" has expended all of its stolen capital and obligated the next ten generations to life as tax slaves, then the system quickly degrades into little more than a bunch of mongrel dogs fighting over scraps. "We have entered a period with the worst possible set-up... with people demanding their state-sponsored giveaways from politicians acting on no principles higher than reelection who then jump through every hoop to continue the giveaways. As a consequence, the ballot box has become a tool for mob rule that supports institutionalized theft from the folks who just want to live their lives to the fullest by enjoying the fruits of their own production.". (David Galland, Casey Research) Mob rule keeps the Defense Department flush with toys, the Social Security spicket turned on, Medicare functioning, even as the train speeds toward its date with the cliff.  The mob knows it, we all know it, but the mob is in control.  They will waste everyone, even themselves, before they suffer a dime's loss. The highly productive class has heretofore been content to sit and watch and pay. No more. The relentless indictment of the rich, combined with the uncomfortable fact that only half of all Americans pay any federal income tax at all has opened the exit door. The embarrassment of expatriation is gone. Going forward, an employer's challenge will not only be to keep their star employees from switching companies, but to keep them from changing flags. Or, perhaps as is also happening in greater numbers, their companies will lead the charge from America to more business-friendly environs.