The Maryland House of Delegates just voted to raise taxes. Should we move to Florida…or Delaware?
If we move to Palm Beach, will we ever be able to visit our beloved Maryland homeland again?
The Financial Times reports that thousands of wealthy French people are now moving to London. Their motive? They want to escape the taxes proposed by France’s new president, Francois Hollande.
Should the French impose an exit tax on these “ex-patriots”? Should it then bar them from visiting France?
Of course not.
In England in 1215, the right to travel was enshrined in Article 42 of the Magna Carta:
It shall be lawful to any person, for the future, to go out of our kingdom, and to return, safely and securely, by land or by water, saving his allegiance to us, unless it be in time of war, for some short space, for the common good of the kingdom: excepting prisoners and outlaws, according to the laws of the land, and of the people of the nation at war against us, and Merchants who shall be treated as it is said above.
Here’s the United Nations Universal Declaration of Human Rights. Article 13:
(1) Everyone has the right to freedom of movement and residence within the borders of each State.(2) Everyone has the right to leave any country, including his own, and to return to his country.
Article 12 of the International Covenant on Civil and Political Rights incorporates this right into treaty law:
(1) Everyone lawfully within the territory of a State shall, within that territory, have the right to liberty of movement and freedom to choose his residence.(2) Everyone shall be free to leave any country, including his own.(3) The above-mentioned rights shall not be subject to any restrictions except those provided by law, are necessary to protect national security, public order (ordre public), public health or morals or the rights and freedoms of others, and are consistent with the other rights recognized in the present Covenant.
People should be able to move where they want, no? They should be able to look for lower tax places to live, shouldn’t they? After all, we’re Americans, aren’t we? Aren’t we all descendants of people who tried to improve their lives by moving to a new place?
Apparently, a lot of Americans don’t think so. Facebook is going public. And one of Facebook’s founders has moved to Singapore. He will save, by one estimate, $67 million in taxes by giving up his US citizenship. He says that’s not the reason he gave it up. But you can believe what you want.
And now the politicos are up in arms. Mr. Saverin has helped to give them an asset worth about $100 billion. Are they grateful? Do they bend down and kiss his derriere?
No! They want to tax him even more heavily…and prevent him from ever setting foot in the US again.
Yes, dear reader, there is no thought so dumb…so short-sighted…so low…that it won’t become the law of the land. Bloomberg reports:
Chuck Schumer, D-N.Y., has a status update for Facebook co-founder Eduardo Saverin: Stop attempting to dodge your taxes by renouncing your US citizenship or never come to back to the US again.
In September 2011, Saverin relinquished his US citizenship before the company announced its planned initial public offering of stock, which will debut this week. The move was likely a financial one, as he owns an estimated 4 percent of Facebook and stands to make $4 billion when the company goes public. Saverin would reap the benefit of tax savings by becoming a permanent resident of Singapore, which levies no capital gains taxes.
At a news conference this morning, Sens. Schumer and Bob Casey, D-Pa., will unveil the “Ex-PATRIOT” — “Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy” — Act to respond directly to Saverin’s move, which they dub a “scheme” that would “help him duck up to $67 million in taxes.”
The senators will call Saverin’s move an “outrage” and will outline their plan to re-impose taxes on expatriates like Saverin even after they flee the United States and take up residence in a foreign country. Their proposal would also impose a mandatory 30 percent tax on the capital gains of anybody who renounces their US citizenship.
The plan would bar individuals like Saverin from ever reentering the United States again.
If Chuck Schumer has his way, entrepreneurs like Eduardo Saverin will think twice before setting up shop in America!
[Editor’s Note: After yesterday’s column, Run, Saverin! Run!r, we were delighted to discover that a brave Fellow Reckoner had actually linked to The Daily Reckoning...on Chuck Schumer’s Facebook page. Ha! Feel free to “like” our bitty missive here and to “share” it on Facebook. Call it non-violent protest. And of course, you can always “be our friend” here.]
Down, down, down…day after day… Stocks down. Yields down.
But what’s this? Gold rose nearly $40 yesterday.
Our “Alert Flag” went up yesterday morning. The Dow fell 156 points during the day. Not that there’s any connection. Most likely, after so many down days, stocks will bounce today. But watch out…
We have a hunch.
Facebook is the biggest deal in the stock market…perhaps ever. It’s a company that didn’t even exist 10 years ago. We know all about the company’s founding; we saw the movie. Twice. Because our daughter has a role in the movie. She’s the waitress in the scene where Zuckerberg means Sean Parker.
Not a bad flick. But from an investment standpoint, Facebook is probably one of the worst moves you can make. Most likely, it will be gone 10 years from now. $100 billion of market capitalization will disappear. Poof! It’s just a website, after all. We looked at a Facebook page, once… We couldn’t figure out why anyone would waste his time.
The trouble with new technology is that in a few years it’s old technology.
Here’s our hunch: The Facebook IPO may mark a major peak…and the beginning of a major bear market on Wall Street.
It happens every time. There’s a big, big deal. And then, it’s over. We’d give you some examples, if we could think of them. But we can’t. You’ll just have to trust us on this.
We don’t really have any evidence or logic to back this up. It’s just a hunch.
But our intuition tells us that when investors finally get the full Facebook treatment, they are going to be turned off by the stock market and Wall Street. Not only will the company turn out to be not worth a fraction of the IPO price…investors will also get a clearer picture of how Wall Street really works.
About that IPO… The idea is to generate a lot of excitement…a frenzy…so that people are eager to get the shares. And with all these Facebook users, who like…like…Facebook…and think they can tell a good investment when they see one…it ought to be easy to create a buying frenzy. Besides, everyone knows shares are intentionally priced below what their backers believe they can get for them. This causes the share-price to “pop” right after the IPO.
Of course, the distribution is tightly controlled. You have to be an insider to get IPO shares. Say…you’ll get them at about $40…and then, you expect them to go to $50 on the “pop.” If it works out as planned, you make $10 per share. This is a lot of money. Easy money. So, the insiders all want a piece of the action.
How do you get to be an “insider”? You have to be a friend of Morgan Stanley. Which is to say, you help Morgan Stanley make money. How? For example, if you are a pension fund or hedge fund you put through a lot of trades. Morgan Stanley makes money on the churn. You make money on the churn, too. Customers don’t make any money on the churn. They pay for every transaction. But who cares about them?
Everyone is convinced that buying…selling…and trading investments makes money. As long as the illusion lasts, Wall Street is happy. The customers are happy too…more or less. They’re participating in the Great Illusion — all trying to make money without actually doing anything.
So everyone churns. And the more you churn with Morgan Stanley the more likely you are to get an allocation of IPO stock. There could be about 50 million shares handed to insiders in this manner. Let’s say they go up $10 in the “pop.” That’s half a billion in gains …in only a few hours.
Dan Ariely explains:
Morgan Stanley and the rest of the investment banks involved will … make sure that their favorite fund manager client “friends” are given lots of free money. Assuming that these “friends” are given 75% of the total number of IPO shares, or a total of 291 million shares, and assuming that the stock does rise from $40 to $50, then these fund managers will collectively, in one day, make $2.9 billion dollars in realized or unrealized profits. That’s right, 2.9 BILLION DOLLARS.
…where and out of whose pocket does this money come from?
Well, just think of it this way… Let’s assume you own a very expensive piece of waterfront real estate, and you hire a broker to sell it for you. After exploring the market and after getting indications of interest, your broker advises you that $10 million would be a great price for your home. You meet with the potential buyers and decide to sell it for $10 million. After the $1 million commission you have to pay your broker, your net proceeds are $9 million. An hour later, you drive by the house and see your broker in the driveway shaking hands with some different people. You pull over to see what’s going on, and you find that the people you just sold the house to for $10 million are very close friends of your broker. To your dismay, you also find out that those friends just sold your (former) house to somebody else for $15 million.
The same exact game is going on here… By the time you drive around the block, these folks will have sold their shares at $50 per share.
I am not sure about you, but I find all of this very depressing.
Bill Bonner,for The Daily Reckoning
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill's daily reckonings from more than a decade: 1999-2010.
Poor misguided Saverin, $67m is not worth giving up American citizenship. Chuck Schumer should pity him not punish.
I rest my case: 30 yr = 1.80%
Correction: 30 yr = 1.80%
Sorry, again, I meant: 2.80%
I gave up my US citizenship decades ago, have not been back since 1988 and have no intention of EVER returning even for a visit. The US will collapse soon and things will be worse there than anywhere else on this planet. Good luck to all who choose to stay. Oh, and if you have a chance to get out but don’t, is your beloved US citizenship worth your life?
I am a citizen of a republic that doesn’t exist anymore. Its foundation was undermined by an insidious, constant slow ebb until it sank beneath the tide. Now, zombies and cronies rule.
How’s that for depressing?
Is restoring the republic worth one’s life? Fortune favors whom?
THE BUSINESS OF AMERICA IS BUSINESS.
THE BUSINESS OF BARACK OBAMA IS DESTROYING AMERICAN BUSINESS.
DR limits to a meaningless 25 word response….
Wait, what? Quoting the (mostly repealed) Magna Carta or the evil U.N. to prove a right to travel? What for? What happened to the notion such a right should be “natural” and need no written confirmation?
Then again if a country is so bad as to leave – why would u want to return? If anything you’d be trying to help other family members get out of there than trying to visit them.
“I gave up my US citizenship decades ago, have not been back since 1988 and have no intention of EVER returning even for a visit. The US will collapse soon …”
maybe. but I’ll bet’choo been sayin’ that since ’88!
“… and things will be worse there than anywhere else on this planet.”
really? worse than anywhere else? given these two statements I’ll bet a dollar to a donut that you live in a bubble and have no idea what’s headed YOUR way.
“Is restoring the republic worth one’s life?”
allow me to translate. “let’s see. who has built me the best republic that I can buy into and grace with my libertarian presence at the least cost to myself?”
I has begun!
Which sane person would contemplate investing any money in the US after witnessing the honorable senators Schumer and Casey foam at the mounth over this issue?
But alas, how many US citizens will be asking themselves why foreigners pay less taxes on US investments than they do? How many will ask; I am really free, or am I just tax lifestock?
gman makes me miss The Investor’s Friend.
Government is a scam. It is comprised of a bunch of liars, thieves, and cheats. Voting does no good as this time it will be a choice between Socialist #1 and Socialist #2. They don’t obey their own “laws” and inflict pain and suffering upon their own people. The media attempts to brainwash all of us into thinking voting actually solves anything.
By voting, one actually condones this crap. Voting for the lessor of two evils, is still evil.
Didn’t seem to bother Schumer ,et all when GE didn’t pay any taxes…
They’re PO’ed because they didn’t get their cut…
@gman: People gotta do what they gotta do, so just wait till things collapse in the USA and people jump in their vehicles to try and get out. Believe me, lots of patriotic Americans will be plugging the highways to leave, but the borders will be closed and they will be stuck. Total chaos will be happening. US citizenship will not matter anymore, nor will family ties, it will be every man for himself. Yes, there will be hard times all over, but the USA and city-dwellers will suffer most, just wait and see.
When you've got a room full of 200 oil insiders scratching their heads at current high prices, something's gotta give.
For most investors, it’s weird to think of stocks as their go-to investing option.
The petropoly has bills to pay and setting the price of oil was a simple way to balance their budgets.
Investors don’t seem to care that what's propping up their investments is what will ultimately destroy them: government monetary policy.
For the next decade the energy revolution will be likely confined to the US, displaying the robustness of American entrepreneurship.
Why the Sage of Baltimore’s commentary persists through America’s changing times.
After attending Platt’s oil conference in London I want to relay two important themes you need to know.