Facebook Follies
Posted on May 18, 2012
Today, the inventors of Facebook finally get rich.
According to the New York Times: “The social network priced at the top end of the range it set earlier this week, when it said it would price its IPO at $34 to $38 a share from $28 to $35 a share, in a sign of the tremendous investor appetite for the offering. At $38 a share, Facebook is valued at $104 billion, the biggest-ever valuation by an American company at the time of its offering.”
According to the Daily Mail: “One thousand millionaires are expected to be created today as Facebook sells its shares for the first time.”
You would think that would be a good thing, an example of American ingenuity. Thousands of people have good paying jobs because of the inventiveness of Mark Zuckerberg and a bunch of smart young Americans.
I like Facebook. I like to read other people’s profiles, look at their pictures, get to know them better. I also like to keep people updated about what is happening in my life, what I am writing about, my latest pictures.
Facebook is a great tool. I don’t know if it is worth more than Boeing, but who am I to judge?
For leading Democrats, the Facebook story wasn’t a happy one of wealth creation and fun times, though. The Facebook story was just another reason to push for higher taxes.
Chuck Schumer and Bob Casey have introduced the “Ex-Patriot Act,” because one of the co-founders of Facebook, Eduardo Saverin, moved to Singapore and doesn’t have to pay the huge taxes that come from the IPO windfall.
The Schumer/Casey bill is stunning. Basically it says that if you moved out of the country and you are worth a bunch of money, the U.S. is going to shake you down.
Here are the details according to Tech Crunch: “any ex-pat with either a net worth of over $2 million, or an average income tax liability of at least $148,000 over the last five years, “will be presumed to have renounced their citizenship for tax avoidance purposes.” The ex-pat will have to demonstrate to the IRS that this is not the case if it is not. If there is a “legitimate reason” for that person living outside the U.S. no penalties will apply. But if the IRS finds that someone gave up their passport for tax purposes, they will impose a tax on that individual’s investment gains “no matter where he or she resides.” The rate of that capital gains tax will be 30 percent — the same that non-resident aliens currently pay on dividends and interest earnings. The tax detailed this act, if approved, will backdate for 10 years after its approval.”
I knew you could pass retroactive tax cuts, because the Congress does that all the time when deadlines expire. I didn’t realize you could pass retroactive tax hikes on people who leave the country. This sounds amazingly unconstitutional to me, but indicative of a Senate hungry to spend more money.
The lesson here is simple. If you want to create something huge that could make you and your friends a lot of money, don’t do it in America. The U.S. Senate will get you, one way or another.
I don’t know why Mr. Saverin moved to Singapore but he had lived there since 2009. I do know that he was born in Brazil, and while he lived in America for many years, he doesn’t necessarily have to live here the rest of his life. It’s his choice.
But Chuck Schumer doesn’t want Saverin to have choices in life. He wants his money.
Facebook is a great American story of innovation and entrepreneurship. Glad to see Senate Democrats play their role, that of tax-hungry bullies.