It was James Piereson, author of the splendid book Camelot and the Cultural Revolution: How the Assassination of John F. Kennedy Shattered American Liberalism, who I think first came up with the phrase “punitive liberalism.” It’s a perfect description for the post-sixties liberalism that abandoned growth for limits, opportunity for entitlement, the rule of law for retribution, and whose egalitarianism—reasonable within limits—has degenerated into pure envy and resentment.
Nothing makes this more clear than the reaction of Democrats today to the news about Eduardo Severin, the Facebook co-founder who renounced his U.S. citizenship last fall in favor of low-tax Singapore. Sen. Chuck Schumer, who, it should be noted, is the chief protector of the 15 percent tax rate for “carried interest” beloved of New York hedge fund managers, is outraged that he won’t be able to pick all of Severin’s pockets. He’s proposing a law to make it difficult to renounce citizenship without paying maximum taxes to the U.S. and adds the twist that if someone does escape out tax net, he or she can be barred from ever returning to the United States, even as a visitor. How’s that for punitive liberalism?
It’s not as though Severin is escaping taxes completely, because all expats have to pay a 15 percent tax on all unrealized capital gains when they renounce their citizenship. In Severin’s case that valuation will be placed to last fall, before the Facebook public offering came to fruition, so the declared value against which he has to pay the exit tax is certainly lower than the market value of his Facebook shares today, following the IPO tomorrow. But he’s complying with the law as it is written today. That’s not good enough for liberals. He must be punished for following the law they wrote. (Also, Schumer and his posse want to apply the law retroactively to all expats for the last ten years. Nice way to encourage repatriation of capital, isn’t it?)
In fact it is possible that Sevein will actually pay more in taxes to the U.S. by leaving the country than if he’d stayed for a simple reason. If he’d stayed, he’d only owe taxes on his Facebook wealth if he sold his Facebook stock. If he never sold much of his stock, he’d never owe anything. If he wants cash, he could borrow against his stock; ditto for investing in some other business (as he says he wants to do). Heck, the interest might even be tax deductible if he used the borrowings for another investment.
Nice going, Schumer.