What is usually overlooked in the discussion of Facebook co-founder Eduardo Saverin leaving the U.S. for Singapore (presumably to sell his Facebook stock) is the CALIFORNIA capital gains tax. Saverin avoided $67 million in net federal income taxes by leaving the country, but he saved several times that amount by leaving CA — which by law has no “exit tax.”
If he were still a resident of CA when he cashed out the shares, he’d pay 10.3% of the profit to the rapacious “Golden State” — a state that treats capital gains as ordinary income.
If either(or both) of the state’s “millionaires tax” propositions are passed by the voters in November, he would pay 13.3%. Or 15.3%. And yes, these taxes would be RETROACTIVE to the first of this 2012 year.
But by leaving the state and moving to a place with no capital gains tax, he will pay no such tax.
Hence he could choose to move to Singapore.
Or to other exotic lands.
Such as Nevada. Or Washington state, South Dakota, Florida, Texas, New Hampshire, Wyoming, or Tennessee.
BOTTOM LINE: People are reluctant to leave a country to avoid taxes — but with big bucks on the line, they WILL leave a state. And no state “exit tax” can stop that.
Any lucky Facebook IPO California multimillionaire who pays a CA capital gains levy on this once-in-a-lifetime windfall is, in essence, paying a tax on their own stupidity. Hopefully the liberal recipients dutifully remain CA residents.