Facebook co-founder Eduardo Saverin recently renounced his U.S. citizenship prior to Facebook's initial public offering and flew the coop with his untaxed assets in tow. He's not the first. He's just highly visible and well publicized and he could be one of the last. Congress is paying attention. To stop this form of asset movement from the grasp of tax policy, Congress may consider legislation to restrict movement of capital into and out of the country through “capital controls” buried in future international free trade agreements.
Recently, U.S. Reps. Barney Frank, D-Mass., and Sander Levin, D-Mich., sent a letter to Treasury Secretary Timothy Geithner seeking confirmation that future trade agreements will allow governments to use capital controls to protect their financial systems, essentially wanting assurance that Treasury will impose additional restrictions on freedom of movement of assets into and out of the U.S. dollar. Could capital controls include restricting the use of U.S. currency to purchase precious metals like gold or silver, or limit the exchange of U.S. dollars into foreign currencies? If these freedoms are taxed, restricted or worse, prohibited, then U.S. dollars will be the only remaining tool to store liquid wealth.
Taxpayers will be powerless to hold liquid wealth in anything but U.S. dollars and thus forced to ride out the looming inflationary implosion of the value of our currency with no place to go. If such capital controls are enacted, we will all be made to suffer equally.
Randy Wedel, Stillwater