Dan Morain

Dan Morain

Dan Morain: A mom struggles as budget crisis deepens

Published: Wednesday, May. 16, 2012 - 12:00 am | Page 15A
Last Modified: Wednesday, May. 16, 2012 - 9:19 am

Wherever he sleeps at night, Facebook billionaire Eduardo Saverin could never dream of living like Jonetta Hall.

Saverin, 30, is a billionaire who will become richer when Facebook, the Palo Alto company he helped found, has its initial public stock offering Friday. He has been in the news since last week when Bloomberg reported that he had renounced his U.S. citizenship and is living in Singapore, which does not tax capital gains he stands to receive on his stock.

Hall, 36, lives in a two-bedroom North Highlands apartment and cares for her 4-year-old daughter, Kayla, two of the 1.37 million Californians on welfare. Their shaky existence became more tenuous this week when Gov. Jerry Brown proposed deeper welfare reductions.

Like Gov. Arnold Schwarzenegger before him, Brown seeks to balance the budget in part by trimming welfare costs. Facing a $15.7 billion deficit, Brown is calling for changes that would reduce welfare rolls by 60,000 individuals in the coming year.

Hall hasn't worked since 2008, when Kayla was born. When her husband left, she saw no choice but to quit her waitress job in Elko, Nev., and return to California to be closer to her family.

In four months, her CalWORKs payment, now $490, will fall to $300. Her rent is $660, plus $40 for water. She gets help from her church, looks for work regularly and routinely is turned down.

"People want to say people on welfare are sitting around," Hall said. "I've been hustling. I've been begging. I'm on my knees. I cry every day. My daughter doesn't deserve this."

Hall was born in the tough town of Vallejo. Her father died when she was a kid. She got a high school degree at a continuation high school and has 12 college credits. Her 1994 minivan broke down in 2009.

Saverin was born of privilege in Brazil and moved with his parents as a boy to Florida. He went to private schools and Harvard, where his roommate was Facebook founder Mark Zuckerberg. He became Facebook's first chief financial officer, had a falling out with Zuckerberg and sued. The settlement was confidential, but Saverin clearly fared well.

His last U.S. address apparently was in Florida, which has no income tax. But Facebook is a success, and Saverin is rich in no small part because of Silicon Valley talent, expertise and venture capital.

Saverin's New York spokesman has said Saverin did not give up his citizenship to avoid taxes. But many commentators note the federal tax rate on high earners could go up to 39.5 percent next year.

As it happens, Saverin has been living in Singapore for some time, having big fun.

"Believed to be a bachelor," the Straits Times of Singapore wrote in 2010, "he is a regular face at the Butter Factory nightclub and more recently Filter Club, a nightspot next to Gallery Hotel opened by a friend of his. Although he likes to keep a low profile, Mr. Saverin is generous at the clubs and spends a lot of money on drinks for friends."

The IRS files regular reports naming individuals who relinquish their citizenship, and named Saverin on April 30, one of 1,780 individuals who defriended the U.S. in 2011, up from prior years.

The IRS doesn't identify states where the expatriates lived before giving up their citizenship, though it should, and California doesn't name high earners who move to low-tax states.

Plenty of wealthy people would never leave the United States or California to avoid taxes. They understand the debt they owe this country. But people of means can relocate to low-tax havens like Singapore or Incline Village in Nevada, a state with no income tax.

California relies heavily on rich people to pay the bills. The Department of Finance said earlier this week that "the increasing concentration of income has made tax revenues dependent to a greater degree on the income and decisions of a relatively small population of taxpayers."

Although the rich can afford it, Brown's tax initiative on the November ballot would increase the state's reliance on the wealthy by raising income tax rates by as much as three percentage points on the highest earners. I hope the tax passes; Jonetta and Kayla Hall need a hand. But Brown and legislators need to overhaul the tax system, and make it more stable.

Saverin has moved on, counting his money on an island, leaving Americans like Jonetta and Kayla Hall behind. The billionaire and the welfare mom do share one connection. She proudly posts a photo of Kayla, dressed in pink, wearing pigtails and a sweet grin, on her Facebook page.

© Copyright The Sacramento Bee. All rights reserved.

Read more articles by Dan Morain



Dan Morain, editorial page editor

Dan Morain

Dan Morain, editorial page editor, has been a columnist at The Sacramento Bee since 2010. As a news reporter, he covered the California Supreme Court when Rose Bird was chief justice, the Legislature when Willie Brown was speaker and the Governor's Office during Gray Davis' tenure. He spent 27 years at the Los Angeles Times, where his final assignment was to be part of the team that covered the 2008 presidential campaign. He and his wife, Claudia Morain, have three children, each of whom attended public schools and California's public universities.

Email: dmorain@sacbee.com
Phone: 916-321-1907
Twitter: @DanielMorain

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