Some dance to the music but duck paying the piper

April 21, 1995|By ROGER SIMON

Michael David Dingman can trace his roots back to Dutch settlers who came to New York in the 1600s, only a few years after the Pilgrims landed on Plymouth Rock.

His father, James Everett Dingman, born in Baltimore, played a small role in American history as the chief engineer for AT&T when it launched the Telstar telecommunications satellite in 1962, the first private venture into space.

But now the Dingman name is known for something else:

In June, Michael Dingman, a man who amassed vast wealth in this country, renounced his U.S. citizenship and became a Bahamian citizen, which allowed him to avoid millions in taxes.

In so doing, he joined a growing band of rich Americans known as the "yacht people."

As Forbes magazine wrote : "The arithmetic is simple and brutal. A very rich Bahamian citizen pays zero estate tax; rich Americans -- anyone with an estate worth $3 million or more -- pays 55 percent. . . . There are huge potential income tax savings, too, in giving up U.S. citizenship."

The United States government is not amused.

"If you've gotten your riches from America," said Leslie B. Samuels, assistant secretary for tax policy at the Treasury Department, "you should pay your fair share of taxes."

So quietly, as not to alert other billionaires who were thinking of fleeing, the Clinton administration came up with new tax laws like the ones in existence in Canada, Germany, Denmark and other countries.

Under the proposed law, when Americans renounced their citizenship, it would be treated as if they had sold all their assets, and any increase greater than $600,000 would be taxed as a capital gain, which they would have up to 10 years to pay.

Real estate and retirement plans would be exempt.

The Senate passed the Clinton bill with Republican support, but House Republicans blocked it and called for more "study." The issue is scheduled to resurface in June.

Michael Dingman got out when the getting was good. But because the IRS can continue to tax him for 10 years if it can prove he left to avoid taxes, Dingman has come up with other reasons.

And so it came as no surprise when he recently told a New York Times reporter that he left the country his family had lived in for more than 300 years out of his deep and abiding love for the Bahamas.

"It's an honor to be a Bahamian citizen," he said. "The change has nothing to do with taxes."

Moments later, however, he seemingly contradicted himself when he said: "This is a beautiful place, it doesn't have big social problems, and you don't have big taxes."

He also said that he and his wife "wanted a gentle, thoughtful, pleasant place to raise our three children."

His three children (from his second marriage) and his wife have retained their American citizenship, however, which means that Dingman can travel back and forth to the United States as much as he wants, unlike other expatriates who can spend only 120 days a year here.

So Dingman gets the best of both worlds: He can do business in the United States, continue to get multimillion-dollar U.S. government contracts, travel here and escape taxes through his Bahamian citizenship.

Not everybody thinks he deserves to be honored for what he has done, however, as he is at the University of Maryland, where he gave $2 million to fund the Michael D. Dingman Center for Entrepreneurship in 1988.

Bruce Mulliken, a 1987 Maryland graduate who now publishes a newsletter for entrepreneurs, thinks what Dingman has done is scandalous.

"Entrepreneurship is unique to this country," Mulliken told me. "Our system allows it to happen. It doesn't happen in the Bahamas. And for somebody to use our system and benefit from it and then say, 'See, ya!' -- that's not right.

"They ought to take Dingman's name off that center. I think it would be wise. It would show they care about teaching people about real entrepreneurship and not about making money and )) splitting."

But if Mulliken thinks the University of Maryland, which is about to announce a new six-figure gift from Dingman, is going to do anything to upset him, he can think again.

"We are not going to take his name off the door, no way," Charles Heller, director of the Dingman Center, told me. "We're going to put a star above it."

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