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Tax Payers & Tax Consumers
Would the 1% shop for a better national ROI?
The tax payer and the tax consumer used to be a unified dichotomy. In a perfect nation, everyone could meet both these descriptions, contributing their dues and benefiting from the system in equal measure. Increasing progressive tax rates has created a divide between these 2 measures to the degree where I wonder, are the highest contributors still getting a ROI worth the expense?
Imbalance in Supply and Demand
A large imbalance between scarcity of supplier and breadth of demand is generally cause for concern at the macro level.
One example where this is relevant at the time of writing is the huge imbalance between the individual company TSMC, a Taiwanese company that manufactures semiconductors, and the 55% of the users in the total market who purchase from this one source(including Apple for many of their products). China’s behavior towards Taiwan is causing concern for the longevity and security of this supplier, and this buying pool is so large that the problem of access to their products could work all the way up the global supply chain. (Jon Stokes does a fantastic job of describing this specific case in more detail here.)
Back to the United States tax system though, here is the striking imbalance that I see:
1% of the Population Yields 40.1% of US Income Taxes
Furthermore, the top 10% pay 71% of federal income taxes, which is essentially the US’s revenue used to offer value in exchange for collection to its’ customers. What does the average citizen get in exchange for that revenue? Roads, public schools, security among many other things, but more and more aggressive tax laws are increasing the burden on the country’s highest earners, without actually increasing the value of their service in many cases.
Problems with Exodus
We all pay taxes. Back to the concept at the beginning however, some of us are getting our money’s worth, and some of us aren’t. It may seem conflated to make that argument because not many of us could individually pay for all of the resources that we get in exchange for paying into a collective system, but I’m thinking about the problems that could arise if those who can, decide to go for it elsewhere.
In our current scenario, if just a fourth of the highest earning 1% of the United States decides to reside elsewhere, say, with even just a lower flat tax, the US’s income tax revenue would decline by 10%. With the state’s current spending habits, the country may have no choice but to supplement that revenue by further increasing the tax burden on the lower 99%. I’m not sure about you, but that includes me, and so I’m talking about what I see, because it’s the most I’m currently enabled to do to solve the macro problems.
I’ll exit the doom loop and talk about some ways to solve the micro-problems next week.
Recently, I jumped seat from the production side for the 3rd time on The Vance Crowe Podcast and sat with Vance for an interview. During that conversation, we talked about this concept and how I believe the US is moving closer towards a tax system where the highest tax contributors would get a better ROI on their citizenship in another jurisdiction. Here’s a excerpt from that interview which loosely highlights the above —
Comments on my posts are always open and I encourage pushback on the ideas I put out or even simply additional context. You can also engage with me on Twitter and now Urbit(~padlyn-sogrum).
Next week, I’m going to talk about some digital tools for sovereignty that I use to protect my wealth and network from failing nation states.
Think out loud today.