The case for fair taxation and an equitable society — and why a drastic reform is needed
With the pandemic coming to an end many countries are left with huge debts and face bleak economic outlooks which are further intensified by supply chain issues, inflation and some trade and hot wars such as the one in the Ukraine.
At the same time the last years have seen wealth gaps rising. But then we need to take a closer look at how wealth and the economy work.
First currently most billionaires are self-made according to research and most of that wealth is more or less illiquid paper wealth, i.e. stock in the companies they build up from scratch, creating many jobs along the way and growing the economy which is socially desirable.
Plus founders cannot sell that large junks that easily without proper reason (if there’s no plausible or natural reason to sell why should other investors keep the stock and not loose faith?) and more often then not consider their companies their babies.
We also all know of strategies like build-borrow-die but truth is that comes at a risk too as the value of the underlying collateral can change dramatically (e.g. just see how much the stock market went down in the beginning of 2022). It’s also why wealth taxes, which are also a bureaucratic nightmare, do not work, because then these mere book losses would become deductible as well. More so a wealth tax has devastating effects on most founders who simply cannot pay such a tax given the nature of startups.
Beyond that founders are the ones advancing society and hence they really earned what they have for all the risks and pain taken as well as desired products/solutions created. Starting with nothing they brought things to life which society wants or needs and hence they receive more and more resources to do more and more of such good things. Market forces of supply and demand work and in the end society controls it all by voting with their feet which essentially makes performance capitalism the ultimate form democracy. It’s all merit based and benefiting society (though I am aware of conflicted buyers choices and other shortcomings, etc.) and everyone can make choices (see my remark on the minimum requirement for that at the very end).
And (almost) everyone can do it. There are countless example of founders who started with nothing (some even stood up from bankruptcy again -> see Bill Gates, Lars Windhorst or Thor Borgolfsso) and then hit it big.
Also all of them defeated huge incumbents or faced incredible challenges.
Just look at Amazon defeating large bookstores who initially had way more resources then back then or Wish who still thrives despite the competition from Amazon or Tesla which has beaten the automotive giants, or Zoom beating Microsoft-owned Skype or TikTok killing other social media platforms out of nothing or simply consider the founder stories of Robinhood, Alibaba, Box, Airbnb, etc.
Corporate taxes, capital gains taxes, income taxes, value added taxes, etc. all go against that performance, creativity and innovation which is plain wrong. It’s what leads people to claim taxation is theft and in that case they are right! Plus these types of taxes are simply a nasty hassle. Admittedly I hate, despise and reject these tax types!
So instead of the implementation global minimum tax rate for companies (which is a hostile act of badly led, self-failing states going against other highly efficiently and well-led countries sovereignty -> just look at my comparison here), it would probably have been more expedient to abolish all taxes as they all cut into social progress and innovation and performance.
Yes you read that right all taxes should be abolished!
Really all? Well, there is one tax which doesn’t: The inheritance tax.
Inheritance is not an achievement in itself and a natural transfer of assets happens at that point anyway.
Now some business owners might be afraid that this will hurt their businesses. That’s all wrong. It’s just a change in ownership and nothing else. Plus several scientific studies have proven that one’s own children are usually not the best successors to a company anyway and if they are the rare exemption every investor will hire them in a relevant position. So should a state or government entity inherit the company. Hell no! That would be horrible as we all know that governments are the worst managers for any business. Instead an investment bank or business broker should be tasked with finding a suitable buyer and then only the sales proceeds go to the state. Now some people say that these investors will strip the company down to pay for the acquisition costs. Well might be true for weak companies without a future but generally investor are more interested in continuing and growing the business so they can sell it at a higher price down the road or benefit from sustainable dividends.
All that would also correspond to the system of performance capitalism and even mitigate the risk of asset bubbles somewhat (companies are sold to people who had to build their wealth from the ground up to buy other companies or shares in them and thus the ties between the financial world and the real economy get narrower again).
Thus you can get as rich as you want and can but you have to get your ass up and work, you must perform, take risks, get creative and innovate rather than relying on an inheritance for which you’ve done nothing.
And if you consider that unfair, well then bear in mind that children of the most financially successful people already have a huge head-start (e.g. valuable contacts and networks) even without all that inherited money but now they need to use that and work. So all will depend on your effort and work ethic. Plus these kids grow up in a more equitable and inclusive society (which also increases their safety again and limits extreme political swings or even worse stuff) where they can still make it to the very top, earn whatever the want and if they fail are taken care off.
In my ultimate vision there would even be a further libertarian element allowing you to partially choose how some of that money is used for socially desirable causes. So each of these thirds could be further subdivided into a part going to the government (just enough to fund a basic UBI and a minimalist night watchman state) and the other to charities or causes of your choosing in that area where taxation is due.
And that is why we need only that one tax along with a global reform as outlined below.
So it’s time to abolish all taxes and introduce a global inheritance tax which is split into three parts. The first part goes directly to the UN as most of today’s challenges are global anyway (e.g. climate change, poverty migration, safety, pandemics, etc.), the second part goes to the country whose citizenship was held by the testator and the third one to the places where time was spent time.
So one third of the inheritance goes to the UN. Simple.
The second third is split based on citizenships held. So if someone held multiple passports or changed citizenship that amount should be split accordingly. Thus if someone held two passports for all his life these two countries should share that amount. If the testator changed citizenship then the amount is split pro rata as well.
Well I do consider myself a world citizen and thus do not believe into nation states, in fact I think they should all be abolished and replaced with a global libertarian, minimalist UN-led world order but that’s another topic which I elaborated on here (we are one world!). So as long as there are nation states the just said split seems best and fairest.
The same logic applies to the third part which is split among places lived. Meaning if the testator died at 84 and spent for example 25 years in Boston, then Boston receives 29.8% of that inheritance part. This way good old market mechanisms and competition among regions and cities remain in place which is good (it holds local leaders accountable and forces them to perform). For global nomads this part of the inheritance will be split based on their trips taken and if that cannot be done (e.g. for lack of proper record) then all of that part goes to the UN as well.
This split would also allow for a bit of well becoming tax competition in some parts while still providing a stable base and enough room for needed social changes.
A sufficiently high inheritance tax could also easily finance an inflation-adjusted and fair UBI (universal basic income) on global scale. Yes that’s enough just look at and learn from efficiently and well led states (the linked pdf is also part of the explanation on why I changed my citizenship)!
Assets and wealth keep growing and people die every year, so there’ll be a relatively stable inflow of cash to implement that adjusting UBI.
And that’s really needed and an important cornerstone of libertarianism in order for people to be truly free (in their choices) and enjoy equality of chances and opportunities while still being encouraged to perform, take risks, innovate, etc. as the incentive of merit-based riches way above average is remains there. And yes most people want to do something useful, cool and productive but what that is and what they strive for might differ widely and that’s all okay. Plus we absolutely need to find solutions to increasing automation, digitalization and changing winner-takes-it-all-economies (though one can always break new grounds and as previously outlined even behemoth can be disrupted but odds keep growing and thus more people will be left behind without that purely inheritance-tax-financed UBI).
And a UBI might even make people more entrepreneurial (take risks more easily and continue to pursue ideas even when initial success takes time) which again is good for society as is overcoming the Easterlin-Paradox.
I started with nothing (no cash, no contacts, no nothing) and made it without the UBI. I did what it took to realize my vision. I slept on trains as I couldn't afford hotels when meeting clients, commuted ultra-long distances to save cash, fought off bankruptcy and other very severe threats (political, financial and legal), took side gigs I didn’t particularly like, and even shot a porn movie when I needed food on the table while my startups were still in their infancies. I literally went through hell for quite a while and finally made it after many backlashes, pivots and iterations. I even had to quit the CEO role at my first venture (after burnout and depression induced by various brutal externalities and changing requirements) and transition to another role which suited me better to get further ahead and truly leverage my skills, talents and strengths.
Today I am doing more than okay (living on a yacht running my thriving startups) and yet I support an UBI.