An Alternative To Taxes

Here’s an interesting idea for Liz Truss and Jeremy Hunt, but you better hurry. Time is short.

We are approaching the tax season, and living both in the UK and the US, we find ourselves in the rather unenviable position of having to pay taxes in both and then work out who gets what.

In short, the tax system is incredibly complicated.

And this week we had the pleasure of watching the Torys debate whether to take 40% of what we earned or 45%. In the meantime, in the US, between city, state and federal taxes, the government creams off about 50%.

There is no escape. There are however, some high priced accountants who will recommend a number of ‘tax efficiencies’ or ‘tax shelters’ to try and avoid as much taxation as possible.

Looked at objectively, the concept of taxation at this level is about the same as it was in Medieval Europe. The King simply came by and took as much of your crops or your animals as he wanted. There were not tax attorneys then, but other than that, not much has changed.

Instead of looking at tax efficiencies or tax shelters, maybe we should instead look at the problem from an entirely different perspective. Why tax at all?

The point of taxation is to give the government the money it needs to pay the bills on social services, on defense, on various and sundry other essential projects, and in the UK for health care. This costs a lot, and where will the money come from, except from you. Go in, cleave off what you need and call it a day.

We just sold an apartment in New York, and there was a % tax on that sale on top of all the other taxes. Then, when we used what was left to buy a house here in the UK, there was another tax, called Stamp Duty that also had to be paid. Tax tax tax tax tax. It’s endless.

But maybe there is another way to raise the resources necessary aside from taxation. Taxation strikes me as, well, Medieval.

Instead of taxing and taking and spending, which seems rather primitive, why not make the government the biggest investment bank in the world. That is, instead of taking money away from those who make it, why not have the government also make money?

What do I mean?

I am part of a group now trying to raise money to start a new business. That is how every new business starts — by raising money from investors. When the business is a success, the investors profit, sometimes enormously. Billions were made by those who put only a relatively small amount of money into start ups like Amazon or Facebook.

But suppose, instead of having to seek money from private high net worth individuals or venture capitalists, suppose the investor of the first resource was the government. Suppose that instead of taking money out of the system, the government put money into it by becoming an investor in new companies, new products and new ideas. Suppose that the government took equity positions on those new companies and as they grew the wealth of the government would grow concurrently. Isn’t that a better and far more productive source of revenue for government expenses than deadening taxation?

In the UK, the current Conservative government (current as of this moment, who know for how long) claims that they want to supercharge and grow the economy, but they are caught on the horns of a dillema. If they cut taxes to grow the economy, they add to the deficit and damage the economy.

Fine. Become an investor in new start ups in Britain. Take an equity position. Make the government the biggest VC or hedge fund in the world. Invest and grow a thousand new companies in the UK; 10,000. Most of them will not work out, but some will, and a few will become the next Microsoft or Tesla or Apple.

Do that, and we’re in the 21st century instead of the 12th, which is where we are now when it comes to taxation.