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Consumer Investment Tax
Tax the VAT and income taxes obliging government to buy shares of companies you engage with, and retire earlier. | |
It has long been true, that the standard path to wealth is through
investment, and compounding interest. However, how do you know
what to invest to?
Well, the idea is that what you buy is already descriptive of the stuff
that you need, so why not to automate its production? Welcome to
consumer
investment tax.
The investment tax works by adding an extra tax to VAT and income
taxes, requiring the government to use taxes collected to buy the
shares of companies that make the goods that you purchased or
worked for, and distribute these shares back to you.
For example, if you buy a pack of milk, a fraction of the VAT would be
used to buy you the shares of the company that made the milk. If you
get employed in a company, and you have to pay income tax, then the
income tax would be used to buy you the shares of the company for
which you worked, or equivalent publicly traded company.
This way, any decision -- either to buy something, or to work in some
company, would be a long-term investment decision. One may expect
that people would choose to buy products of higher quality, and
choose the workplaces that have better long-term prospects.
People who reach the retirement would simply be those who get the
satisfaction of their needs fully automatic (e.g., if one needs milk, the
amount of shares one owns gets the required amount of milk in
dividends).
Result - nobody is left behind without passive income.
[link]
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The government could be tasked with opening a
Robinhood account in everyone's name and regulating the
card majors to round up every purchase that would
accrue to the individual, much like some banks do now
with card purchases -- rounded to the nearest $1 and
added to a saving account. |
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The only additional benefit is that micropayments would
go via stock market investment into national debt
reduction instead of into individual savings accounts. |
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I don't have a problem with managing a VAT differently,
but I have issues with a VAT generally and how
governments regulate them more specifically. [bun] |
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Is this something that applies only in a B2C context - that
is, at the bottom of commercial food chain? |
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Tax has a way of driving behavior, I guess is my point. If a
consumer is to get an equity stake in the companies
whose products and services he or she buys, they have an
incentive to buy more of them (yay capitalism) but also to
buy more of them from the same provider (boo
disincentives to competition). On the other hand, if we
have this operating in a B2B context, that is, through the
VAT food chain, then suppliers may for example find that
being tied into a single customer arrangement (as is the
case for a lot of suppliers into the giant supermarket
chains) becomes less attractive - why would would want
to give the 600lb gorilla who squats on your chest any sort
of equity stake? |
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And the retailers themselves may be less than
enthusiastic, with price reductions in stores being at
heart financial promotions, subject to brain meltingly
complex and expensive regulation. |
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And, interestingly, this calculation could be done retroactively, by issuing
new law, that enforces the consumer ownership of enterprises that
consumers invested to before by paying for their products and services
as consumers... by monetary payments, as well as time and data
investments (like to the enterprises like Google and Facebook, which we
invest to through giving up time and data). People that don't own them
yet, could get to own them, just by issuing a new law. |
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Government interference in markets = very bad & evil. [-] |
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// incentive to buy from them // |
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I did this calculation recently: |
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An average Amazon Prime customer is spending $1300 a
year with Amazon. Let's presume that they've been doing
that for the last 10 years. |
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Ten years ago, Amazon's stock price was $87.28 (on
average) |
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Adjusted for inflation, $1300 of today's money was
actually $1,087.82. |
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That amount would buy you approximately 12.5 shares of
Amazon, which even at today's somewhat depressed price
would be valued at $23,000 and
change |
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Dividing that amount by 10, you would discover that had
you invested that money back in 2009, you made
significantly more from Amazon than you
spent on Amazon :) |
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... but would not have, in the interim, any of the goods and/or services that you purchased. |
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Ignoring the detailed "hierarchy of needs" for the moment, a typical purchase might be a coat costing USD $50, and you purchased it 5 years ago. |
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Now, if you had invested that money, you would have indeed been better off today; but for the intervening 5 years you would have been without a coat, and would have therefore been cold, wet, or possibly both, while outdoors. |
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So presumably if you hadn't bought the coat from Amazon, you would have to have obtained a coat elsewhere. |
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The best option is clearly to steal a coat, as in that way you fulfill your need without expending any of your resources, which you can then invest. The chances of detection and punishment are low; if you take a coat from a rack in a public area and are challenged, you can simply claim to have made a genuine mistake, and return it. A good ploy is to acquire a used, low quality coat superficially similar to the one you steal (from a charity shop), and leave it instead, thus reinforcing the "good faith" defence if you may be required to return the garment. |
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Saving and investing is easy if you have surplus resources. The challenge is when you are compelled to expend those resources merely to address your hierarchy of needs. |
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Since the deployment of such law, due to extra free cashflows, would
affect the supply and demand, and people's behavior, I think the proper
deployment of such law would require a full-blown economic simulation
to be performed in advance, and tested in some countries. |
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On the other hand, it's interesting that something similar to this idea
could be implemented even without the change in laws, just simply by
launching supermarkets and on-line stores, that create derivatives --
"products blended with stocks," where people buy the shares of those
companies along with consumer purchases (think, a bit like Groupon for
stocks), just because -- those extra ingredients in the products, like
<strike>sugar</strike> *stocks* make the products more delicious :) |
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I've run across folks that were trying to build a micro-
investment platform where you would be buying stocks
everytime you make a credit card purchase (based on the
company that makes the product or service). |
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The simpler govt enforced solution is to invest social
security moneys in the stock market. Most governments
do not do that because stock markets can also fall, but
pension funds do it all the time to generate sufficient
income for the pensions they've already guaranteed. |
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That's pretty much what happens in Australia, [their]; the
government mandates that a certain minimum percentage of
income be put aside for retirement with an accredited fund, with
certain tax advantages, and equity investment is a popular
option for these funds. If you don't mind the extra paperwork,
you can "self-manage" your fund (subject to constraints such as
that you can't simply consume the assets). |
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It means that less public money has to be spent on "safety net"
retirement income. |
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// In Australia ... of income be put aside for retirement // |
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[pertinax], "putting aside the income" != "putting aside the expenses" |
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It's all in what information we collect, the psychology, how much
brain-computing time/power we can allocate, and granularity of portfolio
as a response to needs. |
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When investing as part of expenses:
- you collect information about the product and service classes to invest
to
- you think, strategize what and why to buy
- you don't have to split your consumer mind from investor mind
(compartmentalization costs), so can spend more time thinking of that to
buy, how to invest.
- and YOU get to vote what to invest to, NOT your retirement fund,
which, without freedom of time, most consumers would have no time to
think in detail, especially, when they want to enjoy consuming... |
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Imagine -- if you buy milk every day, in a few years, your milk would
come free to the table, and you would be free to think what other things
of value to automate for yourself. People would move in value-chain
with much more security, and naturally focus on the things that they
need to automate next. Of course, milk may be produced by various
companies, so perhaps, the "Consumer Investment Tax" should have
some flexibility to invest into product class, not just a particular company
(for more security due to diversification), and it would be cool for
consumer to have the ability to pay more of the "Investment Tax" by
choice, for example, I can easily imagine myself wanting to invest more,
whenever I discover a product that I love, and have more free income,
by paying larger amount of the "Investment Tax" every time I buy them,
just because, I know that I want to pay nothing to be continue
consuming them. |
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Through each of us focusing narrowly on automating the satisfaction of
our
specific needs, and maximizing signal-to-noise ratios in those domains,
we could be retiring faster, and heck, in most cases we would start not
to mind companies paying dividends in products and services :) |
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By what mechanism does this scheme lead to free milk? |
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The milk isn't actually "free"; it's a return on a savings scheme. |
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A proportion of what you spend on milk is retained as an investment in the milk provider. Thus for every $1 you pay out on milk, 5¢ is retained in your "account". Once you have accumulated sufficient capital (say $10), that is converted to a $10 "share" (more likely, some form of negotiable bond or other instrument*) which pays a dividend - in milk, not money. |
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The problem with that sort of microinvestment is it takes a very long time before you start to see any meaningful return; it's calculable. |
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If you buy $1 of milk a day, that translates to 5¢ a day saving, which is $18 a year. The milk company pays a 5% annual dividend on ordinary stock; to receive your $1 of milk per day ($365/yr), you need $7300 of stock (365 x 20). To accumulate that stock, you need 405 years at 5¢/day ... |
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Don't neglect to factor in that the government will steal some of your milk and give it away free to those who choose not to save, as well as drinking it themselves or just pouring it away. So the odds aren't even that good ... |
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If you have capital to invest, an investment that returns its benefit as a commodity rather than a monetary payment might have distinct advantages for avoiding tax. |
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*but not bagpipes, or musical instruments either. |
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