September 1, 2015
In 1543, Polish astronomer Nicolaus Copernicus published his truly revolutionary work, De revolutionibus orbium coelestium.
For centuries prior, humanity had held the Ptolemaic belief that the Earth was the center of the universe.
Copernicus shattered that belief, demonstrating mathematically that it was the sun at the center of the ‘universe’, with the earth revolving around it.
Though Copernicus died soon after his book was published, his ideas sparked a radical shift, not only in humanity’s view of the world, but in how we viewed our place in the universe.
Recently the current Italian Prime Minister, Matteo Renzi proclaimed that it was time for Italy to have a “Copernican Revolution” in its tax code.
I understood the reference immediately.
Long ago, Italy’s tax code was developed based on a government-centric view of society.
This is the idea that government is the source of growth and development, while the citizens merely exist to revolve around and support it.
As such, the country’s taxation was designed to extract as much wealth as possible from the people to fund the government.
This mistaken belief has been shared by so many declining super powers throughout history.
It was the same held by the Ottoman Empire, where the bureaucrats infamously believed that people existed to support their position rather than their positions existing to support the people.
Just like the Ptolemaic model of the universe, this is not just a different way of viewing the world, it’s completely wrong.
What’s required now is a Copernican Revolution– a complete reset to start thinking that productive people, capital, and business are the real sources of wealth and progress.
Nowhere is a revolution in thinking more needed than in the Land of the Free, which has created a tax code so Byzantine and unfair that each year thousands of Americans make the gut-wrenching decision to renounce their citizenship.
The United States, for example, is the only civilized country in the world that taxes citizens who don’t even live in the country on their worldwide income.
Not even the Chinese, French, or Norwegians do that.
But that doesn’t even begin to scratch the surface.
For a country that claims to be the freest and most capitalistic, the US tax code is truly a barbarous relic.
Its 73,954 pages are completely incomprehensible and almost impossible to be fully compliant.
And as people struggle with the inscrutabilities of their tax code, they face outsized fines and even imprisonment for mistakes that would be civil or administrative matters in any other country.
Meanwhile, companies in the US are penalized with one of the highest corporate tax rates on the planet and discouraged from bringing their global profits back home.
This is absolutely nuts in an era where companies can shift jurisdictions in a heartbeat. And there’s a lot of competition out there.
In the United Kingdom, the British government has been working for years to cut corporate taxes and attract international business to its shores.
In the Baltic region countries like Estonia and Lithuania are using the simplicity of flat taxes to do the same.
Singapore and Hong Kong maintain their appeal both with low rates and constant efforts to make compliance even easier.
Even Rwanda, angling at becoming the Singapore of Africa, has made a point to streamline its tax code.
While countries around the world are waking up to what works, the US remains clueless and inert, making no real movements toward reform.
The last major revision to the US tax code was thirty years ago.
Think about that– Top Gun was dominating the box office the last time the most advanced economy in the world reformed its tax code.
Back then there was no Internet. China was unmistakably a third-world country. And US debt was ‘only’ 46% of GDP.
Things are completely different now. And it really tells you a lot that even the Italian government has realized it’s time to make a serious change.
But there’s a big problem preventing the Land of the Free from moving forward: the US government still holds the narcissistic Ptolemaic view that they are at the center of the universe.
They think that you exist to support the government, not the other way around.
This is not something that gets fixed by punching a chad on a ballot and ‘voting the bums out’.
You’d be a lot better off investing your energy and resources towards learning about all the completely legal, no-brainer ways to reduce what they take from you.
It’s like dealing with an unruly child by taking his toys away. And as this gang refuses to fix their own screwed up tax code, it’s time to take their toys away.
There are countless ways to do this, but I’ll give you a great example tomorrow.