Intellectual Property Hoarding and the Income Tax Factor

Credentialing processes are not only associated with IP supply side limits, they make it easier for governments to claim their share of income streams which accrue to "special" groups. Indeed, governments would be hard pressed to give up revenue from income taxation, in part because it's so easy to hide how income derived revenue streams take place.

Of course, while governments benefit from hidden complications in income taxation, this also holds for the special interests who gain "exceptions to the rule". All of which helps to explain, why taxation is quite problematic and convoluted. How to simplify taxes by making them more transparent, given these circumstance? For the U.S. in particular, it's a general equilibrium problem, in which groups of wildly different levels of resource capacity, are trying to make do with the same arena of redistribution strategies. In general equilibrium, each exception to the rule becomes another tax annoyance, or worse, burden.

Many governments aren't inclined to give up income taxation any time soon. But how much economic dynamism has consequently been lost to redistribution instead of economic progress, via knowledge use protectionism and related means? In an era of knowledge defined wealth, have we also given up on the conceptualization of intellectual property as non rival in nature? As John Cochrane recently noted:

Intellectual property is different from real property, in that is is nonrival. If you live in my house, I can't live in it. But if you use my equation, my blueprints, my recipe for nanoscale lubricants, or my designs for specialty oilfield equipment, that does not hamper my use of the same ideas.

Because of this feature, intellectual property is quite different in law, and in economics, than other kinds of property. Ideally, once an idea is produced, it should be distributed to everybody. The marginal cost is zero, it is nonrival, so society is best off if everyone gets to use new ideas immediately. Economic growth is the spread of better ideas, and the faster the better. Period.

Nevertheless, while IP differs from other kinds of property, the fact it costs money to produce new ideas creates a conundrum, hence Cochrane reminds his readers how "Our patent, copyright and intellectual property system" grants innovators a monopoly.

As more employment and wage structure gradually became associated with the gains of innovation in recent centuries, it became more difficult for populations to avoid what - in retrospect - must have appreared inevitable. Musing on the fact that Britain repealed its income tax in 1816, Timothy Taylor writes:

But the income tax returned to Britain in 1842, "to make up the revenue lost from tariffs as Britain shifted towards a free trade policy".

One could easily imagine that we're returning full fiscal circle for revenue opportunities, as governments take advantage of increased tariffs alongside income taxation and financial strategies in particular. Yet in spite of such revenue efforts, there's simply too many demands on government revenue, to continue fiscal policy as it now occurs, indefinitely. Before the whole system implodes, why not take a closer look at the whole array of public goods and government subsidized services, to see where and how these activities can eventually be generated via more direct means. Since today's private institutions lack the organizational ability to do so, a new institution will need to take on the challenge.

At the same time, we need to address the very real scarcity of our potential time commitments. For those whose economic time capacity is too short for societal expectations, localized versions of defined equilibrium would completely remove taxation from the realm of time scarcity. However, these non tradable sector settings would be defined so that anyone with small wages can still maintain valid roles in economic participation, group responsibilities, services generation, and local infrastructure maintenance.

The equilibrium corporation - by ensuring that time value is utilized as a commodity on symmetric terms - would not subject compensated economic time value to taxation. Further: Since time is both scarce and rival, it has often proven too tempting for individuals and groups, to limit knowledge use to those same rival terms. Nevertheless, too many institutions have resorted to this strategy in recent decades and consequently, long term growth and prosperity are at stake. Even though we can't just walk back tax complexity and knowledge use limits at a national level, fortunately it is possible to begin the process of restoring prosperity, on more localized terms.