Tax the waste, not the work

The tax debate is stuck. Wealth tax or no wealth tax. Corporate rate up or down. Progressive brackets versus flat rates. Both sides treat taxation like a weapon aimed at people instead of what it actually is: an incentive system.

My economics professor at school said it once, and I've never forgotten it: taxes exist to encourage or discourage behavior. This can be seen in the example of (trying to) correct negative externalities or push positive ones. To shape what people do. An example I always come to is that the police or financial regulator exists to keep us safe physically or financially, respectively.

We've lost that thread entirely.

The broken incentive map

Current tax systems hit three buckets: income (the most), capital gains (second), and consumption via VAT (least). The problem is obvious once you say it out loud. We tax productive behavior and barely touch the things that actually destroy value.

Income is a positive externality. Someone working creates GDP, stimulates demand, and contributes to the economy. Taxing it heavily is like fining a gardener for planting seeds.

Meanwhile, carbon emissions (roughly 36 billion tons globally per year), waste, pollution, and monopolistic extraction of rent get a pass or a slap on the wrist. The incentives are backwards.

What if we flipped it?

Start from first principles. Tax the things that destroy hope. That's Kortina's framing, and it cuts through the noise better than any policy paper I've read. In his essay on rethinking tax systems, he argues we should penalize actions that erode collective welfare and future possibility. Carbon above your allocation. Waste. Monopoly profits extracted through market dominance instead of innovation. Consumption 10x over the median (luxury tax, but make it hurt). Unproductive loans. Speculative land hoarding.

Meanwhile, zero tax on income up to the living wage. After that, a subscription model tied to what you earn. Corporate tax based on market share per product vertical. If you own 80% of search, you pay. If you're in perfect competition, you don't. Open source IP and publicly shared data? Zero tax. Hoard it for a decade? 99% rate.

The governance problem

Who decides what's productive versus destructive? Fair question, and the one that kills most ambitious reforms. You can't hand that power to a static committee or a legislature heavy with lobbyists. The categorizer becomes the loophole.

Solution: make it local and participatory. Decentralized Autonomous Organization style governance where citizens allocate tax revenue through quadratic funding. Your neighborhood decides where the money goes: education, infrastructure, climate resilience. Skin in the game through staking mechanisms (Numerai model: burn your stake if your vote led to a net negative outcome).

Yes, this requires new rails. Smart contracts for transparent enforcement. Decentralized verification of impact (Chainlink VRF for randomized audits and Proof of Reserves, maybe). Subscription tiers with two brackets: below living wage, above it. That's it. No 47-page tax code, no offshore shells, no carried interest loopholes.

The tech exists. The will doesn't.

The real cost of avoidance

Every year we keep the current system, we're subsidizing the wrong things. In the U.S. alone, carbon emissions cost an estimated $50 to $100 per ton in external damage (health, climate, infrastructure). At 5 billion tons domestically, that's $250 to $500 billion in uncaptured cost. We could tax half of that at $100 per ton and still come out ahead, even accounting for government emissions.

Meanwhile, we're discouraging income by taking 30% to 50% off the top for high earners who are often the most productive.

The incentive is to hide wealth, dodge taxes, and engineer for extraction over creation. We've built a system that rewards the wrong game. And here's the deeper problem: people and capital move. Heavy taxes in one jurisdiction just push the wealthy and their businesses to places that don't enforce these rules. Monaco. Singapore. Dubai. The race to the bottom is real, and unilateral action accelerates it.

The move

Politically, this is a long shot. The entrenched interests are too deep, the lobbying too thick. But the alternative is to keep iterating within a broken framework, tweaking rates and brackets while the foundation rots.

Start small. Network states/Charter Cities, local experiments, communities testing different models with voluntary entry (zero tax on income, heavy carbon tax, quadratic funding for public goods). Religious groups, clubs, cooperatives are already mini tax systems. Make them laboratories.

Prove it works at 1,000 people. Then 10,000. Then the model spreads.

Or keep taxing the gardener for planting seeds and wonder why nothing grows.

The question I leave you with: If you could redesign the tax system from scratch tomorrow, what's the one behavior you'd stop subsidizing?