The Non-Revenue Tax Option
May 28, 2012
By Bruce Walker
The per capita federal debt is $31,000 and growing. Much of Europe and many American states are facing practical bankruptcy. As the creditworthiness of the United States and many states is been downgraded, the cost of simply servicing the existing debt will rise. Add to these woes vast unfunded entitlements and money simply created out of thin air by the Federal Reserve System, and it is hard to see how even very aggressive Reaganomics can save us.
Government is so far in debt that simply cutting spending less is not enough and raising taxes is foolishness. We need to dramatically increase the sources of non-tax revenue and the convergence of more sophisticated technology and rising costs for natural resources makes that possible.
Anu Mittal, Director of Natural Resources and the Environment for the General Accounting Office recently testified before Congress that the oil reserves in the Green River Formation, spanning much of the Rocky Mountain Region, was greater than all the rest of the world’s reserves combined – perhaps three trillion barrels, with about half the oil on federal land with half of the oil extractable at current prices. The federal royalty by a rough estimate would be over $9 trillion.
As I pointed out last October, Harold Hamm, a billionaire who made his fortune finding where oil can be profitably extracted, believes that the federal royalties from the Bakken Fields in North Dakota and Montana could equal $18 trillion dollars, which could also pay off the national debt. This is, of course, the opposite of what Obama is doing. Oil and gas production on federal lands has dropped by 40% under the dreary marriage of environmentalism, puerile elitism and Marxism which is Obamanomics.
What is true of oil is also true of coal. The price of coal is about $40 per ton and actively promoting coal production could generate $300 billion in potential royalties to the federal government from coal mined on federal lands. West Virginians were so disgusted with the impoverishment caused to their state by Obama’s overregulation that they gave a federal convict 41% of the vote in their Democrat primary.
Ending absurd environmental overregulation and promoting the production of fossil fuels on federal lands could not only pay down the national debt without any more tax revenues, but this would also provide state governments with non-tax revenues, create many good jobs, reduce our balance of payments and keep the cost of energy for business low and stable. The money to fund these operations, along with all the risk, would come from willing private investors within our nation and from all over the world.
Aside from energy revenue, risk-taking and efficient American businessmen could begin to harvest the mineral wealth on the ocean floor. The seabed wealth includes manganese and iron (usually together in nodules) but it also includes gold, uranium, and even small diamonds suitable for industrial use.
Within the last few weeks an even more fascinating prospect of creating great wealth has emerged: Planetary Resources intends to mine the asteroids near our planet for scarce minerals. Already savvy folks are speculating that mining asteroids could produce levels of personal wealth unimagined in modern history, with a single asteroid worth $27 trillion.
America is not bound by the various redistributionist conventions which have attempted to force successful prospectors on the seabed or in space to fork over big chunks of their extracted wealth to international organizations. This means America , land of pioneers and innovators, can offer its flag to those willing to assume the risks and invest the money necessary to draw wealth from the ocean and from asteroids near us. We could offer the most modest royalty structure – although this would be more a hybrid between royalty and tax - for such seabed and space mining operations and still produce vast amounts of revenue.
These sorts of operations, involving pioneering, high-risk and high-reward, are precisely the sorts of businesses which made America the world’s economic superpower. The regeneration of that great factory of wealth would, of course, produce its own stream of tax revenue which would make paying off the national debt even more likely and the need for much government spending unnecessary.
Can modern high-tech businesses do today what wildcatters, gold miners, coal barons, and prospectors once did for America ? Absolutely: some projects will go belly up but this will not be on the taxpayer’s dime; those operations which succeed will create a flow of money into the federal treasury which will pay off the national debt and create real, tangible wealth which can give us honest hope again.