A Tax By Any Other Name: Equity Stakes, Tariffs, Government Debt

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The US government has made headlines over the past year by taking an equity stake in Intel Corporation, along with 4 other companies. At the same, the US government has also levied significant tariffs, and continues to issue new debt (the current total debt to GDP is 125%).

So how are all of these topics connected? They’re all a form of tax.

The Intel Stake

One of the more unique recent government policies was the announcement in October by the US government that it is taking a 10% equity stake in the computer chip company Intel Corporation. It has been framed as a ‘fair’ offset for the subsidies the company receives through government programs.

On first glance, it might sound reasonable – the US taxpayer subsidizes Intel (note: a subsidy is a negative tax) and, in return, the US taxpayer gets 10% equity. But in reality, it’s probably an inefficient way of taxation. Let’s look into how societies fund themselves.

Government Budgets and How We Fund Ourselves

Although governments are often presented as a separate entity from society, it is ultimately “us” that control the government. From a big picture perspective, “we” (via the government) decide that we should provide ourselves with certain goods and services – like education, healthcare, defense.

To fund these goods/services, we collect money from ourselves, done most commonly via taxes (but also via issuing bonds – a promise to pay back the person that gave the government money).

“We” can choose exactly how to do this – we can set tax rates and tax types (income taxes, corporate taxes, congestion taxes, etc). In theory, “we” are completely free to do as “we” choose with regards to what and who “we” tax. Anything that raises money for “us” (the government) can be interpreted as a tax.

Taking the Intel Equity Stake

Thus, taking a 10% stake in Intel by the government is a tax. What type of tax? It’s simply a wealth tax