I want to start today by talking about a specific
piece of mail. It usually shows up once a year,
right? It's in one of those, you know, generic
window envelopes. The one you don't want to open.
The one you absolutely do not want to open. And
depending on where you live or, you know, what
the market is doing, opening it either ruins
your morning or it ruins your entire month. It's
the property tax bill. The dreaded annual reckoning.
Right. But here's the thing that I noticed while
I was going through all this source material
for this deep dive. We spend... virtually all
of our energy, all of our outrage, complaining
about the tax. The rate. The actual check we
have to write. We argue about the tax rate. We
argue about the mayor's budget. We argue about
whether the trash is getting picked up on time
for what we're paying. It's all the downstream
effects. Exactly. But we almost never, and I
mean never, stop to look at the number that actually
dictates the size of that check in the first
place. We ignore the value that's assigned to
the house itself. Which is, I mean, it's a fundamental
mistake because you're right. The tax rate is
just a multiplier. It's a variable. It can change
year to year. The assessment, that specific dollar
value assigned to your property, that's the bedrock.
That's the foundation. It is the raw data upon
which the entire state apparatus is built. If
that number is wrong, everything that follows
it is wrong too. But I think the reason we ignore
it or the reason I've ignored it is because we
assume it's just... reality. You know, if I asked
you what my house is worth, I'd probably go look
on Zillow or I'd look at what my neighbor's house
just sold for. Right. You look for market signals.
Yeah. And I just assume the government kind of
scrapes that same data, runs a program and sends
me a bill. I really didn't realize there was
this massive like bureaucratic machinery specifically
designed just to generate that one number. If
only you were that simple and that efficient.
No, that right there is the core misconception
we have to get past. Market value is what a The
willing buyer is willing to pay you on a given
Tuesday. That's it. Assessed value is. It's an
administrative opinion. That's the best way to
think about it. It is a judgment call that is
made by a human being or increasingly an algorithm
that has to adhere to very specific and often
very archaic. But it's not just a simple question
of what is this worth? It is what is this worth
for the specific purpose of keeping the local
government funded and running? Yeah. And those
can be two very different numbers. Administrative
opinion is a very, very polite way of saying
a guess. An educated guess you would hope, ideally.
But yes, at the end of the day, it's an estimate.
And that really is our mission for this deep
dive today. We're not here to debate. Tax policy,
you know, other taxes should be high or low.
That's a different show. Right. We're going to
unpack the black box of valuation. We're going
to try and figure out who these people are with
the clipboards, why the math is so intentionally
confusing. And I mean, it is full of some wild
jargon. Well, we're going to get to that. And
how this same mechanism of, like you said, guessing
value applies not just to your front porch, but
to everything up to and including global corporate
profit shifting. And it really does feel like
a black box. The source material you pulled for
this is this. It's a massive overview of tax
assessment. It covers everything from like the
tiniest details of US local laws to, you know,
these global tax havens. And what struck me is
that the word assessment itself. It sounds like
the most boring word in the English language.
It sounds like homework. It really does. It does.
It sounds like something you have to do, not
something that's done to you. But what I'm realizing
is that it's actually this incredibly high stakes
game. It is the moment the government looks at
your little slice of the world and puts a price
tag on it. That's it. And that one decision dictates
the flow of so much money in our society. So
it's the bridge. Precisely. Without an assessment.
The entire system is paralyzed. You can have
a tax rate. You can have a government that's
desperate for cash. But until someone, somewhere,
assigns a specific number to a piece of property
or a car or a transaction, you cannot generate
revenue. It's the trigger. It starts the whole
chain reaction. OK, so let's start there. Let's
start with the hook, the human element. We all
know we have to pay. It's one of the guarantees
in life. But who actually decides how much my
slice of the world is worth? Because in my head,
it's just the government. you know, this faceless
entity. It's rarely faceless when you dig in.
Yeah. In the U .S. context, it is usually a very
specific person. They're called the assessor
or more formally, the tax assessor. OK, but the
sources we looked at, they highlight that this
isn't just some civil servant in a back office
stamping forms. This is a weirdly powerful role.
It is an incredibly powerful and frankly, undervalued
role in the public eye. This one official is
charged with determining the value of each and
every taxable property in their jurisdiction.
Each one. Every single one. So think about the
scope of that. In a major city, that could be
hundreds of thousands of individual parcels.
In a rural county, it might be thousands of acres
of diverse farmland, forests, residential lots.
And this one office has to put a number on all
of it and say, this is worth X and that over
there is worth Y. And here's the part when I
read this in the notes that I found genuinely
baffling. I had to read it twice. In the United
States, this person is often elected. Yes. In
many, many jurisdictions, they are an elected
official. That seems absolutely insane to me.
You are literally voting for the person whose
only job, their entire reason for existing, is
to calculate how much money you owe the government.
It creates a fascinating political dynamic, doesn't
it? It creates a massive conflict of interest.
I mean, can you imagine running a campaign on
the slogan, vote for me, I promise to accurately
value your home at the current, you know, totally
inflated market price, which will thereby double
your taxes. You'd lose in a landslide. No one
would ever vote for you. Of course not. Exactly.
So what you end up with is this inherent tension.
On one hand, the assessor has a statutory duty,
a legal requirement to be accurate and fair,
to follow the market wherever it goes. They have
to tell the truth, basically. They have to tell
the truth about value. Yeah. But on the other
hand, they are often politically accountable
to the very voters who, you know, understandably
want their assessments and therefore their taxes
to stay as low as possible. They're stuck. It
puts the assessor in this position where they
either have to be the bearer of bad news every
few years or they risk underfunding the schools
and the fire departments and everything else.
It is a genuine tightrope walk. And to make it
even more confusing for the average person, they
don't even use the same titles everywhere. I
got really stuck on this one term in the notes
you flagged it regarding Vermont, this role called
a lister. The lister. Yes. It's a great, great
term. It sounds like someone who's in charge
of organizing a grocery run for the town. Oh,
don't worry. Bob's the town lister. He'll get
the milk. It does. It has that kind of folksy
small town feel. Yeah. And it is pretty unique
to Vermont and, you know, some other parts of
New England. So is it just a quirky name for
an assessor or is the job itself actually different?
Well, today the job is effectively the same.
Their function is to determine property value
for tax purposes. But the etymology of the word.
You know, the history of it is actually really
important and tells you a lot about how this
all started. Okay. It goes back to the concept
of the grand list. The grand list. What's that?
In the colonial era, and you can trace this all
the way back to England, you had to literally
list your property. You would go to the town
official and declare on a list the number of
cows you owned, the acres of arable land, the
number of silver spoons, the number of clocks
in your house. Wait, wait. So it wasn't just
like... My farm as a whole is worth 500 pounds.
It was a line by line itemized inventory of your
wealth. Exactly. A detailed inventory. And the
lister was the person responsible for compiling
that inventory from everyone in town. They were
the ones checking your list against reality,
making sure you didn't, you know, forget to mention
a few cows. Wow. So modern assessment is usually
what we call ad valorem, which is just Latin
for according to value. It's based on the total
value of the property as a single unit. But that
Lister title is this amazing holdover from a
time when the tax... was based on the specific
things themselves. It feels incredibly invasive
when you put it that way. Someone from the government
coming around to literally count your spoons.
It was. And in many ways, the modern version
still feels that way to a lot of people. When
a property appraiser in Florida, that's the title
they use there, or an assessor in Ohio knocks
on your door, they might not be counting your
spoons, but they're absolutely checking to see
if you finished that basement you took out a
permit for. Right. They're looking for improvements.
They're looking to see. if you added a deck or
a pool. They are in effect updating the inventory
of the jurisdiction to ensure that everyone is
paying their fair share based on the current
state of their property. So it doesn't matter
if you call them a lister in Vermont, a property
appraiser in Florida, or just a tax assessor
everywhere else. The function is basically the
same. They are the ones who provide the data.
They are the gatekeepers of the math. They provide
that base number. And this actually brings us
to the core definition of the term itself. The
source material makes a really important distinction
between assessment as an action and assessment
as, you know, the bill you get. Right. Because
I've definitely heard people say, oh, I got my
assessment in the mail. And they mean the bill,
the tax liability. Colloquially, yes. That's
very common. It often refers to the specific
amount of money you owe, the debt. But for our
purposes, strictly speaking, and for this deep
dive, assessment is the act of valuation. It
is the process of determining the value and sometimes
the use of a piece of property. You said use
of property. Why does the use matter? Isn't a
one -acre lot a one -acre lot? Oh, the usage
changes the value dramatically. Think about it.
Is that one acre plot of land a working farm
that's zoned for agriculture? Okay. Or is it
a commercially zoned lot in the middle of a city
that's about to become a shopping center? The
dirt might be the same. But the tax implications
are wildly different. The assessor has to make
that determination, that classification, too.
So it's not just about running a calculator.
It's also a judgment on what the land is, what
its purpose is. Correct. Yeah. And while we're
focusing a lot on real estate, because, you know,
that's the most common touchpoint for most people,
the source notes this applies to personal property,
too. What do you mean by that? Well, in many
states, businesses have to pay an annual tax
on their tangible assets. Their computers, their
desks, their machinery, all that has to be assessed.
In some places, you pay an annual property tax
on your car based on its current value. That
requires an assessment every single year. It's
just, it's everywhere. Okay, I want to pause
on the math here because I think this is where
most people's eyes just glaze over. And I have
a suspicion that that's at least partly by design.
The source material mentions the mill rate. The
mill rate. It is the source of more public confusion
than almost anything else in local government
finance. It sounds complicated, but it's actually
not once you understand why it exists. Well,
that's my question. Most taxes I pay are just
straightforward percentages. Sales tax is 7%.
My income tax is, you know, roughly 20 or 30%.
Why on earth does property tax use mills? Why
can't they just say the property tax is 2 %?
It comes down to how the budget is constructed.
It's a completely different philosophy, like
we said earlier. Think of it this way. Sales
tax is passive. The state sets the rate at, say,
7%, and then however much stuff you buy, that's
how much revenue they get. If the economy crashes
and you stop buying things, the state gets less
money. Okay, so their revenue just floats with
the economy. It goes up and down. Right. But
property tax, especially for a town or a city,
it works completely backward. A town government
generally doesn't start the year by saying, what
rate should we charge? They don't. What do they
start with? They start by saying, how much money
do we need exactly to keep the lights on? Oh,
so they start with the final bill. They start
with the budget. Let's say a town needs exactly
$1 million this year. That million dollars pays
the teachers, it pays the roads, it runs the
police station. It's a fixed cost. Okay, a million
dollars. The assessor then looks at the whole
town and says, okay, the total value of all the
houses, all the businesses, all the taxable property
in this town adds up to $100 million. They now
have a problem to solve. They have to find a
rate that extracts exactly $1 million from that
$100 million base. Which would be 1%. Mathematically,
yes, it's 1%. But in the world of municipal finance,
they express that using the Latin word millesimum,
which just means thousandth. So a mill is $1
of tax for every $1 ,000 of assessed value. Okay,
so 1 % is $10 for every thousand. So it's 10
mils. Exactly, 10 mils. It still feels like an
extra layer of unnecessary jargon just to obscure
the true cost from people. I think there's some
truth to that, whether it's intentional or not.
It also creates a buffer. It allows for tiny
fractional adjustments, like going from 10 .1
mils to 10 .2 mils, that can add up to a lot
of money across a whole city without looking
like a massive percentage hike on paper. A psychological
trick. It can be. But here is the real catch,
and the source highlights this as a major warning.
You cannot understand your tax bill by looking
at the mill rate alone. You have to look at something
called the assessment ratio. This was the part
that made me feel like I was actively being tricked,
the assessment ratio. It is the hidden variable
in the whole equation. Okay, so break this down.
In a normal, rational world, if my house has
a market value of, say, $500 ,000, the assessed
value on my tax bill should be $500 ,000. Right.
That is what's called 100 % valuation. And some
jurisdictions do that. It's transparent. It's
easy to understand. What you see is what you
get. But the source says many other areas use
a ratio. Explain how that works. So another jurisdiction
might have a policy written into law. that the
assessed value is only, say, 50 % of the market
value. So if my house is really worth $500 ,000,
the town just pretends it's only worth $250 ,000
for tax purposes. Yes, that's exactly what they
do. Why? I mean, that sounds nice. It sounds
like I'm getting a deal. It feels nice, and that's
the point. It is almost entirely psychological.
You open that assessment notice. You see a value
that's way lower than what you paid for the house.
And your first thought is, phew, the taxman didn't
catch me. I'm winning. You feel relief. But I'm
not actually winning, am I? Not at all. Because
remember, the town still needs that $1 million
budget. That number is fixed. Yeah. If they artificially
cut everyone's assessment in half across the
board, what do they have to do to the mill rate
to get the same amount of money? They have to
double it. They have to double it. It's a shell
game. The final check you write is often exactly
the same. That is so devious. It's psychological
taxation. It works. It keeps the taxpayer passive.
Because if you feel like you've already won on
the valuation side of things, you're much less
likely to go through the hassle of appealing
it. Wow. OK, but let's talk about that. What
if the assessor is actually wrong, not just using
a ratio, but legitimately wrong about the physical
house? Like they have on their records that I
have a finished basement, but it's actually just
a dirt pit full of spiders. Then you have a problem
with the core data. And this leads to the taxpayer's
only real recourse, the appeal. And the source
material really emphasizes that this is a legal
right. This isn't just, you know, complaining.
It absolutely is. Yeah. Because an assessment
is legally defined as an estimate. The statutes
in most places acknowledge that it can be flawed.
But, and this is a very, very big but, you cannot
just walk into the assessor's office and complain
that your taxes are too high. I can't afford
this. It's not a valid basis for an appeal. It
is not. That is a grievance you might have with
the budget committee or the city council who
sets the spending. An appeal is strictly and
only about the value. You have to prove that
the assessor's number is wrong. So how does a
regular person even begin to do that? I mean,
they're the expert with the clipboard. I'm just
a homeowner. You have to become an expert on
your own house. You have to generate your own
data. The source notes that the very first step
for any taxpayer is to make their own independent
estimate of the market value. So I have to do
their job for them. In a way, yes. You need to
find comparable houses in your neighborhood that
have sold recently. You need to take photos of
your dirt pit basement. You need to get repair
estimates if your roof is failing. You are effectively
building a legal case to say you, the town, think
this house is worth X, but here is my evidence
that the market says it is actually worth Y.
It sounds like an enormous amount of work for
the average person. It is. And the system is
designed that way, to a degree. The burden of
proof is almost always on the tax buyer. The
assessor's value is presumed to be correct until
you, the homeowner, can prove otherwise with
overwhelming evidence. Of course it is. And the
source mentioned that this becomes really, really
critical during these periods called revaluations.
Revaluation is the moment of truth or the moment
of pain. Depending on your perspective. See,
most towns, it's just too expensive and time
consuming to update every single house every
single year. So they just leave the values the
same for a while. Exactly. They might go five,
seven, even 10 years without systematically changing
the values on the books. So your official assessment
stays flat while the real estate market is going
completely crazy. Precisely. You might be sitting
there with an assessment that's based on 2015
prices, while in the real world, your house value
has doubled since then. You've been getting a
deal, in a sense. Then the town announces a revaluation.
They hire a firm. They update every single property
to current market prices. And suddenly your assessment
doubles overnight. It can, yes. And your tax
bill, even if the mill rate goes down a bit to
compensate. Could still skyrocket. That revaluation
period is the window where you have to pay the
most attention. OK. That's when the most errors
happen because they're doing it in bulk. And
that's when you really need to check their math.
I feel like most people just get that letter,
see the huge new number, get angry for a day
and then just toss it in a drawer and hope it
goes away. I think you're right. But what you're
saying is that that letter is really an opening
bid in a negotiation. That is a very healthy
and accurate way to look at it. It is a proposed
value. You have the. legal right to counter propose
as long as you play by the rules and bring the
evidence. OK, so we've covered the house. We've
covered the local stuff, the listers and the
mill rates and the appeals. But the source material
for this deep dive, it goes way, way broader
than that. It has this incredible taxonomy, this
categorization of taxation. And it turns out
you can assess pretty much anything on the planet.
It really is a broad field. We've been talking
almost exclusively about ad valorem taxes. Again,
that's just taxes based on value, like property
tax. But the source lists so many others, and
they really reveal what a society prioritizes
and, you know, what it wants to discourage. Let's
run through a few of these because they paint
such a fascinating picture of the world. First
up, the obvious ones. The sin taxes. The classic
example. These are excise taxes, usually on things
like alcohol, tobacco, sugary drinks, gambling.
And the assessment here isn't normally based
on like the value of that specific bottle of
whiskey, right? It's not an ad valorem. Right.
It's often what's called a specific or unit tax.
It's assessed based on the volume per liter of
alcohol or it's a flat rate per pack of cigarettes.
But the intent behind the tax is totally different.
How so? With property tax, the primary goal is
just revenue. We need money to run the town.
With a syntax, the goal is partly revenue, but
it's largely about social engineering. We are
consciously assessing a cost to your bad behavior
in the hopes that it will discourage you from
doing it. We're trying to make it too expensive
to smoke. Essentially, yes. Then you have the
environmental taxes, the sourceless things like
carbon taxes, landfill taxes, and this interesting
one called severance taxes. The severance tax
is a really interesting concept. And it has nothing
to do with firing someone. It refers to the act
of severing a natural resource from the earth.
Oh, like mining coal or drilling for oil. Exactly.
The state or the nation is effectively saying
this natural wealth. the oil in the ground, the
timber in the forest, it belongs collectively
to the land, to the people. If you're going to
take it away, if you're going to sever it, we
are going to assess a value on that removal.
and tax you for it. Wow. That's a really philosophical
way to view a tax. You're taking something irreplaceable
from the planet, so we assess a cost to that
action. It's a way of monetizing the depletion
of a finite natural resource. And then, of course,
you have the huge category of consumption taxes.
Sales tax, value -added tax, or VAT, which is
common in Europe, hotel taxes, tourist taxes.
It's just relentless. It feels like everywhere
money moves or value is created someone is standing
there with a clipboard ready to assess a slice
of it. That is the fundamental nature of the
modern state. But what I found so fascinating
is that the source also points out that this
isn't modern at all. The deepest roots of assessment
go back to religious duty and basic community
survival. Yes, I saw this, the religious assessments.
The source listed things like the church tax,
the tithe, the temple tax. And then these very
specific historical terms like the jizya zakat
or the fiskus judaicus. Okay, you've got to break
those down for us. What was the jizya? The jizya
was a per capita tax, a head tax, that was levied
on non -Muslim subjects who were permanently
residing in Muslim lands under Islamic law. It
was a form of assessment based on your status
and in exchange for protection from the state.
It wasn't about your house. It was about your
person and your religion. And Zakat is different.
Very different. Zakat is one of the five pillars
of Islam. It's a form of obligatory almsgiving
that's treated as a religious duty or a tax.
It's often assessed on a person's accumulated
wealth above a certain minimum. The funds are
then used to help the poor and needy. So the
idea of looking at someone's standing in society
or their total wealth and assessing a contribution
based on that, it's ancient. It is absolutely
fundamental to any form of organized human society.
It doesn't matter if it's a secular government
paving roads or a religious community supporting
its poor. The mechanism is the same. You have
to have a system for the assessment of capacity
to pay. You cannot build a civilization without
a way to pool resources, and you can't pool resources
without first assessing who has what. The source
also mentioned a specific school of thought called
Georgist taxes or land value taxation. This felt
like a really specific philosophical argument
embedded in the material that challenges the
way we do things right now. Oh, this is a huge
and perennially debated topic in economic circles.
Henry George was a 19th century American political
economist. His central idea was that people should
be able to own the value they produce themselves,
like the house they build or the business they
run. Okay, that makes sense. But that the economic
value that is derived purely from land, its location,
the natural resources under it, the value created
by the surrounding community, that that value
should belong equally to all members of society.
So if I'm understanding this right, the idea
is to tax the land itself, but not the building
that's on it. Exactly. That's the core of it.
Think about our current system for a minute.
If you buy a rundown vacant lot in a city, and
you invest your money to build a beautiful, productive
apartment complex on it, what happens to your
assessment? It goes way up. My taxes go way up.
Right. The system, as it's currently designed,
effectively punishes you for improving the neighborhood.
It incentivizes you to leave that lot vacant
or dilapidated to keep your taxes low. This is
what creates slumlords, or those weird empty
lots you see in prime downtown areas. That makes
perfect sense. I improve my property, I make
the neighborhood better, and the assessor comes
and punishes me with a higher bill. The Georgist
argument is, let's flip that entirely. Let's
assess the land at its highest and best potential
value, regardless of what's currently on it.
So if you own a prime corner lot in downtown
Manhattan, you should pay a massive tax on the
value of that land, whether you have a skyscraper
there or a gravel parking lot. So it forces you
to build something useful. It forces development.
It forces the efficient use of land. It encourages
development and discourages speculation. It's
a completely different way of thinking about
assessment, not just as a tool to collect cash,
but as a tool to actively shape the physical
form of a city. It's just amazing how much philosophy
is hidden inside these boring sounding numbers.
We think it's just math, but it's actually a
series of decisions about what we as a society
choose to value and what we choose to punish.
It really is. It's moral philosophy disguised
as arithmetic. But of course, wherever you have
rules and numbers, you have people who are trying
to break them or at least, you know, bend them
until they snap. And this brings us to the section
of the source material that read more like a
spy novel than an economics paper. The dark side
of assessment. Avoidance and evasion. The source
draws a pretty sharp line between those two terms.
What's the fundamental difference? It is a critical
legal line, though it's also a very thin moral
one for many people. Tax avoidance is legal.
It is using the existing rules of the system,
as written, to minimize your tax bill. Give me
an example of that. Taking a deduction for your
mortgage interest is tax avoidance. Putting money
into a 401k to defer taxes is tax avoidance.
It's legal tax planning. Okay. And tax evasion?
Evasion is illegal. It is fraud. It is actively
lying. It is hiding assets you're supposed to
report, underreporting your income, or just flat
out refusing to pay what the law says you owe.
The source calls it a cat and mouse game. And
the names of the avoidance strategies, I mean,
they sound like cocktails at some kind of spy
bar in Geneva. They really do. They have a certain
flair. We have the double Irish, the Dutch sandwich,
the single malt. And they are all these fascinatingly
complex and often perfectly legal structures
designed to do one thing. Explain the Dutch sandwich.
I'm getting hungry just saying the name, but
I have a strong feeling it's not about food.
No, it's not. It's about moving money around
the globe to avoid assessment. These strategies
are all related to a concept that tax authorities
call BEPS. That's B -E -P -S. It stands for Base
Erosion and Profit Shifting. BPS. That sounds
like a disease. For national treasuries, it is
a disease. The basic idea is that large multinational
companies operate in many, many countries. And
they want their profits to be assessed for taxes
in the country that has the lowest possible tax
rate. Right. So if I'm a tech company and I make
a billion dollars selling phones in France where
the corporate taxes are high, I want to find
a way to pretend I actually made that money in.
A tax haven. or what's called an offshore financial
center, a place like Bermuda or the Cayman Islands,
where the corporate tax rate might be close to
zero. But how do you actually move the money?
I mean, if I sell the phone in Paris, the cash
is in Paris. You can't just wire it to Bermuda
and say it's not French profit anymore, can you?
Not directly. That's where the Dutch sandwich
and these other schemes come in. They often rely
on something intangible. intellectual property,
IP. So patents, logos, algorithms, that kind
of thing. Things that have immense value, but
no physical location. So the value isn't the
physical phone you sold in Paris. The argument
goes, the real value is the patent on the phone
or the software running it. Ah, I think I see
where this is going. So company A, the French
subsidiary, pays a huge royalty fee to company
B. which is a shell company located in, say,
the Netherlands, for the right to use the company's
logo and patents. And that royalty payment is
a business expense in France, so it reduces their
taxable profit there. Exactly. It moves the profit
out of high -tax France and into the lower -tax
Netherlands. Then, through a series of other
shell companies involving maybe an Irish subsidiary,
that's the sandwich, the money finally gets moved
to a zero -tax haven like Bermuda. So at the
end of the day, the billion dollars in profit
is never assessed in France where it was earned,
and it's barely assessed in the Netherlands.
It lands in a place where the assessment is zero.
Effectively, yes. They are gaming the system
to choose where their value is assessed. It's
the ultimate form of assessment shopping. That
is incredibly clever and also incredibly frustrating
for the countries like France that are losing
out on all that revenue. It is the ultimate manipulation
of the concept of assessment. And notice the
fundamental difference here. You, as a homeowner,
cannot move your house. Right. My house is stuck
in the ground. It's physically here. The lister
can come to your door and count your spoons.
The assessor can come measure your front porch.
You are, for tax purposes, a sitting duck. Your
assets are immobile and easy to assess. But capital
isn't. But capital, intellectual property, corporate
profits, those things are fluid. They are electrons.
They can fly around the world at the speed of
light to find the jurisdiction with the lowest
assessment and the lowest tax rate. That is such
a powerful and infuriating image. The immobile
house versus the hypermobile capital. It feels
completely unfair. It highlights a massive structural
disparity in the global tax system. The burden
of assessment, and therefore taxation, falls
most heavily on the things that cannot move.
which are labor and real estate, while the things
that can move often find ways to escape assessment
entirely. And the source mentions the specific
places that facilitate this whole system. Tax
havens, corporate havens, Ireland, Panama, Switzerland
are all named. Right. These are the jurisdictions
that have built their economies in part on offering
these low tax or no tax environments to attract
that mobile capital. And the source also mentions
the moments where this whole shadowy system was
kind of cracked open. The Paradise Papers, the
Panama Papers and the Luxembourg leaks. These
were massive data leaks from law firms and banks.
Right. Massive leaks of millions of documents,
and they exposed in excruciating detail how the
world's wealthiest individuals and largest corporations
were using these incredibly complex assessment
loopholes and offshore structures to hide what
turned out to be trillions of dollars in wealth.
Trillions. It showed that while your local assessor
is meticulously measuring your back porch to
see if it adds $500 to your property value. Billions
and billions are slipping through the cracks
at the global level because the value is being
intentionally hidden inside anonymous shell companies.
It really does put that lister in Vermont into
a much broader and kind of sadder. perspective.
It does. It just shows you the scale of the game.
It's played at the local level and the global
level, but with very different rules for different
players. But this leads perfectly into the final
section of our deep dive, because this isn't
just something that's happening in the dark anymore.
People are studying this. There are detectives
on the case. The research and advocacy world.
Yes. The source lists some real heavy hitters
in academia who have dedicated their careers
to this. People like Gabriel Zikman, Mihir Adi
Desai, and Joel Slemrod. Let's talk about Gabriel
Zucman for a second. I feel like I've seen his
name popping up in headlines a lot recently.
Gabriel Zucman has effectively become the world's
leading detective of hidden wealth. His research
is groundbreaking because he's trying to assess.
all the money that isn't being assessed. He uses
these very clever methods looking at anomalies
in global financial data to estimate exactly
how much wealth is being hidden in tax havens.
So he's essentially trying to do the job of a
global tax assessor where one doesn't actually
exist. That is a fantastic way to put it. He
is trying to create the grand list for the entire
global economy, trying to find... all the missing
spoons, so to speak. And then alongside the academics,
you have the advocacy groups. And it's really
interesting to see the different angles they
take on the same problem. The sourceless groups
like the Tax Justice Network or TJN and Oxfam.
These groups often come at it from a fair share
perspective. Their argument is that the current
systems of assessment are fundamentally broken
and unjust because they allow all that fluid
capital to escape, which leaves a heavier burden
on regular working people and small businesses.
they advocate for closing the loopholes, like
the Dutch sandwich. And on the other side of
the spectrum? Well, it's not always a clear other
side, but you have groups like the Tax Foundation.
They tend to focus more on tax policy analysis
from an economic efficiency standpoint. So they
might look at that Dutch sandwich and say, Well,
the reason companies go through all this trouble
is because corporate tax rates are too high and
too complex in the first place. If we simplify
the tax code to lower the rates, we'd create
a more competitive environment and they wouldn't
need to hide the money. So different diagnoses
and different prescriptions for the exact same
problem. Exactly. One side says the rules are
too weak. The other says the rules are too burdensome.
And just to wrap up the sheer scope of this topic,
the source has this massive, almost absurd list
of countries at the end. It literally goes from
Albania to Zimbabwe. It's a great reminder that
while the specific jargon changes, you know,
maybe you don't have a lister in Zimbabwe or
a mill rate in Albania. The fundamental challenge
is completely universal. Every single society
needs resources. And every society needs a system
to decide who contributes and how much. It really
is a global human experience. We all live under
the clipboard in one way or another. We absolutely
do. So let's try and bring this deep dive in
for a landing. We have covered a lot of ground
here. We started with a local official, you know,
measuring a basement in a suburb somewhere. And
we ended with these complex global profit shifting
schemes that involve patents and anonymous shell
companies. It's a pretty big journey for a topic
that just starts with a single. boring looking
bill in the mail. It really is. So if we had
to synthesize all of this, what is the single
biggest takeaway? Why does understanding this
word assessment actually matter to the average
person? For me, the key takeaway is that assessment
is the bridge. It is the crucial and often invisible
bridge between the world of private wealth and
the world of public function. The bridge. I like
that. It's the mechanism that turns value. which
is an abstract, floaty concept into revenue,
which is concrete action. It's the process that
turns the market value of your house into a schoolteacher's
salary. It turns a corporate transaction into
a newly paved road. It's the translation layer
of society's operating system. Yes. That's a
great way to put it. And it's a layer that we
ignore at our own peril. Because if we don't
understand how that value is calculated, we can
never really understand how our society is funded.
or who is truly paying for it. That leads perfectly
into our final provocative thought. We always
like to leave the listener with something to
chew on, something that might make them look
at that boring envelope a little bit differently
next year. Here's what I want you to think about.
We've established throughout this whole conversation
that assessment is, at its very core, an opinion.
It is an estimate. It doesn't matter if it's
the Lister in Vermont looking at your barn. or
a massive computer algorithm valuing a corporate
merger or a government geologist estimating the
value of a mineral deposit in the ground. It's
all subjective at some level. It is inherently
subjective. So my question is this. If assessment
is really just an estimate of value, an opinion
that we've all agreed to treat as fact. How much
of our global economy is actually based on these
subjective decisions made by people with clipboards?
We treat these numbers as hard facts. My house
is worth X. This company is worth Y. But they
are just assessments. They are, in a sense, administrative
fictions that we all agree to believe in to make
the system work. And with that in mind, when
was the last time you actually checked the math
on your own bill? Because if you aren't checking
the assessment, you are letting someone else's
opinion dictate what your slice of the world
is worth. And there's a pretty good chance they
might be wrong. That is both a terrifying and
a very empowering thought. Check the math, folks.
Always. Always check the math. Thanks for diving
in with us. We'll see you next time.