In this episode of Tax Notes Talk, Kevin Brown, an associate with Morrison & Foerster LLP, discusses his proposal for taxing moon-based activity.
This transcript has been edited for length and clarity.
David D. Stewart: Welcome to the podcast. I'm David Stewart, editor in chief of Tax Notes Today International. This week: One small step for tax.
As they say, "Shoot for the moon. Even if you miss you'll land among the stars." My guest this week seems to have taken that a bit to heart. He recently published an article exploring the idea for moon-based, or should I say moonbase, activity.
Here to talk about it is Kevin Brown, an associate with Morrison & Foerster LLP's tax group in Boston. Kevin, welcome to the podcast.
Kevin Brown: Hi. Thanks for having me.
David D. Stewart: Before we dig into the possibility and the mechanics of the moon tax, could you give us a bit of background about yourself and how you became interested in the subject?
Kevin Brown: Sure. Before entering the legal field, I was a high school English teacher for seven or eight years. I have a deep love for language and for literature, so law school seemed like an obvious choice once I wanted to expand my career opportunities.
I got to law school and a friend of mine who was already out of law school and practicing tax said, "Take a federal income tax class. You won't regret it. At the very worst, you'll learn some interesting stuff that you can talk about every time April 15 rolls around." And so I took the class and I absolutely fell in love with federal income taxation. It was so interesting, so much more philosophical and epistemological than I thought it could ever be.
The way that I ended up getting into moon tax was my first year of law school a lot of my former colleagues and my friends would say, "What are you interested in practicing after law school?" As a mere 1L I had no idea. I was just dipping my feet into all these different 1L curricular buckets. As a joke I started just saying, "Oh, I'm going to be doing moon law." That would kind of throw them off.
Eventually the joke got around enough that people really started asking, "Is that a thing? Is moon law real?" That prompted me to actually look a little bit into the types of laws and treaties governing outer space activity. There's not a ton, but there's enough to get a nice conversation going. The more that I looked into it, the more fascinated I became.
When it came time, I was thinking about writing some articles and the moon tax just seems like an edgy and simple enough idea that people seem to always want to hear more about it. That's why I decided to start with the moon tax.
David D. Stewart: Every time I talk to somebody about their journey into taxation, it always starts with, "I took federal personal income tax, and then immediately just jumped into every tax subject possible."
Kevin Brown: I was an English teacher before coming to law school, and what I ended up realizing is that the practice of tax involved so much close reading, parsing of language, and placing certain words in their proper context given the application that you're investigating. It came full circle from my teaching of literature where I'd be parsing a poem or teaching Shakespeare. I find that a lot of the skills that I actually had in my career in education were super applicable to the practice of tax.
David D. Stewart: Turning back to the moon tax specifically, it's been nearly 50 years since humans have been on the moon. Why is this an issue that we should be considering today?
Kevin Brown: I think that we're in a period right now where it really only seems like a matter of time — and I don't think it's going to be a ton of time — until people are going up to the moon and putting stuff down on top of it. It could be as part of their business. It could be different governments around the world setting up operations there on a semipermanent basis to conduct research or to aid in the refueling of ships going out on longer missions.
I think the lunar space is going to be something that we're going to actually see a lot of activity commercially and governmentally in the next two decades probably. What are the tax implications of that?
David D. Stewart: Can you explain your proposal for what a moon tax might look for? Who's going to be paying it and that sort of thing?
Kevin Brown: I think that the first time that we try this — if we try this — we should make it simple and easy to administer, collect, and report. That's why I landed on using an excise tax on use of the lunar surface.
The U.S. Geological Survey has already mapped the lunar surface. If you split it up into a grid, you can make a box on the grid any size you want. One square kilometer is a nice size. If you put something on grid number 18568, you are charged a certain annual levy for your right to use that part of the moon. If you're there on the moon in a moon unit, you have to pay a nominal fee to be there.
David D. Stewart: As you were considering options for taxing lunar activity, did you look into a profit model? Or is that what you're trying to simplify, and that's why you proposed an excise tax?
Kevin Brown: I think that an excise tax definitely helps with the simplicity aspect. I think that if you were going for a different model, you could make it income-based. You could peg it to the value of things that you produce through your occupation of the moon.
Let's say that you put a machine up there, and the machine pops out widgets. Those widgets would have some sort of fair market value. You could say the tax is a certain percentage of the output value of whatever you're producing on the moon. But I think that that has its own complications.
It's very important that the tax doesn't present any sort of substantial obstacle financially. That's why I think an excise tax at a flat rate per moon unit just seems like the simplest choice.
David D. Stewart: Let's say the base is occupying one of these moon units. How would it apply? How would you determine they're using additional space beyond where the base immediately is?
Kevin Brown: That's a great question. I think that whatever organization was administering and enforcing this tax is going to put some satellites up there that would swirl around the moon and periodically take photos or video of what's going on in the lunar surface. One model is that you could leave it totally up to whatever it's your governmental organization that does this.
But I also think it would be cool if you opened the feeds or the bank of photos up to the general public to the same kind of extent that anyone could log onto Google Maps and really get fairly up-to-date picture of anywhere on earth. You can do the same with the moon.
You could provide some sort of very minimal, but economic incentive to people who are interested and who want to help with enforcement. Maybe in exchange for monitoring what's going on in the moon and logging it in a publicly accessible database, a lunar oversight authority will make a micro donation to a charity of your choice or something like that.
David D. Stewart: Now let's explore this oversight authority idea. You would think that governments would get together and create some body to administer this task?
Kevin Brown: That's the theory. I'm basing most of this off of the law of the sea, which we get from international agreement called the Convention on the Law of the Sea of the United Nations, or UNCLOS. Over 100 governments around the world already have gotten together to figure out how to administer use of the deep seabed. It lies so far off of any nation's coast that really no one can claim total sovereignty over it practically because it's just too deep and too far away.
Governments have already done this in the context of the sea. I don't think it's much of a stretch to say that they would come together to do it where the moon or other celestial objects are concerned.
David D. Stewart: What would this entity then end up doing with the revenues that they collect?
Kevin Brown: Right. While I was writing this article, we were in the midst of the pandemic and I was reading the news about how the U.S. government and other governments that are funding the World Health Organization were pulling funding. I think the WHO itself was scrambling to mitigate all of the different problems that the pandemic raised that it usually would have addressed under less stressful circumstances.
I thought, "Wouldn't it be great if the world had its own coffers for problems that really no individual nation can substantively address on its own? Wouldn't it be great if the world could dispense to organizations that have demonstrated excellence at solving those kinds of problems?" To me that made a lot of sense.
I don't think the money has to absolutely be spent any which way. But if you're drawing this revenue from an asset like the moon, which truly belongs to no single sovereign, then it belongs to everybody and everybody should benefit from whatever revenues collected.
David D. Stewart: What do you see as the prospects for governments actually coming together and doing something like this? Do you think that this model of the convention on the seas is something that is reproducible?
Kevin Brown: I'm always optimistic that the more advanced our global civilization gets, the more willing countries will be to collaborate in the common interest. I really do hope that it is something we see.
Over 50 years ago there were a lot of treaties about use of the moon, Antarctica, and more recently, the deep seabed, in which countries have come together. They expressed that there is a common interest vested in all mankind in using these spaces responsibly as global actors. I think that there's a lot of potential and precedent for a situation like this.
David D. Stewart: Now your idea deals specifically with the moon, but can we deal with other celestial bodies in the same way? I'm assuming that there's going to be asteroid mining in the future. Is that something where this idea would work as well?
Kevin Brown: I think so. Originally the paper that I published with Tax Notes International had a much broader scope, but I realized it was just too large, so I narrowed it just to the moon.
I think that there already have been several attempts to commercially mine asteroids. There's one case from Texas where someone tried to assert his rights to minerals recovered from an asteroid. It was ultimately dismissed, but this is something people are trying to do.
Beyond asteroids, I think that there has been an increased interest in Mars and potentially sending people there one day. It's so far away you'd need to have some sort of quasi-permanent settlement there.
We should think not only about concrete objects, but also positions within space. There are different grades of orbit above the Earth, and people are trying to put things up there like space hotels nowadays. I think that the same concept of, "We're going to let you be there if you want, but we're going to tax your right to be there because there's a finite amount of space."
David D. Stewart: Now the excise tax concept covers specific occupation of the moon. Would you anticipate that they would need to establish additional taxes for perhaps an extractive industry?
Kevin Brown: Like I said before, I think that in the initial stages of any sort of tax on people doing things on the moon should not impede any certain industry. Right now it's kind of an industrial Wild West where there's a lot of opportunity, and the more taxes you start piling on top of things, the less enticing it will be to go do business up on the moon.
I think that in order not to discourage responsible commercial activity up on the moon, piling too many taxes right away up on the moon might discourage commercial activity.
David D. Stewart: Down here on Earth we are already having a fair amount of difficulty establishing tax rules, especially around the digital economy. We have a bunch of jurisdictions trying to get together and figure out how to make things work. Is there really an appetite for adding a new version of tax that we now have to negotiate on a multilateral basis?
Kevin Brown: I think so. I think that there are two strong foundations for why a tax like this should exist. I think one is that in international law there's this principle called the common heritage of humankind. It states that there are places beyond the reach of any single nation state that because no one state can govern — or should govern — the only real way to monitor activity would be for many, many states to come together and agree. I think that's the situation that we're in with the moon.
Even though this common heritage of mankind principle is kind of wishy-washy, and no one's quite sure exactly what it means, it's already embedded in the Antarctic treaty, the law of the sea, and outer space. I think that there is this principle in international law that would support a moon tax because if it is the common heritage of mankind, then the benefit of it must flow to all mankind. How do you do that? It seems to me like a tax is the easiest way. By making the tax simple hopefully you won't be creating more problems that outweigh the benefits you're getting.
I think the other argument is that the moon — just like Antarctica and our deep sea floor — is an incredibly valuable natural resource that we need to take steps to preserve. If we let anyone who wants to go up there leave their moon trash all over the lunar surface, it would create a huge environmental liability. Everybody for generations would suffer.
I think an excise tax on occupation would say, "Listen, if you go up there and you make a big mess, and you're occupying a bunch of moon units with your trash, you have an ongoing liability to repay humankind for your littering."
David D. Stewart: Kevin, this is a fascinating idea. Thank you very much for being here.
Kevin Brown: Thanks a lot. It's been a pleasure and I really enjoyed talking to you, Dave.