Could a government make so much money from investments they can stop charging taxes?

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The Politicus
Nov 19, 2022 02:34 PM 0 Answers
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(Not sure if this should rather be on the Economics SE)

Inspired by the following paragraph from this article.

Singapore — one of only 11 countries in the world with the coveted AAA sovereign rating — is also in a league of its own. For starters, it does not have any net government debt. This is because there are laws that prevent its government from spending more than what it earns annually unless there are extraordinary circumstances, such as the Covid-19 pandemic. The prudence in financial management has allowed the accumulation of sizeable reserves, on top of what is reported by its central bank, which uses currency strength to hedge against inflation.

The little debt service charges (less than 0.5% of revenue in 2020) Singapore incurs are more than made up for by its investment returns, which make up around one-fifth of its government’s annual income, giving the city state flexibility to remain a low-tax regime.

Singapore is able to lower taxes because their investments are sufficient to provide 20% of the government's revenue. But if one can get 20% of revenue from investments, then it also might be possible to get 100% of the government budget from investments. At that point, one would not need taxes anymore.

Is hitting 100% of revenue from investments actually possible? If yes, has any country ever managed or is attempting to hit that benchmark? If it is not possible, why not?

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  • November 19, 2022