 Thank you all for coming. So what I want to talk about is tax in the final frontier. What we have just heard is that the technological barriers to getting to Mars are falling quickly, and that before we know it, we may well be on Mars. What I want to talk about with you today is another hurdle that may either impede our efforts to get to Mars or at the very least sort of shape the way we do it. And of course, I'm talking about the tax system. So I want to divide my talk into three parts. The first will deal with getting to Mars. The second deals with how our current tax system would tax any profits earned on Mars or in outer space. And the third considers tax reform proposals that we might want to think about as we plan to leave Earth and get to outer space. So the first part of the talk, getting to Mars is going to be very, very, very expensive. So Apollo cost about $150 billion in today's dollars. We recently put a small satellite on a comet. That cost $2.1 billion. And the Mars one folks predict that it will cost $6 billion to put four people on Mars by 2023. And they're talking about $4 billion for each additional trip with colonists. So that raises sort of the big question, which is who's going to pay for it? It's going to cost a lot of money, whether we build one of these or one of these or even just one of those. It's going to cost a lot of money. So who pays for it? Well, if the idea here is scientific exploration and discovery, it's almost certainly going to be the government. Government's going to pay for it. But in today's constrained budget environment with sequester and all of that, it's not clear that the government's going to pony up the money. So that leaves the other way we're going to get to Mars, which is private enterprise. And private enterprise, of course, means Wall Street. And so the idea is that Wall Street is going to come together. They're going to raise the capital. And they're going to fund our going to Mars. The problem, of course, is that Wall Street just doesn't gather capital and send it off into outer space without some expectation of a return. So they're going to need some kind of a profit. So for the sake of the rest of the talk, what I want to do is assume that we go out there and we actually find, let's see here, well, we are having a problem with our clicker. Here we go. Wait a minute. Let me go back a slide. I apologize for the, well, don't you know you have a technological problem. OK, so let's assume we go out there and we find some unobtainium, right? So suddenly Wall Street says, we're going to kick in the money. And we're going to send people out to Mars. So we've got private enterprise paying for the trip to Mars. But I'm hoping that everybody in this room is either jaded or cynical enough to understand that it's going to immediately turn, that the private enterprise will immediately turn to the federal government. And there's going to be huge pressure for subsidies. All right. So I think I need some help from the people behind the screen. All right. So I guess what I will do at this point is just say next slide and hope that the wizard behind the screen will get there. So there'll be huge pressure for subsidies. And direct subsidies seem difficult in today's economic environment, right? It's just not going to happen. So next slide, the answer is going to be instead of direct subsidies, we're probably going to go with indirect subsidies. So what does indirect subsidy mean? Indirect subsidy means tax incentives. And so I'm a tax professor at ASU. And so what I want to do is I want to talk about sort of what tax incentives might look like. So the first idea is something, a tax deduction. So next slide, please. So tax deductions. We could have industry specific tax deductions, right? A space manufacturing deduction. We could have special depreciation rates for spacecraft. But the problem with tax deductions, next slide, is that they're worthless unless you have any income, right? So giving somebody a deduction makes no sense unless there's income. So that leads to what will almost certainly be a push for tax credits. Next slide, please. So we've got general tax credits, like the R&D tax credit that we'll apply today. But almost certainly there will be a push for industry specific credits. So for instance, next slide. A couple years ago, there was the Invest in Space Now Act of 2003. It didn't pass. I have a copy of it here if anybody's interested in looking at it. But already there is huge pressure to have tax credits for people who are willing to invest in outer space. And the wonderful thing about tax credits, unlike tax deductions, is that they can be valuable whether you have income or not, because they can be either refundable or transferable. In either way, the person who's building the spaceship can get money out of the tax credit in a way they can't from a tax deduction. So what I would hope that our congressmen and legislators will do and would ask people in the room to think about, though, before we start launching into tax credits, is where's the market failure? So the thing is that the whole idea behind government subsidy should be that there is a market failure, that businesses are not investing what they should invest, because generally speaking, they can't capture the full benefits. That's why we should have tax incentives. And what we hear about outer space a lot is, well, it's risky, but it turns out that risk alone doesn't justify a government subsidy. If risk alone justifies government subsidy, I'm going to Vegas when I'm done here, and I'm hoping that the government will subsidize my trip. There's got to be something else involved, not just market failure. All right. So Elon Musk famously once said, I've said I want to die in Mars just not on impact. So let's assume for the moment that he gets his way, not that he dies, but that he actually gets there. So what are we going to do on Mars? Well, there are a number of things we could be doing. So first, we could be establishing actual colonies. Second, we might be out there mining asteroids. We could instead establish our own standalone space stations, or generally be out there doing all kinds of things. But the point is that once we're out there, what are we supposed to do when we're in outer space? There's one thing. We've been told it over and over again. We're supposed to live long and prosper. And as long as we're talking about prospering, we're talking about taxes. So what I want to turn to next is the important question of, so how will the tax system actually apply to profits that are made in outer space? Because getting there is step one, making money while we're there is step two. So let's talk about the current law. So the US employs what's called a worldwide system of taxation for citizens, residents, and businesses. And at first, you might say, well, this is awesome because worldwide is limited to the earth, and therefore income earned in space is not taxable in the US. But unfortunately, that's not quite true. It's probably more accurate to describe our tax system as pangalactic. It is true that workers and businesses under current law will be subject to US taxes on all the income they earn in space. And so how are they going to earn that income? Well, they could go outside the space station and go and do some work, normal labor. They might stop by the nearest casino and make money. But the fact is that they're going to have to pay taxes on whatever earnings they have. So there is actually a provision in the tax code that says workers living abroad can exclude up to about $100,000 worth of income. So at first blush, you say this is great because I can exclude the income earned in space. But unfortunately, you have to have a tax home in a foreign country. And at least as of this writing, space does not count as a foreign country. So the two astronauts who are going up to the space station for an entire year, they're going to be out of the country for the appropriate amount of time, but they will not have a foreign country tax home, so they're going to have to owe tax on everything they earn over the next year, unfortunately for them. There is one other interesting idea out there, which is what if workers are paid in ship credits that can only be used on the ship or in outer space? Could they avoid tax because they're not getting paid in real dollars? This is actually a fascinating tax question, and it applies with things like Bitcoin. And in World of Warcraft, if you slay a dragon, do you owe tax on the 1,000 gold pieces you earn? And so actually, tax scholars are coming to grips with some of these issues. The short answer is getting paid in script that's not convertible, probably you're going to owe tax on that, too. So that's not a tax dodge that's going to work for most workers. So assuming that workers are, in fact, subject to taxes here in the US, there are a number of issues that are worth exploring. So the first one is what's the appropriate tax year? So if you're out on Mars, the tax year is 686 Earth days. If you're on Jupiter, it's 12 years. I understand that it's inappropriate to talk about Uranus in public settings like this, but it's 84 years. Think about the deferral opportunities if we adopt a non-Earth tax year. And in fact, you might not even be in orbit around the sun. So you'd have no tax year whatsoever. So it's quite clear that the tax year has to be the Earth year, but this also poses problems. So right now, we're talking about going to Mars, but what happens if we start traveling at relativistic speeds? For those of you who know anything about relativity, 100 years could pass on Earth in one year for the astronaut. So that means that that astronaut's going to have to file its taxes 100 times in one year. And that's deeply, deeply problematic. But that's off into the future. So other things, filing taxes. So those of you who follow the space program know that or might remember that John Swigert, who was on Apollo 13, had to get an extension because he found himself unexpectedly in space. And on April 15th, he said, oh my gosh, I need an extension. Now he was lucky he was out of the country, so he got an extension. But that's problematic. So how are people in outer space going to file? Now, electronic filing may alleviate some of these concerns. But do we really want our astronauts trying to figure out what to put down on line 38 of their schedule A while they're in the hard vacuum of space? That's a problem. And what happens when Mars is on the other side of the sun from the Earth and there's interference? So electronic filing will solve some problems, but not all of them. Customer support. If you think it's hard to get through to the IRS today, try it when there's a 21 minute delay or more. So other issues, collection. The IRS has seen its budget cut significantly. And if they don't have their own space fleet, it's unlikely they're going to be able to get into outer space and collect taxes. So these are all the sort of practical issues that are going to arise if our current system applies to individuals in outer space. So the good news, by the way, is if we actually find Martians on Mars, they're not subject to the US tax system. Because why? Obviously, they're non-resident aliens. And non-resident aliens are not subject to US taxes. However, if they move to the US, they will be subject to US taxes. So it may affect our interspecies relations depending on how we construct and construe our tax system. All right, so I want to talk about next corporate income. Corporations are going to get taxed in the United States on all of their earnings, wherever they earn them. And for those of you who are tax geeks, any space-related earnings they have will be considered US-sourced for foreign tax credit purposes. So what does that mean? Well, it means that people are going to engage in tax planning. So what's likely to happen? So Martian companies, once they're there, are going to organize outside the United States to avoid US taxes. US companies on Mars may try to invert. So if you've been following the news, we have a lot of US companies that are inverting. They're essentially establishing foreign domicile to avoid US taxes. Another problem that might happen is that the Martians may actually try to renounce their US citizenship to get out from under the current tax system. And that's happening today with a lot of Americans living abroad. Now, the US, again, if you've been following the news, the Treasury Department's been taking a lot of steps to try to stop inversions. There have been some executive actions. There's a lot of talk in Congress about trying to stop companies from inverting. Renouncing your citizenship, it turns out you need a consular agent or officer present. And so if the Martians are going to renounce their US citizenship, they need to do it in front of a consular officer. And if we don't have one on Mars, they may renounce and we may not accept their renunciation. So where does that lead us? Sadly, I think it leads us to this, right? Asteroids being hurled at Earth. Sort of the classic science fiction revolt. Now, we failed at SDI, right? We didn't build a space defense, but we're not completely defenseless, right? We have our resources here on Earth when asteroids get hurled at us, but Bruce here is getting long in the tooth and he may not be there forever. So how do we open the door to space exploration and protect life on Earth? The answer is obvious, it's tax reform, right? That's what we need to be talking about. So what can we do? We can do a couple of things. The first is to switch to a territorial tax system. So this is something that the Republicans are very, very much in favor of. And the idea with territorial taxation is that you end up taxing in the U.S. only income that is earned in the U.S. Now, if we make this switch, right? So under a territorial system, right? You earn income in space. You know, it's not gonna be taxable here in the U.S., except we also have a rule that says that income earned in space by U.S. persons is considered U.S. sourced income, which is subject. So we're gonna have to move to a territorial system and change the sourcing rules for outer space. There are some problems with the switch to territorial though. And the first is that underlying territorial taxation is the idea that if we don't tax it, somebody else will, right? So if we don't tax income earned in France, that's okay because the French are taxing it. Income earned in outer space at current writing is out of everybody's territorial. So in a territorial system, nobody's taxing that income. And also, to the extent that stuff is mined in outer space and brought back to Earth and sold here, it may well be deemed U.S. sourced and therefore again subject to U.S. taxation even under a territorial system. So what's the work around? What's really gonna happen? How are people gonna respond to our tax system? So companies are gonna organize their businesses to ensure that profits are earned in tax havens. It's currently happening, but here's what it looks like in outer space. And this is probably true whether we stick with our current system or move to a territorial system. So step one, mining company out in the asteroid belt gets the stuff and sells it to the transport company, title passes in outer space. Transport company ships the stuff to lunar orbit and parks it there, sells it on to a shuttle company that drops the goods probably in the Cayman Islands because it's a tax haven, right? And then ultimately, it gets sold from the Cayman Islands into the United States, but there are no profits, because all the profits have been sucked out along the way, along the chain of commerce. And so at the end of the day, there's nothing to tax here in the United States. Now, this is bad from a tax perspective, but it might actually be good from a public safety perspective, because of course, you never really know what might be hiding in the cargo hold. There we go, whoops. So what are the creative solutions, right? How do we deal with this? Well, one is to exempt all space income from tax, right? Sort of adopt and embrace what I was saying about the territorial system. This is great because you say, look, if I can invest in outer space and make a ton of money and pay no taxes, that's where I'm going to direct my capital. So the problem there, though, is that the heavens become tax havens, right? And so suddenly, before you know it, GE, Apple, et cetera, will be earning all of their profits in outer space and paying absolutely nothing in taxes. This is essentially the Cayman Islands on steroids, right? So exempting all income from outer space from tax, probably not good. The other idea, though, would be to create a separate taxing authority in space, right? And just say, look, we're going to collect taxes on income earned in space, and we're going to use the revenues to clean up the space junk in orbit or to provide transportation or whatever services or infrastructure in outer space. So that's a potential solution. So the point I'm trying to make here, and there is a serious point here, is that taxes matter, and that whether we know it or not, whether we understand it or not, the way we colonize or the space will probably be driven in some degree, maybe even to a large degree, by the tax system that we have in place. And so while we may not be heading to Mars tomorrow, we'll be heading there soon as we just heard in the last panel. And we need to be thinking seriously about what our tax system should be to facilitate the exploration of Mars and the exploitation of resources in the universe, so that we end up not with the sort of space program and enterprise that we end up with, but rather the one that we actually want to have. So once that is sort of cleared up and out of the way, what I would say is, you know, engage. So thank you. And I don't know if I have any more time, but if so, I'm happy to take questions. Nope, okay, I'm done. So thank you. Thank you.