Tax credit infrastructure - proposal feedback
Hi Everyone,
Sharing Afloat's proposal draft. We'd really appreciate your feedback.
Summary: Afloat enables the fractional buying and selling of tax credits that historically have been inefficient, opaque and centralized. It has already processed tax credits ranging in orders from $2K -$70k USD.
It was built on a private Ethereum clone but due to Polkadot technology and identity management, it’s applying for a grant to migrate.
Afloat founder: Louise Reed
"Tax credits promote individual rather than governmental choice of how money will be spent to accomplish public policy objectives (Weidenbaum 1974). As opposed to most governmental subsidies, a tax credit is given directly to the citizen after the desired behavior is accomplished. Tax credits may serve as incentives in areas where direct expenditure by the government would be difficult (Hyatt 1977). Tax credits are perceived as a "costless form of subsidy" because the government merely refrains from collecting taxes from eligible individuals rather than redistributing funds."[1]
Tax credits, as a socioeconomic tool, are very similar to concepts found in the Substrate, Polkadot, Kusama (dotsama) ecosystem, where the tokenomics are decided by participants through a governance process designed to maximize the benefit for the network. For example, the network will
- "mint or burn DOTs in order to reward the nodes that run the consensus protocol, to fund the treasury, to control the inflation rate, etc."[2],
- "[ensure] DOTs also play a role in slashing protocols designed to disincentivize attacks or adversarial behaviors,"
- "let DOT holders express their opinion in governance decisions", and
- "decide which projects are allocated a parachain slot".
Afloat stakeholders and the Dotsama ecosystem embrace similar socioeconomic tools and align well in spirit and in practice.
A common tax credit is for land preservation. The inhabitants of a geographic area recognize that their shared quality of life may be positively impacted if more land was preserved rather than developed. If the owner of land property in that area agrees to preserve land, they may be eligible to receive a tax credit in an amount associated to the value of the land property.
A tax credit only reduces the tax liability for the holder of the tax credit, and they expire at various durations. A common scenario is for a taxpayer to earn tax credits well beyond their tax liability over the effective lifespan of a credit. To maintain the original intended benefit of the tax credit, they are allowed to be sold to other tax payers in that have a corresponding compatible tax liability.
Afloat is an application for connectivity and liquidity. Tax payers may originate credits using the platform, and a special type of NFT is minted with any files encrypted and attached . They may request appraisal and verification of their paperwork, forms, or other evidentiary paperwork. Afloat has a number of known tax credit experts (e.g. accountants, CPAs, attorneys), and upon accepting the appraisal request, are given access to the encrypted materials. The appraiser may provide a judgement and/or a value attached to the credit.
Here is the detailed proposal.
Open Sourced components
- Substrate pallet(s) for a "gated marketplace for graded assets"
- Substrate pallet(s) for "NFT Candle auctions" to support expiration-configured pricing
- Support for encrypted files attached to NFTs
[1] https://www.jstor.org/stable/2488893
[2] https://research.web3.foundation/en/latest/polkadot/overview/2-token-economics.html
Comments (2)
Hello! Thank you for sharing this proposal, looks interesting. I am wondering where this application will be deployed? Its your plan to deploy this on top of a a smart contract parachain? to have your own chain? any other plan? Depending on this, the treasury might be able to provide funding for the migration or not. Also, if the application already lives on-chain but on Ethereum: how do you plan the migration to Polkadot ecosystem? If this is planned to live in a smart contracts chain then it is understood, but if not, let us know how you plan to organise the migration. Furthermore, what is "fruniques pallets"? is this unique pallet, meaning the certificates will be hold as NFTs? Is M1 entirely an event ops and mgmt to onboard people? could you share some numbers regarding the usage of your application while in Ethereum? Thanks!
I had no idea tax credits could be bought or sold. Here’s a personal/more concrete example as to why I can relate, that may be helpful to others: I recently purchased an old home (early 1900s) that is in a registered historical district and is eligible for a historic revitalization tax credit. Old homes can be less expensive to purchase, but are expensive to maintain. For example, I had to have a chimney lined with stainless steel to prevent the brick from crumbling further and falling into the house. Although I had to pay for the repair work, I was effectively reimbursed 20 percent through the tax credit. The two-fold benefit is that (1) I paid less for the necessary repairs and (2) 100 years from now folks will be able to enjoy what will then be 200 year old architecture. Where I live tax credits are not transferable, but this is interesting nonetheless. If I understand correctly, one of the positive side effects of having a tax credit market, is that those who might not otherwise be inclined to participate have an incentive to do so and that benefit could flow to the common good. So the business model for Afloat is to create and operate the market leveraging Polkadot technology and raising awareness of what can be accomplished with the Polkadot ecosystem. Speaking as a random community member, this sounds like a yes vote for me… Is there an existing web-based interface that current customers use, that communicates with Ethereum “backend” infrastructure? Is this mostly a matter of swapping out the existing Ethereum “backend” with a Kilt based counterpart or more involved than that?