Beam Me Up, Scotty!
Fifty-five years ago, NBC debuted a new series that producer Gene Rodenberry called “a Western in outer space — a so-called Wagon Train to the stars.” Star Trek starred a journeyman Canadian actor named William Shatner as Captain James T. Kirk, helming a crew of comically diverse stereotypes (the Russian! The Scot! The Vulcan!) aboard the Starship Enterprise. Shatner went on to play the defining role of his career throughout the series’ three-season run, as well as an animated spinoff and seven feature films.
Today, Shatner is still going strong at age 90, famous mostly for being William Shatner. And last week, he got to boldly go where few men have gone before, strapping on a space suit and joining three other passengers to the edge of space. He didn’t use a transporter, or reach warp speed nine, or reach the Romulan neutral zone. He did it on a Blue Origin rocket owned by lifelong Trekkie Jeff Bezos; he topped out at just 2,235 miles per hour; and he climbed just 66.5 miles above the west Texas plain. But that was enough for him to describe it as “the most profound experience I can imagine.”
Celebrity has its privileges. In Shatner’s case, he paid for his flight with publicity. But two of his fellow passengers, both tech entrepreneurs, paid for theirs with cash. Blue Origin claims to have booked $100 million in ticket sales. Richard Branson’s competing company, Virgin Galactic, has sold 600 tickets to space at roughly $200,000 each. And Elon Musk’s SpaceX, which launched a Tesla into orbit, charges an estimated $50 million to ferry passengers all the way to the International Space Station.
Right now, those tickets are just defraying the cost of shooting people into space. But someone, someday, will finally turn a profit on space travel. (Will it happen before or after someone, someday, finally turns a profit on ride-sharing?) At that point, the sci-fi fans at the IRS will perk up and start paying attention.
Taxing individual astronauts is easy. Here in the U.S., you pay on all your income wherever you earn it. Now, you can exclude up to $107,600 of foreign income from your tax return, and you can claim a credit for foreign taxes you pay. But those rules assume you’re paying tax somewhere else. In 2008, the Tax Court ruled that a married couple couldn’t exclude wages they earned in Antarctica. Why? Because it isn’t a “country,” so there’s no government, so there’s no tax. While that may sound like the ultimate libertarian paradise (minus, y’know, the weather), the same precedent applies to astronauts earning income in space.
Taxing space businesses like Blue Origin presents tougher challenges. Corporations are infamous for shifting income to places like Bermuda or Ireland with lower rates than our own 21%. What happens when corporations argue the nexus of their income is space, where the marginal tax rate is lower than the force of gravity?
The real losers here are likely to be the states, which have no reach beyond their own borders. Elon Musk has already announced he’s moving himself and Tesla to Texas to avoid California’s maximum 13.3% tax. Who doubts he would move to Mars if he thought it could mean paying even less?
Someday, one of you reading this article is going to visit space. We don’t know when and we don’t know where, and you’ll probably have to wait a while for it. But all of you can make smarter choices with your business and taxes. That’s where we come in. So beam yourself up to our office and let’s talk. It may not be as profound as traveling to space — but we’re pretty sure you’ll appreciate the results!
Roland C. Manuel, Enrolled Agent