How about a flat tax on repatriated income?

Last week, Microsoft disclosed in SEC filings that it is keeping just over 92 billion USD in earnings overseas to avoid just under $30 billion in U.S. taxes. This might be shocking except for the fact that it is common knowledge that other companies legally keep up to $2 trillion in capital overseas for exactly the same reason:  Congress simply hasn’t given them a reason not to.

What is legal and rational for an international corporation is not necessarily right and moral for a country. Within Microsoft’s yawn of a headline lies a potential path to both move the needle on inequality while paying for our most pressing fiscal demands in entitlement and defense spending here at home.

{mosads}What if President Obama opened a 12-month window where corporate cash repatriated back to the U.S. would be taxed at a flat 15 percent. In other words: bring those dollars home and pay taxes now, and all future earnings from those dollars, while invested within the United States in capital expenditures, research and development, or new hires, remain tax exempt. 

This in and of itself is a new idea, but what we can do with the 15 percent flat tax is where the real opportunity lies. But first, a little history.

Our lives are largely luck. Any success any of us may have in life, or the companies we start, is only minimally due to our own efforts. Instead, the random place and epoch of birth, the culture we live in, and our merely having survived long enough to actually accomplish anything are far more relevant factors.

This begs a more complex question: what is the sum total of over 200 years of American institution building and the subsequent accumulation of intellectual and social capital via the free market system worth?

The answer should be the price I pay as an individual should be based on the incremental value that lottery ticket life randomly gives me. If I am first lucky at birth and then work hard later in life, I just might be able to create spectacular wealth from the precious tapestry of institutions and values that we call America.

The problem future generations will face is that those being born “lucky” will be an increasingly smaller subset of the population as inequality increases. Someone who is born smart but not very lucky will face worse neonatal care, poorer early nutrition, higher education costs via-a-vis the compound interests costs of student loans, delayed adulthood because the unlucky have to pay all off this off, and consequently they will have less time to accumulate capital of their own.

The born unlucky will have fewer tools and even less time to innovate and create. Here is where the tapestry begins to fray: the United States needs to support more early development and low cost life-long learning in order to close the inequality gap all while maintaining our other critical fiscal obligations – entitlement programs as well as defense and, more critically, intelligence spending.

The difference between myself and a fiscal conservative is that I recognize the massive value, and consequentially the massive debt owed, to the mosaic of values and institutions that allows me to capitalize on whatever native talents I may have in the most productive way possible. If the lottery of life gives me a winning ticket that I am able to maximize because of where and when I was born, then I owe more— potentially much more, in fact.

Despite the structural challenges America faces in an aging workforce and aging infrastructure, we seem to be poised on the precipice of a stunning century of innovation in genetic engineering, clean water and energy technologies, material sciences, nanotechnology, and artificial intelligence. America is where the hope and application of those technologies will be born, and the future looks very bright.

What if the first shareholder of each new LLC and C corp in America working in the advanced technology that could bring us back from the brink was the United States?

What if it were as easy to give 5 percent equity in my new startup at incorporation as it is to give $3 to the presidential election fund on my 1040?

By opening a window to a corporate Roth IRA, for lack of a better label, the US could potentially have tens of billions in unexpected income. With this windfall, the President could also simultaneously name a venture capital dream team and hand over the checkbook.

Anyone at incorporation giving an equity slice to the U.S. treasury would be eligible, but not guaranteed, to receive backing, but more importantly, the dream team could use the cash to proactively acquire small stakes in companies that a team member, Mark Cuban for example, thinks could have global impact in health, energy, and food production.

The obvious rebuttal is if Mark Cuban sees a world changing idea, getting funding won’t be a problem. Funding, however, isn’t the point. By acquiring thousands of equity slivers in startups across the country either by purchase or donation at incorporation, the United States stands to exit just like any other investor—but her implicit investment has been made every year since 1776 and has gone mis-priced for far too long.

Entrepreneurs and venture capital wizards can either pay up to 5 percent on equity now or 90 percent on income in the not too distant future if we do nothing. We could also see carried interest taxed as ordinary income in the year received. The options are endless and brutally punitive. The Piketty pitchforks are coming out, rightfully so, but this is a way to avoid that outcome.

If the sum total of American values, innovation, and culture is the greatest startup incubator the world has ever known, then we have an obligation to start paying in equity and not just on income. There simply isn’t enough taxable net income to keep all the plates spinning, feed the bond market, meet our entitlement obligations as well as close the inequality gap.

By recognizing the costs entrepreneurs have incurred aren’t only the ones on the income statement, we begin to acknowledge the massive debt owed to this unique crucible of opportunity we call home. It is time we begin paying it back.

Our starting points, our lives, and ultimately our individual outcomes are more random than any of us would like to admit. Only to a very small degree do we make our own luck. For those of us born or working in America, we have hit the lottery and it’s time to pony up. For me personally, I’m just getting started –but I have a few big ideas and I know I am very, very lucky to be here.

Cooper is a Truman National Security Fellow and a Term Member at the Council on Foreign Relations. Views expressed are his own.