Combine Two Powerful Investment Forces into One

Heavy-handed tax reform isn’t just an Australian phenomenon; it’s happening across virtually all debt-laden Western economies.

Whether that’s US citizens fleeing California’s wealth tax and taking shelter in neighbouring states, or British citizens departing for tax-friendly locations like Malta.

And this universal tax grab seems to align precisely with record government indebtedness.

But don’t think for a second that the impacts are isolated to just the uber-wealthy billionaire class:

According to the Wall Street Journal, Britain lost 35,000 residents with an individual net worth of £1 million or more since 2024, a loss blamed squarely on the country’s tax grab.

That represents a colossal 7% decline in the number of millionaires in the country in just two years.

Clearly, an important threshold is being crossed throughout the West: broad-reaching tax regimes moving down the wealth pipeline.

And once trends get underway, they’re almost impossible to reverse.  

Here in Australia, there are plenty of countries across Asia and beyond that would welcome our ‘tax refugees’ with open arms.

But, for the rest of us who aren’t as mobile, this is the system we have.

So, how do we work with it? 

Well, here’s one idea I shared with my paid readership group recently:

Focus on Income

As we know, long-term wealth building is being preyed upon by unchecked government spending, which needs to carve out new ways to generate revenue.

And there’s no ceiling on how high taxes on assets could go, perhaps the full termination of capital gains tax discounts?

Who knows.

Yet, when it comes to income taxes, the story could be a whole lot different.

You see, income taxes have a very definite ceiling.

If taxes on salaries breach a certain limit, people stop working, creating an immediate impact on government revenue.

It’s a concept known as the Laffer Curve, an idea popularised by economist Arthur Laffer back in 1974.

Anyway, the theory illustrates the relationship between tax rates and the total revenue governments collect.

Beyond a certain threshold, higher rates disincentivise work, reduce labour supply, and encourage legal avoidance or illegal evasion, shrinking the overall tax base to the point that total government revenue actually drops!

Bottom line: at a certain point, raising income taxes becomes a self-defeating exercise for the government, and that’s why taxes on assets will remain the primary destination for future raids.

So, how does that change 
the investment game?

Given that governments are targeting assets rather than income, we could be moving into an era that focuses less on long-term wealth accumulation…

And one that’s far more directed towards income generation.

The era of ‘tax the wealthy’ means predominantly assets, not income.

So, how do we shift our investments from a wealth-accumulation strategy to one focused more on income? 

The obvious angle is dividends, stocks that pay out regular cash to shareholders.

These types of companies may not offer the same capital growth potential, but they offer tax-advantaged income, especially in Australia, with the added benefit of franking credits.

In fact, it’s possible we could see this become a self-reinforcing idea: as more investors pour into income-generating assets, it could actually raise the premium on these stocks. 

So, why not combine potentially two powerful investment forces into one?

The hunt for income and combining that with real asset investments, like commodities?

In other words, adding stocks across the resource sector that pay you to hold them.

That could include miners, royalty companies, energy producers, and companies that service these sectors.

That’s what we’re doing at my paid service; in fact, we’re sending out a new recommendation tomorrow that aligns with that exact theme.

You can find out more here.