Companion to NCOS Working Paper v1.0 · Reference calibration Rmax 10%, m 6.00 ($1M) · ncos.world · November 2026
Abstract. A standard critique of wealth-only fiscal architectures holds that high-income households who consume rather than accumulate will face low civic obligations, leaving a gap that a single-instrument system cannot close. This note examines the claim at the NCOS reference calibration. For all empirically prevalent saving behaviors, NCOS imposes substantial obligations on high-income households; only sustained non-accumulation produces the low-obligation corner; and that corner, while more attractive at the reference calibration than under earlier calibrations, still requires a household to give up most of the wealth it could otherwise build.
Revision note (October 2026). This edition replaces the April 2026 note, which used the earlier calibration (Rmax 12%, inflection ≈ $241M) and a capped S2. All figures below use Rmax 10%, k 1.414, m 6.00 (inflection $1M).
Inequality has two dimensions: some households have high income and low wealth, others low income and high wealth. An income tax reaches the first; a wealth tax the second. A wealth-only architecture may leave high-income, low-wealth households lightly taxed relative to a two-instrument system. The question is whether, given NCOS’s architecture, this is a practical vulnerability or a narrow boundary condition.
Net wealth W on the National Verified Ledger includes real estate, public and private equity, business interests, retirement accounts, vessels, aircraft and vehicles above threshold, art and collectibles, intellectual property and digital assets, net of verified liabilities. Transitory consumption, human capital and minor household goods do not enter W. A household that converts income into any durable asset does not escape the base; it changes only the composition of its balance sheet.
The S1 obligation is T(w) = w · R(w), with R(w) = 10% · σ(1.414(log₁₀ w − 6.00)):
| Net wealth | S1 rate | Annual S1 |
|---|---|---|
| $1.00M | 5.00% | $50,000 |
| $10M | 8.04% | $804,396 |
| $50M | 9.17% | $4.59M |
| $100M | 9.44% | $9.44M |
| $500M | 9.78% | $49M |
Three households each earn $5 million a year in labor income for ten years (ages 35–44). Income tax on wages is eliminated under NCOS; S2 is paid by the employer under the Parity Protocol, which holds the employer’s total cost per job constant. Each saves a different share of income; S1 is paid each year from the accumulated stock. For simplicity the table assumes no investment return on savings (a conservative assumption that understates wealth and S1; at a 7% return, A would reach about $21M by year 10).
| Scenario | Saving rate | Wealth end of year 1 | Wealth end of year 5 | Wealth end of year 10 | S1 in year 10 | Cumulative S1 |
|---|---|---|---|---|---|---|
| A | 50% | $2.34M | $9.87M | $16M | $1.49M | $8.97M |
| B | 25% | $1.18M | $5.06M | $8.30M | $716,095 | $4.20M |
| C | 5% | $242,521 | $1.08M | $1.85M | $118,844 | $647,132 |
Scenario C requires a household earning $5M a year to avoid durable assets almost entirely. It is taxed lightly not because the system failed but because it chose not to accumulate claims on future output.
All registered asset classes enter W at assessed value. The S1 obligation on $20M is about $1.73M whether the $20M is an equity portfolio and a home, rental real estate, or a closely held business. Composition affects liquidity — addressed by the NBUSA liquidity channel, S18 and the Payment Flexibility Protocol — not the obligation.
At the reference calibration the combined S1 and S11 rate stays below the long-run nominal market return (≈ 9.9%) up to about $69M of net wealth, so accumulated wealth keeps growing in nominal terms. In real terms (after roughly 2–3% inflation), the combined rate exceeds a 7% real return above about $2.8M, so passively invested wealth above that level slowly loses purchasing power unless deployed productively. The low-accumulation corner is therefore more attractive than under earlier calibrations.
It remains dominated for any household that values future wealth. Consuming a dollar destroys it; investing it, even above $2.8M, preserves most of it — the real decline is at most a few percent a year, and productive deployment that beats the market reverses it. The comparison is not "accumulate and pay S1" against "keep the dollar untaxed"; it is "accumulate and pay S1" against "spend the dollar and have nothing." The architecture accepts that some very high earners will consume more; that is the Return Imperative working as designed, not a revenue leak, because consumption does not shelter wealth — it eliminates it.
NCOS taxes durable claims on the economic commons, not every income flow. If future democratic deliberation under the Sigma Mandate decides a supplemental high-income instrument is warranted for the high-income, low-wealth region, the sigmoid architecture can accommodate it: S2 already applies to wages without a cap (ceiling 15%) and S21 to trade flows. NCOS does not include such a supplement because the reference calibration balances the budget without one, and because the normative case for taxing transitory consumption at high incomes, as distinct from the durable wealth it might have become, remains contested.
| Household type | Annual income | Saving rate | Wealth at year 10 | Cumulative S1 over decade |
|---|---|---|---|---|
| High accumulator | $5M | 50% | $16M | $8.97M |
| Moderate accumulator | $5M | 25% | $8.30M | $4.20M |
| Near-zero accumulator | $5M | 5% | $1.85M | $647,132 |
The high-income, low-wealth edge case is real but narrow. It describes a household that earns at high levels for years while deliberately forgoing capital formation. For empirically prevalent high-income households, NCOS operates as a serious, progressive wealth-based system.
Technical Note D1 — NCOS Working Paper v1.0 companion document · Cross-reference: Working Paper §2.3 (S&P 500 Anchor), §13.5a; Technical Note D2 · ncos.world · November 2026