A Hybrid Approach for a Federal Sovereign Wealth Fund

While this author has long called for a United States Wealth Fund to be started by excise taxes on mineral wealth extracted from federal lands, President Donald Trump’s use of executive power to invest in private industry also points a way for the funding of a United States Federal Sovereign Wealth Fund. Senator Bernie Sanders has long championed a sovereign wealth fund by placing a tax on AI in order to fund the needs of the American people living in an AI world. All three methods have come up against each other, and with each pandering to their supporters, nothing is getting done. Yet everyone agrees that a federal sovereign wealth fund would be good for the United States as a whole. Instead of just one way to fund a federal sovereign wealth fund, a combination of all three might make a federal sovereign wealth fund politically possible. 

A US Federal Sovereign Wealth Fund could be funded by a federal mineral excise tax and private industry investments, featuring direct startup funding for private companies and deferred investor payouts until the fund turns a profit. [1] 

Structure and Funding 

· Mineral Excise Tax: A new extraction fee applied to all oil, gas, and hard rock mining on federal public lands and waters.

· Increase The Current Excise Tax: Increase the current excise tax of 12.5% that the United States government currently charges private companies to at least 50%. 

· Private Investment: Corporate and institutional capital pooled into the fund, secured by a priority profit-sharing structure. 

· Deferred Return on Investment: Private investors receive no dividends or payouts until the total portfolio net income exceeds operational costs and baseline capital reserves. 

Projected Revenue Impact under a 50% Excise Tax 

A 50% excise tax on federal mineral extraction radically changes the fund’s financial scale. 

· Annual Revenue Surge: Total production value on US federal lands regularly exceeds $70 billion annually. 

· New Base Capital: A 50% tax yields $35 billion to $50 billion annually.  • Economic Footprint: While a 50% excise tax rate could reduce private extraction activity on federal lands, this probability is low. As an example, the Norwegian Tax Administration, through the Petroleum Tax Office, levies a 78% extraction excise tax on private oil companies extracting oil wealth off of the Norwegian coast.

Investment Strategy 

– Direct Private Equity: Taking non-controlling stakes in high-growth, privately held American companies in critical sectors like clean energy, biotechnology, advanced manufacturing, and the mining of minerals on the Moon, such as Helium-3. 

· Strategic Scaling: Providing domestic capital to bridge the gap between venture capital funding and public market readiness (IPO). 

· National Interest Focus: Prioritizing supply chain security and domestic technology retention alongside financial returns. 

Governance and Operations 

· Independent Management: Run by an independent board of professional asset managers, shielded from short-term political influence. 

· Profit Milestone: Reinvesting 100% of early revenues into portfolio expansion until the profitability threshold triggers public dividends or debt retirement. 

Allocate Capital to Commercial Space Ventures 

· A strategic allocation of the fund targets high-growth privately held aerospace firms to secure domestic supply chains and dominate the space economy.

Optimize the Space Tech Portfolio 

· The fund distributes capital across distinct tiers of maturity to balance high-risk innovation with proven execution: 

• Heavy Launch Infrastructure: Anchor large-scale capital into market leaders like SpaceX to accelerate Starship deployment, reduce payload-to-orbit costs, and expand global satellite constellations. [1, 2] 

· Lunar Resource Extraction: Invest early in pioneers like Interlune and Lunar Helium-3 Mining (LH3M) to secure first-mover advantages in harvesting Helium 3, water ice, and rare earth metals from the lunar surface. [1] 

· In-Space Manufacturing: Finance automated microgravity factories, orbital refueling depots, and commercial space stations to establish permanent domestic infrastructure. [1] 

· Deep Space Logistics: Fund next-generation propulsion systems, asteroid prospecting ventures, and space debris mitigation technologies to protect orbital assets. 

Structure the Direct Investment Terms 

To protect public capital while fostering rapid commercial growth, the fund deploys a dual-class investment mechanism: 

· Non-Voting and Voting Equity: The fund would take substantial equity stakes without demanding government board seats, ensuring founders maintain

operational agility. While the political arm of the federal government would not have voting rights, the fund’s investment board would have voting rights to protect the financial interests of the American people. 

· Warrants and Rights: Secure anti-dilution rights and preemption warrants to maintain equity percentages during subsequent private funding rounds.  · Dual-Use Milestones: Tie capital disbursement to specific technical achievements, such as successful orbital insertions or lunar landings.  · Public Access Upside: Require a guaranteed allocation of shares at a discounted rate if the space venture transitions to an initial public offering (IPO). 

Mitigate High-Risk Space Capital 

· Extended Horizons: Set 15-to-20-year capital lock-up periods to match the ultra-long R&D lifecycles of deep-space extraction and exploration. 

· Cross-Subsidization: Use steady cash flows from the federal mineral excise tax to absorb the high failure rates of early-stage aerospace hardware. 

Immediately Invest in Commonwealth Fusion Systems 

Arguments for Reallocating Funds to Commonwealth Fusion Systems 

– Speed to Market: Private companies target commercial power generation by the early 2030s, whereas massive international public projects face long bureaucratic and engineering delays.

· High Private Confidence: Commonwealth Fusion Systems has raised roughly $3 billion from heavy hitters like Bill Gates and Nvidia, proving strong market validation. 

– Targeted Innovation: Focusing public money via milestone programs directly rewards domestic companies achieving net energy and magnet milestones rather than paying into overseas construction overhead. 

Arguments for Maintaining ITER Contributions 

· Global Data Access: The U.S. funds a minor share (roughly 9%) of ITER yet gains access to 100% of the cooperative global scientific research and plasma database. 

· Foundational Science: ITER tests large-scale burning plasma physics and tritium breeding tech that benefits the entire global fusion ecosystem, public and private alike. 

· International Treaties: Abruptly dropping out breaks binding multi-nation agreements, which can isolate U.S. scientists from future international mega-science projects. 

Core Mechanics of a Market-Led Fusion Strategy 

· Milestone Funding: The government uses public-private partnerships, like the DOE’s Milestone-Based Fusion Development Program, paying companies only when they hit specific technical targets.

· Capital Efficiency: Venture capital, private equity, and corporate investors absorb the financial risk, ensuring funds go to projects with the highest commercial viability. 

· Technology Agnostic: Instead of committing to one design (like ITER’s low-field tokamak), the market allows competing concepts—such as high-field tokamaks, stellarators, and laser fusion—to race for the best economic outcome. 

· Rapid Iteration: Private firms operate outside of slow, multinational bureaucratic frameworks, allowing them to build, test, and fail quickly to accelerate deployment. 

Structural Trade-offs to Consider 

– Proprietary Silos: Private companies shield their breakthroughs with patents, reducing the open-source global collaboration that drives foundational scientific fields. 

· Neglect of Basic Science: Markets rarely fund long-term, high-risk research with no immediate payoff, such as advanced materials science or tritium breeding logistics. In the case of Commonwealth Fusion Systems, total funding of its research and development has been 100% private equity. 

· Regulatory Hurdles: The transition from lab to market still depends heavily on public regulatory bodies (like the US NRC) to establish clear, safe frameworks for licensing commercial fusion plants.

Conclusions 

Commonwealth Fusion Systems has already demonstrated their use of a 3-ion fuel, with Helium-3 being the sparkplug to the plasma process, and their adoption of new high-temperature magnet systems that they are close to turning their theoretical experiments into an actual functional fusion reactor where Q>2. Q> 2 is where more energy is produced than the amount of energy necessary to begin the fusion process. 

Their fusion tokamak is much more scalable than the ITER project. The United States government should take the ITER contributions and invest them in Commonwealth Fusion Systems.  There is a constraint to this process, though. The fusion tokamak operates in 15-minute pulses, followed by a 60-second interval where the fusion process is renewed. It takes 2 mg of Helium-3 each time to start the fusion process. While there are limited amounts of Helium-3 on earth, mostly obtained during the maintenance of nuclear weapons, an Australian mining company called Gold Hydrogen has discovered a field of Helium-3 while prospecting for hydrogen. The field is  extensive and the Helium-3 has a purity level of 36.9%.