Income Tax Is The Next Financial Primitive
Our Investment In Column Tax
Six years ago, I got to be an early customer of Plaid in my last life as a fintech product manager. By leveraging consumer credentials to unlock structured banking data through a modern API, Plaid and its competitors have enabled developers to verify and analyze user assets and transactions. Over the past two-and-a-half years, BCV participated in the seed and led the Series A for Argyle, which has emerged as the leader in APIs for accessing employment and income data.
Today, my partner Keri Gohman and I are delighted to announce that BCV has led a $5.1M seed financing for Column Tax. Alongside Plaid for assets and Argyle for income, Column Tax empowers developers to build with tax, enabling any company to calculate user tax liabilities, suggest withholding optimizations, and initiate embedded filing services.
As Old As Government
Some 8,000 years ago, the Third Dynasty of Ur enforced one of the earliest known forms of taxation, as recorded in stone tablets from Lagash, in modern-day Iraq. Ancient Mesopotamian leaders had militaries to feed and irrigation projects to build, priorities not so alien to our society today. Over thousands of years since, governments tinkered with how they raised revenue, seeking to be more fair, efficient, and to utilize taxes as incentives for desired behavior.
Today, the US federal tax code is 75,000+ pages of single-spaced text that grows every year. In just the past year, legislation has adjusted the treatment of childcare, retirement plans, COVID recovery checks, among many other changes. The IRS estimates that several billion human-hours each year are spent on tax preparation, not to mention $16B+ spent on personal income tax filing services; the form factors for these services have changed little since the advent of electronic filing.
As a baseline, Column Tax enables consumer finance and other trusted companies to offer Tax Filing to their customers, delivered seamlessly in their digital products. Many of these companies have an opportunity to assist the customer in pre-filling key financial data points, or to subsidize the cost of filing, leading to easier, more affordable taxes for consumers.
Ambient Tax Compliance
While making it turnkey to add tax filing services is a big opportunity on its own, Column Tax has an even more transformational opportunity, which starts with the tax engine that underlies the company’s filing services. Column solves for the complicated math and tracking ever-changing federal, state, and local laws, so that developers can send users through a thoughtfully-crafted process and receive a reliable estimate of a consumer’s anticipated tax liabilities.
One exciting initial use case has been Tax Refund Unlock. Many Americans withhold significantly more money for income taxes than they need to, and while a windfall refund can be exciting, it often implies that those Americans who need every dollar they have, may in the previous year have had to borrow at high rates or forgo time-sensitive purchases simply because they had unknowingly deposited extra dollars with Uncle Sam. Challenger banks, for example, are leveraging Column to offer customers a simple way to correct their withholdings and unlock larger paychecks now.
Releasing hundreds of billions in excess withholdings is a huge opportunity, but we believe it is just one example of how companies will leverage Column Tax to imagine new tax optimization experiences. Over the coming years, rather than a surprise in April, consumers should be able to continuously understand and meet their obligations at the point that they make any decisions with tax impact — starting with withholdings, but inevitably encompassing deductions (e.g. EV tax credits), capital gains (selling those Gamestop call options), and other line items.
With a huge vision and opportunity ahead, Column Tax needs an incredible team at the helm to sort through the complexity, streamline developer integration, and package tax into a joyful consumer experience. Co-founders Gavin Nachbar and Michael Bock are technical enough to have built self-driving cars at Waymo, operationally rigorous enough to have run global worker networks at Premise, and they imbue the company with the UX standards of famously-seamless Dropbox.
We are honored to partner with Gavin, Michael, and the incredible founding team they’ve assembled from Intuit, Google Brain, and CoinTracker, along with co-investor friends South Park Commons, Core Innovation Capital, Operator Capital, and angels like Charley Ma and Nico Chinot.
Together, we can’t wait to help developers embed tax intelligence alongside the financial services and decisions Americans interact with throughout the year, moving hard-working taxpayers away from excessive withholdings and year-end surprises, and into a future of tax data that is open and continuously up-to-date.
You can read more about Column Tax in TechCrunch’s coverage of their seed financing
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