What is a Citizens Dividend?
Geonomics: The Citizens Dividend Liberates Everyone
by Jeffery J. Smith
People campaigning for a better world should also demand a social salary. A social salary is an extra income apart from one's labor or capital, paid to everyone. It is not a bribe. It is not a reward for good behavior. It is your right. It's similar to the European proposal for a Basic Income. It is different in that this Citizens Dividend is paid from rent.
A version of rent dividends already exist in some places. Once passed into law, it is almost impossible for reactionary forces to remove. Alaska pays its residents a dividend from oil rent, which was about $1800 in 2000. Alberta (Canada) pays the average family $C860 per year from oil revenue. Before the Gulf War, Kuwait paid a sizeable dividend from oil royalties. Oil is but the tip of the iceberg. There is much more rent to be collected. It's all the money we spend on the nature we use. What are we waiting for?
Currently the elite collects most rent via bank mortgages and corporate prices for food, fuel, homes, and other products. If instead we were to collect and share this immense stream of revenue, we would do more to weaken the corporate elite than almost any other strategy imaginable. Because this strategy is so subtle, it remains a secret - and its advocates remain safe. But it's a potent reform. Politically, sharing rent would create a world of equals. Economically, sharing rent would lift people out of poverty and motivate people to conserve the environment. This Citizens Dividend lets us create the world we all want.
Use taxes or lose taxes?
The mechanics of sharing rent are simple. Government could collect rent by: (a) levying a tax on the value of sites and resources, or (b) charging a fee to use sites and resources, or (c) requiring dues from owners of sites and resources. Then, government could share the collected rent among its citizens by: (a) providing desired services (e.g., a paved road instead of a monstrous dam), or (b) paying vouchers (e.g., for education and health care), or (c) paying dividends that citizens would decide how to spend; whatever they spend their share on, they couldn't do a worse job than some politicians and bureaucrats.
To collect rent, if fees or dues are used, then it becomes possible to abolish taxes. To share rent, if dividends are used, then it becomes possible to abolish subsidies (and vouchers). Replacing taxes with land dues and subsidies with rent dividends is the policy of geonomics. Getting a dividend while not paying taxes, people would be as free as our ancestors were before the crush of civilization, yet we moderns would enjoy all the conveniences that make life comfortable - and World Social Forums possible.
The reasons to abolish taxes are several, besides often being a case of paying something for nothing. (1) Taxes distort prices, which distorts the choices of producers and consumers. (2) They burden the poor more than the rich. (3) Taxes are expensive in that they reduce investment and employment. And (4) taxes maintain a power relationship of inequality between citizen and state. If society chooses to abolish taxes, that would attract and impel more business, which would increase the value of their land and resources. Thus there'd be more rent for government to collect, perhaps more public revenue than before, to fund any desired services plus the Citizens Dividend.
Some reformers prefer to retain taxes in order to take from the rich and give to the poor. This Robin Hood scenario has rarely happened in history. More efficient than trying to capture wealth downstream, after the elite has accumulated it, is to capture wealth upstream, preventing an elite from forming. A tax on income or sales or property captures wealth downstream, too late to do much good. Land dues, on the other hand, capture rent upstream, preventing the concentration of wealth by the more grasping among us.
The familiar philosophy of redistribution is like feeding milk to a little lion cub then later trying to squeeze milk out of a mature lioness. It'd be more practical to not give milk to the cub in the first place. How does society feed the lion cub? Partly by buying the products of the corporations owned by the elite. Partly by investing in the corporations owned by the elite. But mainly by granting privileges, via the state, to big business.
Ten favors for Big Business
The state's bias for big business consists of ten privileges, three familiar ones and seven subtle ones. The following examples are from the US, as am I, but they're probably not much different from the economic policies of most countries, as we'll see. The three better known favors are (1) subsidies, such as the millions of tax dollars the US gives MacDonald's to advertise its hamburgers in Paris, (2) "sweetheart" contracts, such as those between the US and the weapons industry which charges the military $400 for a toilet seat, and (3) tax breaks, such as the US deduction for investing in new machinery but not in retraining workers, or tariffs that protect General Motors but not the wages of the workers of GM.
The seven subtle favors are permits granted at far below market value:
(1) the corporate charter which limits the liability of management and investors and is worth billions of dollars to those businesses putting people and planet at risk. When the charter is not enough of a shield, the state further reduces the liability of responsible parties. When Y2K was an unknown factor, the US passed a law that sheltered Microsoft and other software giants from any possible suits from unhappy customers.
(2) the waivers from, or weak enforcement of, existing standards. First the US set air pollution standards at the convenience of the automobile industry, then continually pushes back the deadline to meet these standards. Again, the US set background radiation standards at the convenience of the nuclear industry, then looks the other way when a nuclear power plant fails to comply. Non-enforcement of air quality standards alone (never mind other pollutants) is worth $300 to $500 billion annually.
(3) the franchises that states in America grant to corporations to provide electricity, phone service, etc. In these natural monopolies, there is little or no competition, so the state is supposed to keep profits low. In reality, they are very high. The uncollected market value of franchises is again in the billons. The next four permits grant ownership or control over parts of nature (which includes logical structures), the heritage of us all.
(4) the patents that are supposed to protect inventors but are used to create monopolies for investors. For example, the US pays for research in medicine then when a new drug is developed, grants the company a patent without recovering any of the cost of the research. The US grants Microsoft a monopoly via patents and copyrights while at the same time accusing Bill Gates of acting like a monopolist. The uncollected value of patents for industry and technology are several hundred billion dollars each year.
(5) the licenses that the US grants to TV, radio, and cell phone networks turn part of nature, the electromagnetic spectrum, into virtual private property. Sometimes the US auctions off some of the spectrum but the most lucrative part - TV wavelength - it gives away for free. TV networks turn around and charge advertisers a million dollars a minute on Superbowl Sunday. All these licenses are worth at least a hundred billion dollars every year.
(6) the leases that the US grants to corporations that mine ores or raise cattle show just how bad the state defends the interest of the people. One corporation paid $10 thousand for a mining claim worth $10 billion. The huge cattle ranches not only pay government much less than private landowners charge them, they also damage the grazing lands before they move on to the next pasture. The full value for these "fire-sale" leases is again in the billions annually.
(7) the titles to land and resources that counties in the US grant to owners do little to protect small homeowners who, by paying mortgages their entire careers, are actually tenants to the bank. What titles really do is blind the middleclass to this reality, to their actual station in life as perpetual debtors to the lending institutions. Americans spend trillions on titles each year.
These ten privileges, especially the seven subtle ones, funnel one to three trillions of dollars in the US each year into the bank accounts of the elite. That money is why capitols are infested with lobbyists, milking the system. The elite will continue to swell and rule until society decides to cut their supply lines. That is, run government like a business. Turn the rhetoric of the capitalist to society's favor. Charge full market value for these seven pieces of paper; with the proceeds pay dividends to the stakeholders, the citizenry.
As charging full value for permits would end the plutocracy and make possible a true democracy, so paying out the collected revenue would make life materially comfortable for the vast majority and harmonize our economies with the ecosystem. This program of geonomics would do so by leveling the playing field. Then worker could compete with boss and alternative technology with the entrenched variety - and win.
In a Geonomy, being on a first-name basis with politicians would do one no good. Instead, the well-connected and everyone else would get the same Citizens Dividend. When receiving a CD, which might be about $1000 per month to start, workers would no longer be at a disadvantage with employers. The poor would no longer have to humiliate themselves by applying for public assistance. (a) They'd have their CD, (b) wages would be higher where land is used efficiently (remember Ricardo), and (c) prices would be lower where taxes are not levied. Plus, keeping government out of debt (and consumers, too) would (d) reverse inflation; thanks to techno-progress, prices for goods and services would continually drop.
Even without paying a dividend, just collecting rent does lots of good. In history it has re-distributed land bloodlessly and spurred rapid development. Three times, geonomics has granted humanity a bloodless revolution: in Denmark in the 1790s, in California in the 1890s, and in Taiwan in the 1940s. In each case, government collected more land rent. Owners of vast tracts of land found it too expensive to hang on to their surplus. So they sold it to their former tenants at prices the peasants could afford. The new owners, who lived on the land, then worked much more efficiently. Denmark became famous thru-out Europe for its dairy products. California became "the breadbasket of America". And Taiwan went from hungry peasants to well off farmers (anyone else getting hungry?) who could then afford the goods manufactured in cities. Taiwan set the world record for rapid development and for continuous expansion. Taiwan has many problems with its corruption and pollution, but not so much with poverty.
To develop sustainably and thus protect the environment, society must do more than collect a little rent from rural land. Government must also collect rent from urban land and require owners to place an Ecology Security Deposit and carry Restoration Insurance, and others to bid on emission permits before letting risky byproducts loose in the environment. These surcharges, plus fines in cases of negligence, would steer users of nature away from exploitation, toward sustainability. The various aspects of geonomics - make polluters pay, make depleters pay, end subsidies, collect ground rent, and pay an eco-bonus - have been endorsed by over a hundred notable environmentalists and organizations around the world - and the number of backers keeps growing (coming aboard?).
Besides the logic of geonomics, there's another reason it's attractive to environmentalists. We greens see economies as not above the ecosystem but as part of the ecosystem, subject to the same natural laws and patterns that operate in the rest of the universe. The ecosystem stays in balance using feedback loops. The economy can also self-regulate when rights are enforced. For example, consider the Share-Rent Cycle. Receiving rent, people work less, which lowers output, site value, and the rent dividend. Getting less rent, people work more, which raises output, site value, and the rent dividend. So people work less again, around and around forever. Hence work is put in balance with play automatically, and with ample leisure, life acquires new meaning. We could say "bye-bye" to economan.
Thu-out history, 101 famous people, including Einstein and Jesus, have said words similar to "the fruits of the earth belong to all of us." Some of the more notable proponents were the Quakers in the 1600s, the physiocrats in the 1700s, the Georgists in the 1800s, and the environmentalists in the 1900s. Waves of support have appeared in a century cycle, as if something were nagging our collective conscience. Recently the Mexican town of Mexicali along the California border replaced its property tax with a land tax.
Present progress should lead to future victory. Each major sector of society can find something to like about geonomics. Greens and real farmers like the collection of rent. Businesses like the end of taxes on real capital. Workers like the end of taxes on wages. Libertarians and people worried about wasteful government like the end of subsidies. And women and single mothers and other overworked parents would like to receive a social salary: a Citizens Dividend from one's nation, a Resource Share from one's state, and a Housing Voucher from one's city or county. Drawing from each sector, geonomist could be soon win a critical mass that would overwhelm old-guard opposition.
None of us created land. We all have an equal right to a fair share. None of us individually created the value of land. We do that collectively as society. If we are to reap as we sow, then we must collect and share rent, not our individual earnings. A reform this just, this practical, must some day win. With your help, that day will come sooner. Are you ready?