Would-be reformers rant nonstop about the lack of taxes on the rich and rave about spending to create jobs. Both proposals make tons of sense to normal people. Ah, normal people, my heart goes out. How does it make sense to try to take back from the rich the very money the normals gave them? Or demand work when labor-saving inventions sit on shelves?
Taxing the rich is a knee-jerk policy left over from our peon days. A big-picture policy, more fitting for egalitarians, is to quit creating the rich. Owning up to our role, we’d see our subsidizing the rich is what creates them.
How does the unknowing (or uncaring) public endow the elite?
Seven Ways the Nanny State Lavishes the Rich with Public Dollars:
1 Direct cash gifts; once the US Treasury gave MacDonald’s free money to open a restaurant in Paris.
2 Overpaying for a product or service, like how the military goes along with contractors in paying $400 for a toilet seat.
3 Undercharging for privileges like low-interest loans or low-fee corporate charters that limit liability.
4 Lenient enforcement of laws when corporations violate pollution standards or refuse to turn over royalties.
5 Overtaxing competitors, like levying labor more than capital, making it harder to negotiate higher wages.
6 Funding programs that make the assets of the rich appreciate, like infrastructure that ups land value or debt-finance that inflates stocks.
7 Under-funding competitors, like workers and consumers, by not disbursing social surplus, making people more dependent on jobs.
Examples like these are repeated over and over involving huge amounts of cash. Stop these state favors and watch the undue rich wither away.
If not taxing the rich, why tax at all? By requiring bureaucracy and distorting prices, taxation makes economies less efficient. Government can utilize other fiscal tools, ones that act more like prices. Government can charge fees, dues, leases, etc. Like …
* the fee for a patent monopolizing a section in the field of knowledge.
* land dues for displacing everyone else from a location in a community.
* a lease to extract minerals from our common natural heritage or to utilize a band in the EM spectrum.
How much to charge applicants for government favors? Don’t let politics set the amounts but economics. Run the government like a business. No longer charge tiny flat fees but charge “rent”—the full annual market value of the land or oil or sector in the field of knowledge—the raw material of most enormous fortunes.
While government charges a pittance for a corporate charter, that piece of paper is worth many factors more. By limiting liability, the charter grants an enormous competitive advantage to businesses that impose risk on worker, consumer, and nature yet shrink the market share of businesses that are not hazardous to other living things.
Instead of that near-zero filing fee, government would adjust the charge to how much risk the business imposes, making polluters pay. Since insurance companies can figure out how much to charge, so can public bureaucrats. And if not, abolish government-granted charters and let insurance companies handle it.
For patents that lock up valuable knowledge, again government only charges an insignificant fee. Tech-corps get thousands of patents annually, and trolls get hundreds. Analysts estimate 80% of the value of US stock is patents. The lion’s share of such patents is rent, the monopoly value, the value of excluding others from exploring that part of the field of knowledge. It’s another socially generated value.
The US Congress abandoned its constitutional mandate to issue new money and gave that monopoly to the central consortium of major banks, domestic and foreign; the so-called US Federal Reserve is actually a corporation. That “bankers’ seigniorage” is also worth trillions annually. Either charge for the privilege to create currency, or reclaim that responsibility, or let private currencies compete to qualify as legal tender, or all the above.
However much an absentee owner can demand, that’s rent. Natural rents are payments for sites in the city, or above an oil field, or in the electromagnetic spectrum, or on the filed of knowledge. Social rents are payments for privilege. Rent constitutes the bigger half of the GDP, the lesser half being the returns to labor and capital. That's how efficient economies are, how much surplus they generate.
Consider those huge mounds of rent, then consider the call for more jobs, uncaring if the work would be productive or merely conformist. Normal people, indifferent to the quality of the jobs, cheer the quantity of jobs. But not all jobs are worth doing, ones bad for the person or for the environment. We’d be better off automating such jobs.
Normal people blame employers for low wages. Yet low pay at the entry level is fair. Some jobs nobody should do their entire lives. Those jobs should be left for newcomers to the workforce. Nevertheless, conventional people happily herd the unfortunate into a lifetime of labor, whether life affirming or not.
Of course, some jobs are underpaid. Yet when jobs seek people instead of the other way around, wages go up. What makes jobs plentiful? Well, taxing them does not. Debt does not. Vacant lots at prime locations do not. Poor people under-consuming do not.
Let wages be market driven. It hampers economies to misalign prices and values. But make sure markets are fair, acted out on a level playing field. That's an economy where people get what they earn and earn what they get, made possible by eradicating taxes and subsidies.
Normal people also assume the only form of income for the masses is wages. It doesn’t have to be that way. It’s possible to pay everyone an extra income apart from their contribution of labor or capital.
A growing number call for a “Basic Income Grant” (BIG). To soften the resistance from jobists, these extra-incomers also call for more jobs, which sort of defeats the purpose of an extra income, but there’s no end to amusement from political people.
If people did get extra money, the jobs that’d be left would be jobs people choose to do rather than were forced into for survival. An extra income also lets people employ themselves. And it gives entrepreneurs the chance to start businesses that’d need staffing.
Emphasizing jobs, however, weakens the argument for free money. Demanding jobs not only diminishes one’s intrinsic worth, it also reinforces Protestant Work Ethic guilt and delays acceptance of Polynesian Play Ethic happiness. Instead, talk about leisure, time with family, rebuilding community, communing with nature. All that.
Do-gooders also argue for BIG because people are poor. This approach reinforces the belief in scarcity and that making everybody comfortable isn’t possible. To win, do-gooders should drop dearth and proclaim surplus. The rental values of natural resources and government privileges are ours. What are we waiting for?
BIG is a pipe dream of people who have no experience in business or creating value others willingly pay for (most graze in academia). BIG does not exist except in minor partial experiments. What does exist, not even as an experiment but as policy, is rent sharing. Alaska shares oil rent, Aspen CO site rent, Singapore location value—reforms legislated into existence by practical politicians.
Some BIGists have begun to raise the visibility of what’s already ours. They tend to be very good company; some even talk soccer football! They’ve turned from calling for yet another federal budget expenditure (BIG) to a promoting this citizens dividend.
It’s ironic. The public has no right to private property yet sees no alternative to taking via taxation. Meanwhile, the public is blind to its own abundance so fails to recover it, whether via familiar taxes or more ethical fees, dues, and leases. To the normal person, a cornucopia of rent is "too good to be true". To the 1% getting it, they know it's true.
The middleman role of rentier is one government should perform on behalf of all citizens. Recover that social surplus and disburse it as a citizens dividend. Because rent is trillions annually, each share would be thousands monthly.
As long as we don’t recover rent, then we elevate the hierarchy so that those at the tip top no longer belong to any society but are a nation unto themselves. We leave the elite with the wherewithal to command and control government. We let donors direct higher education and cliques of old families swallow up new technology. And we exaggerate the reward for exploiting nature and humanity. We let the fundamental problem persist and never forge a better world for all.
Once we share surplus, taxists will never have to envy the wealthy again; there won't be any outrageous fortunes left to tax. So don’t demand taxes, demand dues. Don’t demand jobs, demand dividends. For more detailed information, see my book, Counting Bounty.
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JEFFERY J. SMITH published The Geonomist, which won a California GreenLight Award, has appeared in both the popular press (e.g.,TruthOut) and academic journals (e.g., USC's “Planning and Markets”), been interviewed on radio and TV, lobbied officials, testified before the Russian Duma, conducted research (e.g., for Portland's mass transit agency), and recruited activists and academics to Progress.org. A member of the International Society for Ecological Economics and of Mensa, he lives in Mexico. Jeffery formerly was Chief Editor at Progress.org.