First, understand that we can afford it. The per capita Gross Domestic Product of the United States of America is about $60,000. The annual minimum wage is around $15,000. That is, per person, the nation earns about four times what someone working year-round at a minimum wage job earns. The national debt is about $20 trillion, but its wealth is around $60 trillion. A similar balance sheet can be drawn up for most Western nations. Poverty is not a state of nature; it is a policy of the State.
Second, imagine an individual state stipend of $1000 paid out monthly to every citizen, regardless of current income or employment status. Obviously, this would let us do away with all minimum wage laws as people seek work merely to supplement an income that allows them to satisfy their basic needs (food, shelter, clothing) while consuming none of their time. It would immediately make the majority of all welfare programs unnecessary and, as people learn to use their time to keep themselves happy and healthy and helpful to each other, would lower the costs of education and healthcare. A great deal of worry about retirement would, likewise, be a thing of the past.
Next, imagine the abolition of all taxes (except one, to which we will return). Every dollar you earn, by work or by wit, is yours to do with as you please, supplementing the $12,000 basic income provided by the state. Businesses would bear no administrative burden on behalf of the State to collect taxes of any kind. If they want to replace their accountant with a cigar box and the honor system, that's entirely their business.
At this point, pause to reflect. Is this the paradise of the worker or the entrepreneur? The answer is that it is paradise for both. Consumers would have the purchasing power to buy what they need; and entrepreneurs would, therefore, have the market to sell what they produce. The economist (and perhaps The Economist), however, will rightly point out that if you print and distribute $1000 to every citizen every month the result will be runaway inflation. We come now to the single tax that would be needed to center the wheel of circulation.
Imagine a single tax on the unimproved rental value of land. This tax would be completely uncomplicated to administer and would encourage owners to develop the economic potential of their property in a sustainable way, distributing its value to the consumers who have the money to compensate them for it. At bottom, the currency, issued as basic income, would be underwritten by its being the only legal means of paying the property tax. If you want a big house and an estate to yourself, you had better manage an efficient factory to produce things of value for customers who are willing to spend their money on them. If you merely want a quiet life in the suburbs, and couple of exotic vacations every year, you need only contribute your labor or leadership to such a factory.
Again, ask yourself: is this the fantasy world of the so-called Left or the so-called Right? It is neither. It is the realistic image of a world in which 99% of the population of any sovereign country would lead happier more fulfilling lives. It is Utopia. It is Nowhere from the point of view of a very small group of very wealthy people, whose wealth depends on keeping this world unimaginable. Poverty, I say again, is not a state of nature. It is the policy of the State.
(I needed to get that off my chest this morning. Everyone should have a vision of the better world towards which their energies are directed. It is not just a manifesto for political action, but the image of perfection against which all value judgments are made. I'm not going to write much about this utopia here, but I will be updating a page on my website continuously as I refine my views, sharpen my image. As the picture develops, I will add pages there. Every now and then I will inform readers of this blog about updates.)
I'm sure that a staunch Georgist like you have already crunched the numbers, but it seems unsustainable to me. Isn't it? The present total land value of the US is 23 trillion and the present federeal and state spending is 7 trillion; add to that the extra 3,8 trillion incurred by your 1,000 dollars a month per citizen proposal. That means the property tax would have to be roughly 40 procent of the TOTAL land value (not rental value) - which would supposedly lead to a massive decrease of land value thereby aggraviting the fiscal problems of utopia even more.
ReplyDeletePS: Yes, the reform would also massively increase purchasing power leading to higher prices on ALL assets incl. land, but it would make consumption in the form of Land Rovers, Gucci bags and Michelin restaurants relatively more attractive that consumption in the form of nice big villas with swimming pools etc. leading to an at least *relative* drop in land prices.
I'm embarrassed to admit that I haven't run those numbers. But you're right that there would be a lot of revaluations. Keep in mind that a city block in Manhattan will be priced in one way, a coal mine in another. The taxes on both with be set according to the "extractable" rents (presumably you don't rent a coal mine in order to sleep in it).
ReplyDeleteAnd notice that the only way to tax, say, JPMorgan Chase in my utopia is through the rent on their headquarters. (There would be no corporate taxes on a bank's profits.) So that's actually the most important adjustment: the erosion of the basis of financial rents and fortunes based thereupon. That probably would initially feel like a 40% tax on at least some properties.
After about twenty years, banks would become very modest institutions, properly taxed simply through the rental value of the buildings they operate out of. There would be much, much less financial "leverage" in such a system. Banking would once again become a boring profession.
PS. Since money would be created as basic income, not bank credit, the current business model of banks would completely collapse. Banks would only be able to loan out their deposits, i.e., money they already owe to their depositors. This also means that there would be very little "wealth" in mere debt. Wealth would be stored in real estate and stocks in the means of production. I have a hunch it would affect the price of gold, making it unsuitable as a store of value in the long run. The hope, in any case, is that you can be "rich" only in so far as you are "invested" in the real economy.
ReplyDeleteDid you include in your calculations 2- 3 Trillion USD sitting in accounts of private equity funds? Economic analysts indicates that only a portion of this is invested. The remaining is "dry powder" which the PE firms charge fees on but don't invest.
ReplyDeleteI haven't looked specifically included this. But it stands to reason that this sort of wealth would quickly be eroded in a world where ordinary people had worry-free purchasing power and land was taxed to give it to them. Paper equity would lose its meaning. The only value would lie in the fundamentals of the real economy: the business of supplying people with what the need and want.
ReplyDelete