UPDATED AND MOVED TO THE FRONT (9/2/14) – The Cato Unbound symposium is now complete. Here’s an up to date summary of everything that was written.

The debate over my essay, “The Pragmatic Libertarian Case for a Basic Income Guarantee” rages on at Cato Unbound, and elsewhere around the web.  Here’s a roundup of some of the most notable responses so far.

At Cato Unbound:

  • Mike Huemer argues that states lack the authority necessarily to implement a BIG, and also takes issues with the freedom- and reparations-based arguments for a BIG that I’ve made elsewhere.
  • Jim Manzi worries about the work disincentives that a BIG would produce, and doubts that my idealistic proposal would look quite so attractive once filtered through real-world political processes.
  • Robert Frank thinks a generous BIG would generate too much resentment among taxpayers, and argues instead for a very modest cash grant supplemented by a greatly expanded program of public employment.
  • In “The Gospel of Work,” I argue that neither economic theory nor the available empirical evidence supports Jim Manzi’s claim that a BIG would create significant work disincentives. And such work disincentives that it would create aren’t necessarily a bad thing.
  • Mike Huemer takes issue with Robert Frank’s argument that taxation isn’t theft.
  • In “On Safety Nets, Political Authority, and Henry George,” I respond to Huemer’s anarchist challenge by arguing that a modest safety net might violate libertarian property rights, because it might be part of the justification of those rights. I close by suggesting that a BIG might best be funded by a land value tax (LVT).
  • Mike Huemer responds to my essay on Georgism here and here, raising some worries about how much revenue a LVT would actually raise given that much of land’s value derives from the productive efforts of other people, not the intrinsic qualities of the land.
  • I argue that Mike’s appeal to population density value isn’t a problem for Georgism. It’s not the mere fact that a landowner benefits from the positive externalities of others’ labor isn’t itself a problem. It’s the forcibly excluding others from doing so.
  • Jim Manzi presses me on the issue of work disincentives, arguing that a BIG clearly would reduce work effort and that the burden of proof is on me to show that this is not a problem.
  • In a probing and thoughtful essay, Mike Tanner worries that a BIG achieves simplicity at too great a cost – both financial and moral.
  • Ed Dolan weighs in with a few supportive comments of his own on the pragmatic libertarian case for a BIG.
  • Finally, in “BIG and BIGger,” I argue that a BIG is not only desirable, it is politically feasible. If not wholesale, than at least piecemeal.

Elsewhere:

  • Mike Konzcal argues that I’ve given the current welfare state a bad rap. Paul Krugman agrees.
  • Noah Smith doesn’t, but thinks that libertarians like me who defend a BIG have fallen in to a trap. Ruh-roh.
  • Karl Widerquist explores the hidden assumptions about property and freedom in Jim Manzi’s critique of the BIG.
  • and, finally, Ed Dolan wrote a terrific two part series on the theory and evidence regarding BIGs and employment disincentives.

All in all, it was a terrific debate. Thanks to Jason Kuznicki for setting it up, and to Mike, Robert, and Jim for their thoughtful and constructive replies.

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  • Les Kyle Nearhood

    That’s a lot of reading !

  • Jerome Bigge

    The idea seems to be growing more popular on the “left” from what I’ve been reading. Mainly I think because of how it would cut the “overhead costs” of our present day welfare system. Apparently it is thought that converting Social Security to the BIG would be a good idea too. Increasing development of improved robots means less need for workers. It is pointed out that unlike the switch from agriculture to industrial production, advanced robots will simply replace many of the jobs that are now performed by human beings.

    • TheBrett

      I don’t think it will lead to mass unemployment (there’s no real limit to the potential tasks that people can think up), but it could lead to a lot more instability in income and living standards for people who don’t have a pile of relatively stable financial assets providing them with non-work income. A BIG would help to smoothen that out, and also push for greater labor-saving technology while reducing opposition to said technology.

      In fact, if you wanted to pay more tax in the short run, you could even eventually get it to a system that doesn’t rely on taxes at all. Build up a large enough sovereign wealth fund, and the dividends on it besides whatever it takes to keep ahead of inflation could pay for a certain level of BIG payments. Granted, this is not something we’ll see anytime certain in the US, since it would require a SWF in the tens of trillions of dollars, but it’s close to potentially being a reality in some countries (such as Norway and the small Gulf countries like Qatar and UAE).

    • TracyW

      It’s not going to happen. A BIG requires either a sharp raise in taxes or a massive cut in the incomes of the poorest. (Or both).

      • Raoul

        Technically, cutting tax exemptions like the personal exemption and diverse tax credits, in favor of paying out cash to people, would be a sharp tax increase. BIG could be implemented ‘cost’ neutral like that though.

        I’m not sure why that wouldn’t happen.

        • TracyW

          Sure. Ed Dolan figures that redistributing all existing welfare spending into a BIG would give $3,160 a year.

          To get to $4,452 a year he eliminates all tax deductions apart from for healthcare, but including the personal exemption, and gives people the choice of the UBI or social security, but not both.

          So, if you want to go above $4,453 a year you either need to cut remaining government spending sharply or raise taxes.

          • Raoul

            Hmm, how about this then: What about subsidies, including but not limited to QE, though that’s more of a broad term subsidy. It does however subsidize banks so they can recover costs from not getting loans returned. Giving QE money to people to pay back loans, instead of to banks to recover lost money, sounds more on the spot.

            Giving people money to buy food, instead of subsidizing big agriculture corporations, sounds like a meaningful transition as well.

            Also tax rates on the bottom should approach the top end rates more as well. Just so we don’t end up with a situation where you have a mere 15% taxrate or whatever on your 1000dollar income, plus 1000 dollars untaxed from the state. Instead seeing a 40% general tax rate would make sense. (though I am not decided on what tax system we should go with, but keeping the net wages within a 30% corridor of what people make right now, would be a wise step for the beginning)

            There’s a lot of points of current spending and taxation that need consideration with the topic!

            P.S. There’s a german saying that goes like this: “If you want, you’ll find ways. If you don’t want, you’ll find reasons”

          • TracyW

            Do thr maths then and see what you come up with. (Also your reference to “keeping net wages within a 30% corridor of what people make right now” – does that imply an up to 30% cut in post-tax incomes?

          • Raoul

            talking about the maxium desirable upfront increase for low wage workers there. As in, just give em a tax rate on earned income or higher consumption tax amounting to around 30-40% their earned income, as well.

            Of course after that, wages might vary depending on how undesirable jobs are and how little people really want to do em (or not).

          • TracyW

            I can’t find a link to your maths on the Germany case. Can you please repost it?

          • Raoul

            For some reason I only come up with a near 300billion surplus now when I do the maths, oh well… anyway, more heads thinking about this are better than less, so

            https://www.destatis.de/DE/ZahlenFakten/GesellschaftStaat/EinkommenKonsumLebensbedingungen/EinkommenEinnahmenAusgaben/Aktuell_Bruttoeinkommen.html;jsessionid=A74896A9AC14212714663FBD21E42373.cae4

            has the number of households and average household income before taxes (brutto) per month from labor. (2012)

            2482*12*36700000

            apply a 0.45 uniform tax rate of 45%

            2482*12*36700000*0.45
            =491.8 billion

            deduct the ~200 billion (2011) actually collected as wikipedia mentions on http://de.wikipedia.org/wiki/Einkommensteuer_(Deutschland)

            Anyway, thanks for making me re check, it’s still a pretty significant amount, considering it’d cost 1trillion to pay every human being 1000 euros within germany.

            also it seems 2011 germany spent over 600 upfront on social security. Which does include health and retirement insurance, so take it with a grain of salt. Though I’d imagine you can pay health insurance off of a 1000 euro flat grant. https://www.destatis.de/DE/ZahlenFakten/GesellschaftStaat/OeffentlicheFinanzenSteuern/OeffentlicheFinanzen/OeffentlicheFinanzen.html

            Not to forget children might not need as high a basic income. It’d cost only 900~ bill to pay all people above 18: 1000 a month, all under 18: 500 a month.

            69200000*12*1000+12800000*12*500
            =907.2 billion

            oh right, with my original calculation I might have taken into account raising the 7% reduced value added tax on food and diverse other selected goods (like hotel stays since ~2010…) to the general rate of 19%, as I heard of a study which found that rather than helping low wage earners, it helps the middle class a lot more. And exceptions are silly c; Forgot how much that added but it was a good amount, too.

          • TracyW

            So a 45% flat tax, plus 17% flat VAT rate. So, for someone who spends 100% of their after-tax income, they’re paying on average 62% of their income in taxes under your scheme. (Not top marginal, average).

            Put together, this sounds roughly in the same ballpark as my old figure of an average 50% tax rate in NZ back in 2001 for replacing existing welfare spending with a $10,000 a year BIG. So it sounds about right.

            62% is similar to those very high-marginal tax rates Matt Zwolinksi worries about for people coming off benefits.

            And if I follow your €200 billion reference correctly, you’re talking about more than doubling the German government’s tax take to fund the BIG.

            I don’t know enough about Germany to know how a €1000 per month before tax, or €550 per month after tax (or €12,000 per year before tax, €5400 after tax) income per person stacks up. How does that compare to, say, the basic pension rate? (Germany does have the advantage here

            Note: I agree with you that a flat VAT is far superior to a differentiated rate. Quite apart from the distributional benefits, it wastes a bunch of time and money on boundary issues. NZ has a nearly flat GST rate. (Renting and exports don’t pay GST, nor do financial services, though in the case of financial services they can’t reclaim GST paid on their supplies, and the tax policy guys say that works out about the same in terms of total revenue.)

          • Raoul

            45% tax on income and 17% vat would effectively mean a 55% tax, just fyi ( 1-(1*0.55*0.83)=0.5435 )

            as for the 200 billion figure, that’s the tax take from income tax, as of now. Which isn’t every tax take, or Germany would not be able to already pay out triple the amount in social spending.

            Also I didn’t touch on the questionably low tax rate on profits from capital investment (25%), as well as any of the other income german households have, all of which sees lower taxation. Income from work is merely 62% of the total household income, on average. 23% are state social transfer payments, though. So since we plan to replace most of these, we can’t consider em for taxation base, realistically.

            Also 62% isn’t a high marginal tax rate by german standards. If you are on benefits you get to keep 120euro untaxed for getting to work related expenses, then till 450 euro, every earned euro reduces your benefit by 0.80cent. past that, every 1 euro reduces your benefit by 1 euro. oh well.

            Either way, we’ll have to either start printing more money or tax the rich more, or we won’t see the much needed aggregate demand to get the economy back to have decent incentive to produce for the broad masses. But that’s entirely unrelated to basic income.

          • TracyW

            Thanks for spotting that mistake of mine on the logic of the tax.

            I agree that the rate of withdrawal of benefits is a high effective tax rate. (I’m surprised it’s as high as 1:1). The trade-off is that a low benefit withdrawal rate as income rises catches a lot more people and thus is a lot more expensive.

            I’m a bit lost in your calculations, sorry. I thought the ~€2300 figure you cited earlier was all household income, not just wages/salary. Also, what existing government spending are you planning to replace with the UBI?

          • Raoul

            The income figure was just the work related income, as I wasn’t quite sure what to do with the other income streams, but thinking about it now, then we actually have to look at the ‘lohnsteuer’ (labor income tax) only (150 billion http://de.wikipedia.org/wiki/Lohnsteuer_(Deutschland) ), for calculating the surplus of a general 45% tax rate on labor income.

            As for what programs to replace, all that pay as much or less than the basic income, and aren’t supposed to be supplementary for special cases. I’m kinda open on the issue though and haven’t looked into it too deeply.

  • CFV

    I’ve just read your piece “On Safety Nets, Political Authority, and Henry George”. Welcome to the wonderful world of Left-libertarianism!

  • TheBrett

    Is Manzi still arguing against the Negative Income Tax instead of the BIG? People have pointed out repeatedly that an NIT has features that a BIG does not have that might reduce work hours (although in practice the reductions appear to be either minimal or non-existent). A BIG is just a flat grant, and it doesn’t reduce work incentives except insofar that it kicks people into slightly higher income tax brackets if they work on top of it (considering that rich people already work more hours than most poorer people despite the higher rates, I’m going to guess that reduction will be very, very limited).

    Robert Frank is doing the same thing. It’s not that I don’t think some type of “job guarantee” is a bad idea, although it’s second-best to a BIG. In fact, I’d be in favor of changing Unemployment Insurance after 3-4 months into a program where the government basically pays companies a partial wage subsidy to hire people for whatever jobs for a certain period of time, so that people at least avoid the stigma of long-term unemployment.

    • TracyW

      A BIG is just a flat grant, and it doesn’t reduce work incentives except insofar that it kicks people into slightly higher income tax brackets if they work on top of it

      Ah, when we did a back of the envelope calculation in NZ, for a BIG of $10,000 a year back in 2001, we estimated that average taxes would need to be 50% to pay for it (that’s average, not top marginal, so, say, if you exempted the first $10,000 of earnings the average rate would have to go up to compensate), and that BIG at the time would have meant a cut in the basic pensioner’s income of over 1/3.
      A BIG requires either much higher taxes or very large cuts in the income of the poorest.

      • TheBrett

        When you mean average taxes, are you looking at income taxes only or overall taxation per person? While I suspect a BIG would be funded out of higher income taxes, I’m actually indifferent in that regard – it could be funded out of a mix of tax types.

        • TracyW

          Ah, it was average of income.

          All sustainable taxes are funded out of income eventually. Eg, if the property tax is $1,000 a year, the property owner either has to find income of $1,000 a year to pay the tax, or sells the property to someone who does have income of $1,000 a year. For consumption, say I’m spending 100% of my income each year, and then a VAT raises my total bill to 110%, I’ll have to sooner or later cut back my spending so I’m back to living within my income. Different tax types have different incentives and impacts of course.

  • TracyW

    Your Gospel of Work file is bizarre. It only looks at the recipients of the BIG, and not at the total society. The after-tax earnings of most people would fall under a BIG (as they have to pay the taxes to pay for the BIG) and thus total work effort would fall.

    • Michael Byrnes

      Depends on your assumptions. Today, with no BIG, most people pay taxes that fund various federal programs for the poor. Repurposing that money would have no effect on most peoples’ after tax earnings.

      • TracyW

        Of course. But just redistributing that money results in very low levels of BIG per person, eg Zwolinki links to an analysis by Ed Dolan in which this money is redistributed and a bunch of wealthy and middle-class tax exemptions are cut, and under that everyone gets $4,452 a year. So, out of the $20,000 a year Zwolinski says is spent on every poor person, under his BIG, less than 1 dollar in 4 of that money goes to the poor.

        And $4,452 a year is a very low income to live on in the USA, which rather undercuts Zwolinki’s talk about how this will benefit the poor.

        • Michael Byrnes

          In Dolan’s analysis, he excluded two large sources of safety spending from his analysis: federal spending on health care and state programs. And I think he got up to about $5,800 per year, at least in the version I saw. It’s still small in comparison to a “liveable income” – but in any case the goal here is not to pay everyone enough so that no one has to work.

          • TracyW

            Dolan did say in the comments that he’d made an error in the calculations and fixed it – that may explain the $5, 800 figure.

            Dolan says he excludes health spending on the basis that if he included that the minimum level of the basic income would just have to go up to cover healthcare costs, so swings and roundabouts.

            As for the goal not being to pay enough so no one has to work: so if you have a disability or the misfortune to be living through a time of mass unemployment, well, sucks to be you, but if you’re a healthy slacker who just wants to cut their hours at the coffee shop, or you’re the stay-at-home husband of a high-flying corporate lawyer, we’re here to help!

            I can get the appeal of a public social security scheme that offers to protect everyone against sickness, disability and unemployment. I can get the logic of a strict libertarian approach by which everyone is responsible for insuring themselves against the slings of outrageous fortune. But the BIG you describe appears to be “we’ll tax you up the bejesus to fund social welfare and yet you also have to buy insurance in case anything really bad happens to you.” Worst of both schemes.

    • TheBrett

      Depends on how responsive people are to higher marginal taxation. Work hours for the percentage of the population that was employed weren’t noticeably lower under the high tax regime of the 1950s and 1960s than they are now in the US.

      • TracyW

        Ah, figures on working hours are averages, across big swathes of the population. The high tax regime of the 1950s and 1960s you are referring to was high taxes (with lots of exemptions) on high income earners.

        Overall, in the USA in the 1950s and 60s were around 16-18% of GDP, most years, in the 2000s they were about 15-19% of GDP (tax receipts tend to fall faster than GDP in a recession because of the progressive nature of the tax system). So, while the top tax rate may have been very high in the 1950s and 60s, most workers weren’t paying that much more than now, perhaps less (I don’t know any figures on how much was actually collected). (See http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=205)

  • TracyW

    I got to thinking about the maths of a land value tax for financing this.

    Apparently the total land value (improved + unimproved) of the USA is <a href="https://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=4&cad=rja&uact=8&ved=0CDgQFjAD&url=http%3A%2F%2Fwww.slate.com%2Fblogs%2Fmoneybox%2F2013%2F12%2F20%2Fvalue_of_all_land_in_the_united_states.html&ei=byruU86tM9D9yQSrioCoDw&usg=AFQjCNEn2cRPg47C87-7TBqwRrnEjXu8CQ&sig2=lJsd8QYUvajvSRqhmorV1AUS<$14.488 trillion..

    If the BIG is $10,000 to every citizen 21 or over, well, estimated adult Americans are about 246 million (though that’s from age 15). So total cost per year is 2.46 trillion.

    2.46 trillion is about 17% of 14.488 trillion. So, if the BIG was funded entirely from land taxes, and you own a $100,000 house, you’d have to pay taxes of US$17,000 a year to fund the BIG. On top of whatever taxes you pay for all the rest of government, like roads, schools, military, police. Own a $300,000 house? You owe $51,000 a year. Each year.

  • johnbarri

    When I was young and arrogant I believed that if one cannot hack it one should step aside and allow others who can the room to hack it. So, I reasoned, those who stepped aside should be supported by charity.

    I have grown a bit since then and am now old and arrogant and believe now that those who can’t hack it probably can’t because they have not had the opportunity to train and skill themselves. A BIG would give them that chance. Of course not all would use it that way and in fact not all would need to, but I firmly believe that those who do need it and have the opportunity to empower themselves are likely to do so rather than get high on the proceeds. Most folk will respond positively to opportunities of empowerment and that is what I believe a BIG would be, an opportunity to empower the self.

    But why would a libertarian support the idea? I believe that self empowerment is central to the idea of libertarianism. If you resent the idea of an indigent banging on your door for a hand-out, begging for fish, teach him to fish. I believe BIG would do that for many recipients. It would also help support the truly helpless with some dignity. I also believe that would make a libertarian proud.

    Not all libertarians are sh ts. I for one want to live in a sea of prosperity not a sea of poverty. Even when appealing only to self interest, that makes a great deal more sense than seeing folk buried, maybe even dying, in desperation. It makes for a bigger and wealthier market for whatever I am selling. It makes for more prosperity and wealth all round. I believe BIG would do all that.

    As to afordability – there are better ways of taxation. Just as a BIG would be a superior form of social welfare payment than the plethora of (conditional) means of distributing social welfare presently extant in the US and many other ‘welfare states’, so there is a better way of taxation with similar benefits to those of a BIG.

    The one I have in mind is TEAL, a Total Economic Activity Levy. It is a levy applied to all who are active in an economy, applied universally to the richest and the poorest and all in between.. You can think of it as a payment for the right to participate in the activities of an economy. It is collected as a thin and consistent slice collected from the top of every banking transaction.

    I don’t think there is a universally applicable relationship between the conventional tax base and a TEAL tax base, but some calculations put it at a factor of some thirty-fold for some economies. Thus for every $1 tax base available for a conventional tax system, there may be a $30 tax base available for TEAL. So the rate can be really low (perhaps in the region of 1/2%) for each deposit into and withdrawal from all bank accounts, no exceptions, no excuses. For a salary earner that would equate to a 1% rate of income tax. For a business that would load costs by 1%. But that TEAL would probably be the only tax necessary to fund an entire fiscus. Imagine that – no BS from the IRS/Receivers of Revenues, no crippling bureaucracy to fund. No tax forms to complete. No personal tax audits. No intrusion in the affairs of the tax payers’ lives. No BS at all. Just a simple levy.

    That would be libertarian enough to satisfy me. Just as would a BIG.

    • TracyW

      Well that will stop people from using banks.

      • johnbarri

        Thanks for the response. Think about what you just said. Stop using the banks???. How do you pay for things? – The business round trip NY > LA > NY, the costs at either end, the holiday in Hawaii, the fuel in the aircraft, the salaries for the flight crew, your salary (if you have one) BIG (if it ever happens), the gas in your car’s tank, the groceries for your sustenance, your rent, your home? You barter? Perhaps? But how would that work? And where do you stash your Las Vegas winnings (after they ban you for life) – in your bed roll? How safe is that?

        Banks and money are just a commonly acceptable and convenient means of exchanging value (sometimes not so convenient but what better is there?). In so far as that goes, they are indispensable. Proponents of TEAL (I am one) understand that there would need to be a regulatory framework for TEAL to work. It cannot exist in a vacuum. But given that framework it is the most efficient and cost effective tax ever devised (even cheaper than outright pillage – you don’t need the pillagers, unless you view the banksters as pillagers, and many do) but they already exist, you don’t need any additional infrastructure. In fact you reduce the tax collection infrastructure and costs hugely.

        • TracyW

          Oh it would be inconvenient I agree – but it would be a big savings in terms of taxes.

          • johnbarri

            Hi Tracy. The mistress of brevity.

            So anything goes as long as you don’t pay taxes? You have access to the internet so I assume you have some form of income. I don’t know what you pay in taxes but my guess is that it is at least 30% of your income and maybe more when hidden taxes are factored in.

            So, good bye taxes – no more government services, no more roads, airports, ports, power & etc, and, despite what the private sector thinks, it is government which empowers them and permits the private sector to function. So, you advocate chucking out the baby and the bathwater? Thats a lose-lose arrangement.

            Why not reduce your 30% or more taxes to a 1% tax and still have those government services that empower the private sector & etc.? It’s a win-win arrangement.

            Thinking about it, I imagine that that is what a libertarian ideal is, a society in which everyone wins, not only a few winning at the expense of the many.

            You’re going to make me read all your posts in this thread to try to understand where you are coming from.

          • TracyW

            All taxes are paid out of income eventually. You can’t raise large sums of money from a tiny tax rate. In the case of the 1% tax, so, when a company pays my employer, 1% goes. When my company pays me, 1% goes. When I take the money out of my bank, another 1%. When I buy some Chinese-made shoes another 1%. When the shoe company pays their importer, another 1%. When the importer asks their bank to convert pounds into remimbi, another 1%. When the bank sells the pounds to a Chinese guy who’s paying for his kids’ western education, another 1%. When the school gets the money, another 1%. When the school stashes the money in a mid-term deposit, another 1%. When the school spends it on food, another 1%. When the food company pays their employee, another 1%. When the employee pays their electricity bill, another 1%. When the electricity company pays their supplier, another 1%. And so on, as that dollar works it’s way back to me. If each dollar goes through 30 transactions a year then a 1% tax each year adds up to about 26% (the calculation is 1-((1-.01)^30). If the tax is 0.5% then it adds up to 14% a year. Both cases assume no avoidance. A 14% tax rate on GDP is $5,000 per person a year in the USA. If it was all spent on a BIG, so nothing for roads, etc, that’s how much everyone would get. Not much to pay for healthcare.

            As for in place of the BIG and the TEAL, I think the status quo, despite its many flaws, is better than either. The BIG is madly expensive relative to the benefits it offers and a TEAL would discourage economic activity, at least in forms that go through banks.

          • johnbarri

            Thanks for the response, for your eloquence and precision and the very high standard you have set. What – are you a mathematician or economist or something? Sometime I must tell you a joke about economists from economics 101 circa 1970.

            I hear your reservations and will try to further the discussion.

            Are you are talking of a multiplier effect? All taxes are subject to multiplier effects, whether you like it or not. Attempts are made to avoid it with vat and sales taxes but that is a pipe dream and it only works within the specific tax, when it works at all. Every tax is a tax on the back of every other tax, and in some countries the taxes on taxes can very easily amount to a flat 60% or more of income, without factoring in the multiplier effects.

            The thing that makes TEAL different is its inclusivity as it taxes economic activity and not income. The GDP of a nation is a measure of production in the formal sector (I think). Generally, conventional taxes aim to collect about 30% of the GDP. More than that is considered destabilising. TEAL collects from all sectors of the economy, from the formal through the informal all the way to the blatantly illegal & etc. As I mentioned, the tax base for TEAL can be as much as 30 times the tax base for conventional taxes. Indeed, it can be 30 times the GDP.

            Part of what that means is that all those clever boykies who function outside of the tax system but still function within the banking system, would all fall within the TEAL tax net. I cannot quantify that. I only know that in my country, South Africa, which has a central banking clearing system and for which transaction volumes by value are available, that is the case, and a 1% TEAL on that volume will collect almost twice the taxes that the plethora of conventional taxes collect. The 1% is made up by 1/2% on deposits + 1/2% on withdrawals.

            Importantly, the load is spread across the entire economy and not just from employees in the formal sector, mostly middle to lower income earners with no wriggle room to minimise their taxes. What this amounts to is that these lower to middle income earners, who traditionally (if you consider a practice spanning little over a century as a tradition), and who fund the fiscus off which the fat-cats feed, would no longer bear that burden alone. As mentioned before, with TEAL the load is spread evenly across the entire economy.

            So I am quite happy with your analysis of the multiplier effect and note that 30% of a larger pie is a lot better than 30% of a smaller pie, if that is what it amounts to, and that a multiplier effect on 1% of income is much preferable to a multiplier effect across 60%, however you would work that out, if in doing so the situation where too much tax is collected from too few taxpayers is alleviated.

            Regarding the question of compliance you refer to: Compliance would be encouraged by the regulatory framework which would need to accompany TEAL. Cornerstone of compliance would be the definition of a bank and the penalties for banks who do not comply. So you can barter and deal in cash all you want, but if in doing so you act as a de facto bank, and you do not comply with TEAL, you really would not enjoy the consequences. The 1% carrot would probably be accompanied by a 20 year stick. Much simpler to use the banking system.

            Regarding the question of flying the banking system, and the minor inconvenience it would cause, I think you are vastly understating the degree of the inconvenience and ignoring the fact (ok – my assumption) that the tax you would save would be insignificant by comparison to the costs of the inconvenience. But each to their own. But in that respect and coming back to the regulatory framework, regulations would make it obligatory for all formal compensation for all work and goods and services to be conducted through the banking system, and while that would not prohibit other forms of trade, those would be special cases which would need special forms of compliance. Again, deliberate and persistent non-compliance, if discovered, would not be cost effective.

            Regarding the question of funding a BIG, I am much more optimistic about it being possible with TEAL than with a conventional tax system, But to work that one out, I would need to draw up a full scale budget for a living economy to be funded by TEAL, with the impact of all the adjustments that would entail, before I could comment intelligently. It is beyond my capacity to do that as I simply don’t have the resources. And I don’t think a simple maths formula on the back of a cigarette packet would be up to the task. The possibility remains to be proved or disproved.

            Assuming that TEAL would make a BIG possible, to some or other extent (and I know we will disagree with that assumption) the benefits of a BIG would be enormous. No more ingrained and unavoidable poverty, no more justifiable crime (Sir, I dun the deed so I could live), probably massive reductions of crime (how many do crime because that is, indeed, the only way they can survive), massive reduction in demands on the welfare system and private charities, massive injection into the economy (to the extent of the BIG, whatever that amounts to) benefiting everybody in the economy from the mom n pop store on the corner to Wal Mart, to General Motors to the Banksters, and everyone in between, not just the sh ts on the top of the pile, and massive creation of employment in response to that massive economic injection. Think of the multiplier effect of all of that.

            And yes, we are moving toward a society where not everyone can assume they will be employed, and how do the unemployed survive in an economy which cannot employ them? I think the move toward a BIG is inevitable, where the chief form of employment is as a sort of professional consumer of the products and services of a highly automated and robotised economy.

            And yes, I believe in the creativity of folk to keep themselves productively employed, even if it is not in the formal economy, and TEAL, with its simplicity, would also encourage that productivity.

            Please understand that I am not visualising a utopia. I’m just looking for the simplest way to live our lives. I am a libertarian. I understand by that term, that I seek to be a sovereign citizen who is liberated from undue interference of government. Having said that, I believe in a minimal government necessary for the peaceful and orderly functioning of a complex economy and a just and sustainable society. I believe that TEAL and under the circumstances I believe will become the reality of the future and prevail in the not too distant economies of the world and not just the good old US of A, a BIG will contribute meaningfully to those goals. I do not think they are necessarily the only nor the best solutions, which is why I asked what you saw in their place.

            Your answer that the status quo would be preferable distresses me somewhat because I firmly believe that the status quo is not sustainable and in my deepest nightmares and paranoia, is leading us to a revolution to end all revolutions (if ever there is such a beast). I believe we desperately need a solution that includes social, economic and political stability, before we reach that point.

            The present mix of a failing democracy (who controls government? the 1%?), a failing economy (we are on a roller coaster from one economic crises to another in a rapidly quickening and escalating cycle) and a failing capitalist system (really only serving the 1%) in a failing un-free free market system (who controls the means of production and the markets, the same 1% who control government?) (and that is similar to the classic communist centralised economy), is not providing that solution. So we have to find a better democracy (I am a staunch democrat – but not in the American party political sense nor in any other absolutist sense) and a better capitalist system (I am a staunch capitalist) which provides that sustainability in society. It doesn’t have to be perfect, just functional and sustainable. And if we fail in that we need to beware the pitchforks, for they will surely come.

            OK – these are all assumptions and need to be proven or disproven, which I think brings me to my economics joke.

            An economist, a physicist and a mathematician were stranded on a barren island. All they had was some driftwood and a can of bully beef (pre internet spam) and no can opener. The physicist had the idea that they should build a fire using the driftwood ignited by rubbing two stick vigorously together. When they had a good blaze going they would throw the can of spam into the fire, wait for pressure to build and the can explodes. The Mathematician would then plot the trajectory of the content through the air, so it could all be collected, and the Economist could tell them how to distribute the content for the most equitable benefit of their little economy. The economist thought about it for a micro-second and said – “That is far too complicated. Let’s just assume we have a can opener”.

            Please tell me you laughed.

            But this is the rub – we do need a new kind of can opener, something simple that opens cans without the need of approval from a local bureaucrat or warlord or gatekeeper.

            That is what I am looking for.

          • TracyW

            I’ve normally heard that joke told with mathematicians as the butt.

            As for the rest of it, if you want to convince me that a BIG funded by a tax on TEAL is a good idea, you’ll need to do the maths.

            Every single case I’ve seen where people have actually done the maths, they’ve wound up with either a BIG that implies massive cuts in the income of the poorest, or incredibly high tax rates. Everyone I’ve seen who supports a BIG either:
            a) is happy with a massive cut in the income of the poorest (I think this is Charles Murray’s position), or
            b) is handwaving over the maths.

            You’re currently in category (b). Like Matt Zwolinksi and Ed Dolan.

            (There is hypothetically a category (c), people who are happy with the massive taxes that a BIG that doesn’t involve a massive cut in the poorest would require, I just haven’t yet encountered any one in this category).

            Personally I think it’s ridiculous to be advocating for a policy without having a workable costing for it, but I’m clearly not going to convince you of that. Nor, apparently, Matt Zwolinski.

          • TracyW

            Your answer that the status quo would be preferable distresses me somewhat because I firmly believe that the status quo is not sustainable and in my deepest nightmares and paranoia, is leading us to a revolution to end all revolutions

            Sorry, I missed this in amongst all the hand-waving.

            So, your argument for a BIG and/or TEAL is, fundamentally:
            1. We must do something.
            2. This is something.
            3. Therefore we must do this.

          • johnbarri

            About the math – I have done sufficient modeling (not maths although you need some maths to model) to know that in the economy of my country, if the tax base were extended to include all economic activity in the country, a number of consequences will occur:
            1) The tax base increases by a factor of about 30
            2) The tax rate can be radically reduced (say from an average of 45% (including hidden taxes) down to 1%)
            3) The tax revenues will increase by between 75 to 85 %
            4) The cost of collection is reduced significantly ( a guess of a 90% reduction of costs)
            5) Tax lawyers, accountants and employees in the tax industry become endangered species (but not discarded – there is plenty other more useful work for them to do)
            6) There is money sufficient to kill the deficit and run a balanced budget and meet all the social needs of the country (the banksters won’t like that but what the hell).
            7) There is money left over to either reduce the rate of TEAL, over time, or to channel into expanded social needs.
            8) A BIG seems to make some hypothetical sense under those hypothetical circumstances – that there probably are funds available for a BIG.

            Just how big a BIG would need a full scale national budget proposal to investigate what is possible. One day I may need to do that but not today. We are, admittedly, only speaking hypothetically.

            This is my first exposure to BIG and I need to think about it if I were to make a serious political proposal for BIG in my country. I would have to do the math and the models to include BIG. I have done neither.

            I guess you must be a mathematician – hence all the arm waving.

            I protest that your precis is a trifle glib. It begins too late and ends too late. It should start with the point that “what we are doing is failing us” and end with “we need a fix”.

            What that fix is should start with debates such as this. Thank you. You have provided food for thought.

            I wonder how you would feel about living in a theocracy? You don’t have to answer that, but perhaps you should think about it, because it is a distinct possibility.

          • TracyW

            I guess you must be a mathematician – hence all the arm waving.

            None of the maths I have used in this debate is beyond high school level.

            And that’s assuming that maths education in your country of origin sucked as much as it did in mine.

            I protest that your precis is a trifle glib. It begins too late and ends too late. It should start with the point that “what we are doing is failing us” and end with “we need a fix”.

            So your criticism of my precis is that it wasn’t wordy enough.

          • johnbarri

            The present level of education in maths and science in South Africa is arguably the worst in the world. By glib – I mean items 2 and 3 presume too much of my proposal/s.

          • TracyW

            1) The tax base increases by a factor of about 302) The tax rate can be radically reduced (say from an average of 45% (including hidden taxes) down to 1%)

            I’d like to see your maths for this, given that by my calculations a TEAL of 1% equates to an income tax rate of 26% (assuming that total economic activity is 30x income and is unaffected by the tax). One of us must have made a mistake in our maths.

          • johnbarri

            i will explain shortly (in a day or so)

  • J Peterson II

    Zwolinski, what about my response to your basic income?

    http://wti.liberty.me/2014/07/30/the-libertarian-case-for-leaving-libertarianism/

  • Jod

    That was a great roundup–you saved me a lot of time!

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