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Under the Protection of Government

Louis Post: Outlines of Louis F. Post's Lectures, with Illustrative Notes and Charts (1894) — Appendix: FAQ

Q54. Is it right that the owners of land should pay all the taxes for the support of public institutions, while the owners of commodities go untaxed?
A. Yes. Public institutions increase the value of land but not of commodities. Read notes 14 and 18. ... read the book

Nic Tideman: A Bill of Economic Rights and Obligations

Article 3: All persons, in all generations, have equal rights to natural opportunities, such as the use of land, natural resources, and the frequency spectrum. Therefore Congress shall place levies on states to equalize among states the per capita annual value of access to natural opportunities, and to compensate for the harmful effects of activities in states on other states and on future generations. State legislatures shall place corresponding levies on their subdivisions.

Article 4: Congress may place levies on states to collect from states a portion of the benefits they receive from national defense, national systems of infrastructure, research of national significance, or any private activity that has widespread public benefits. State legislatures may place corresponding levies on their subdivisions.

Peter Barnes: Capitalism 3.0 — Chapter 5: Reinventing the Commons (pages 65-78)

Common wealth is like the dark matter of the economic universe — it’s everywhere, but we don’t see it. One reason we don’t see it is that much of it is, literally, invisible. Who can spot the air, an aquifer, or the social trust that underlies financial markets? The more relevant reason is our own blindness: the only economic matter we notice is the kind that glistens with dollar signs. We ignore common wealth because it lacks price tags and property rights.

I first began to appreciate common wealth when Working Assets launched its socially screened money market fund. My job was to write advertisements that spurred people to send us large sums of money. Our promise was that we’d make this money grow, without investing in really bad companies, and send it back — including the growth, but minus our management fee — any time the investor requested. It struck me as quite remarkable that people who didn’t know us from a hole in the wall would send us substantial portions of their savings. Why, I wondered, did they trust us?

The answer, of course, was that they didn’t trust us, they trusted the system in which we operated. They trusted that we’d prudently manage their savings not because we’d personally earned their confidence, but because they knew that if we didn’t, the Securities and Exchange Commission or some district attorney would bust us. Beyond that, they trusted that the corporations we invested in were honest in computing their incomes and reliable in meeting their obligations. That trust, and the larger system it’s based on, were built over generations, and we had nothing to do with it. In short, although Working Assets provided a service people willingly paid for, we also profited from a larger system we’d simply inherited.

I got another whiff of common wealth when Working Assets considered going public — that is, selling stock to strangers through an initial public offering. Our investment banker informed us that, simply by going public, we’d increase the value of our stock by 30 percent. He called this magic a liquidity premium. What he meant was that stock that can be sold in a market of millions is worth more than stock that has almost no market at all. This extra value would come not from anything we did, but from the socially created bonus of liquidity. We’d be reaping what others sowed. (In the end, we didn’t go public because we didn’t want to be subjected to Wall Street’s calculus.)

Trust and liquidity, I eventually realized, are just two small rivulets in an enormous river of common wealth that encompasses nature, community, and culture. Nature’s gifts are all those wondrous things, living and nonliving, that we inherit from the creation. Community includes the myriad threads, tangible and intangible, that connect us to other humans efficiently. Culture embodies our vast store of science, inventions, and art. ... read the whole chapter

Peter Barnes: Capitalism 3.0 — Chapter 7: Universal Birthrights (pages 101-116)

Dividends from Common Assets

A cushion of reliable income is a wonderful thing. It can be saved for rainy days or used to pursue happiness on sunny days. It can encourage people to take risks, care for friends and relatives, or volunteer for community service. For low-income families, it can pay for basic necessities.

Conversely, the absence of reliable income is a terrible thing. It heightens anxiety and fear. It diminishes our ability to cope with crises and transitions. It traps many families on the knife’s edge of poverty, and makes it harder for the poor to rise.

So why don’t we, as Monopoly does, pay everyone some regular income — not through redistribution of income, but through predistribution of common property? One state — Alaska — already does this. As noted earlier, the Alaska Permanent Fund uses revenue from state oil leases to invest in stocks, bonds, and similar assets, and from those investments pays yearly dividends to every resident. Alaska’s model can be extended to any state or nation, whether or not they have oil. We could, for instance, have an American Permanent Fund that pays equal dividends to long-term residents of all 50 states. The reason is, we jointly own many valuable assets.

Recall our discussion about common property trusts. These trusts could crank down pollution and earn money from selling ever-scarcer pollution permits. The scarcer the permits get, the higher their prices would go. Less pollution would equal more revenue. Over time, trillions of dollars could flow into an American Permanent Fund.

What could we do with that common income? In Alaska the deal with oil revenue is 75 percent to government and 25 percent to citizens. For an American Permanent Fund, I’d favor a 50/50 split, because paying dividends to citizens is so important. Also, when scarce ecosystems are priced above zero, the cost of living will go up and people will need compensation; this wasn’t, and isn’t, the case in Alaska. I’d also favor earmarking the government’s dollars for specific public goods, rather than tossing them into the general treasury. This not only ensures identifiable public benefits; it also creates constituencies who’ll defend the revenue sharing system.

Waste absorption isn’t the only common resource an American Permanent Fund could tap. Consider also, the substantial contribution society makes to stock market values. As noted earlier, private corporations can inflate their value dramatically by selling shares on a regulated stock exchange. The extra value derives from the enlarged market of investors who can now buy the corporation’s shares. Given a total stock market valuation of about $15 trillion, this socially created liquidity premium is worth roughly $5 trillion.

At the moment, this $5 trillion gift flows mostly to the 5 percent of the population that own more than half the private wealth. But if we wanted to, we could spread it around. We could do that by charging corporations for using the public trading system, just as investment bankers do. (For those of you who haven’t been involved in a public stock offering, investment bankers are like fancy doormen to a free palace. While the public charges almost nothing to use the capital markets, investment bankers exact hefty fees.)

The public’s fee could be in cash or stock. Let’s say we required publicly traded companies to deposit 1 percent of their shares each year in the American Permanent Fund for ten years — reaching a total of 10 percent of their shares. This would be our price not just for using a regulated stock exchange, but also for all the other privileges (limited liability, perpetual life, copyrights and patents, and so on) that we currently bestow on private corporations for free.

In due time, the American Permanent Fund would have a diversified portfolio worth several trillion dollars. Like its Alaskan counterpart, it would pay equal yearly dividends to everyone. As the stock market rose and fell, so would everyone’s dividend checks. A rising tide would lift all boats. America would truly be an “ownership society.” ... read the whole chapter

Peter Barnes: Capitalism 3.0 — Chapter 8: Sharing Culture (pages 117-134)

One can imagine a culture in which free concerts in parks, poets in schools and libraries, independent theaters and filmmakers, and murals and sculptures by local artists in public spaces thrive alongside corporate entertainment. There’s no lack of artists who’d participate in such a culture, or of nonartists who’d appreciate it. The problem is how to pay for it.

What we need is a parallel economy for noncorporate art. Fortunately, models of such an economy exist. For example, there’s the San Francisco Grants for the Arts program, funded from a tax on hotel rooms. Since 1961, the program has distributed over $145 million to hundreds of nonprofit cultural organizations. It’s a prime reason the city pulses with free concerts, murals, film festivals, and theater in the park.

Then there’s the Music Performance Trust Fund, set up in 1948. To settle a dispute with the musicians’ union, the recording industry agreed to pay a small royalty from recording sales into a fund supporting live concerts in parks, schools, and other public venues. The fund was, and continues to be, administered by an independent trustee. In 2004 it sponsored over eleven thousand free concerts throughout the United States and Canada. Thanks to this system, sales of corporate-owned music support the living culture on which the recording industry ultimately depends.

These models could be scaled up. As a revenue source, consider what companies like Disney get with their copyrights. They get ninety-five-year protection for their movies, they get those FBI warnings on our DVDs, they get the U.S. government extending intellectual property rights worldwide, and they get police busting street vendors for selling “pirated” DVDs. That kind of protection is worth big bucks. Yet the companies’ price tag for it is exactly zero. (They do pay taxes, but so does everybody else.)

What if, instead of supplying copyright protection for free, we charged a royalty on sales of electronically reproduced music, films, and video games? This could be supplemented by charging broadcasters for their exclusive licenses, and advertisers for their invasions of our brains (see the following section). The resulting billions could be distributed, through a National Arts Trust, to local arts councils, which in turn would support community arts institutions and artists. Under this system, corporations would give back to a commons they now take from for free. More art would be live and local, and more artists would be employed. We’d have corporate and authentic culture at the same time. ...

The airwaves, also known as the broadcast spectrum, are a gift of nature that modern technology has turned into a valuable resource. As a medium for sharing information and ideas, airwaves have enormous advantages over paper and wires. The problem in the early days was that signals often interfered with one another. If two nearby transmitters used the same or adjacent frequencies, a radio listener would hear two sound streams simultaneously. America’s approach to this problem (though not Britain’s or Canada’s) was to give free exclusive local frequencies to private broadcasters, subject to periodic hearings and renewal.

The quid pro quo for this gift, according to the Communications Act of 1934, was that broadcasters would serve “the public interest, convenience, and necessity” — whatever that might mean. The airwaves themselves would remain, in theory, public property, with the Federal Communications Commission (again in theory) acting as trustee. ... read the whole chapter

Peter Barnes: Capitalism 3.0 — Chapter 9: Building the Commons Sector (pages 135-154)

Some commons trusts will generate income from the sale of usage permits. Many others will need income to acquire property rights, restore degraded habitat, or give children start-up capital. It’s therefore essential to encourage a multiplicity of revenue sources. The best way to do this is through a federal commons tax credit.

When I was in the solar energy business during the 1970s, our customers benefited from a combination of federal and state solar tax credits. As I frequently explained then, a tax credit isn’t the same as a tax deduction — it’s bigger. A deduction is subtracted from the amount of income subject to tax; if your marginal tax rate is 30 percent, a tax deduction saves you thirty cents on the dollar. By contrast, a tax credit is subtracted from the amount of taxes you pay, regardless of your tax bracket. If you owe taxes, it always saves you one hundred cents on the dollar.

The premise behind a commons tax credit is that wealthy Americans owe more to the commons than they currently pay to the government in taxes. That being so, a commons tax credit would work like this. The federal government would raise the uppermost tax bracket by a few percentage points. At the same time, it would give affected taxpayers a choice: pay the extra money to the government, or contribute it to one or more qualified commons trusts. If people do the latter, they get a 100 percent tax credit, thereby avoiding additional taxes. The message to the wealthy thus is: You have to give back more. Whether you give it to the IRS or directly to the commons is up to you. If you want to eliminate the government middleman, that’s fine.

What qualifies as a commons trust? It’s a trust that either benefits all citizens more or less equally or collects money to restore an endangered commons. Social Security, the American Permanent Fund, the Children’s Opportunity Trust, and most land and watershed trusts, would qualify. By contrast, a normal charity would not.

Contributions to normal charities would remain deductible from taxable income, but not from taxes owed. ... read the whole chapter




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Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper