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Bureaucracy-Ridden Welfare System vs. Guaranteed Income

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Author Topic: Bureaucracy-Ridden Welfare System vs. Guaranteed Income  (Read 12256 times)
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« on: August 24, 2010, 11:25:18 am »

There are many Georgists and Neo-Georgists who advocate instituting a “Citizen’s Dividend.”

What, specifically, is this Dividend?

It is a dividend paid on an equal per capita basis to all the citizens of a nation out of the surplus revenue generated by a tax on the economic rent of land (otherwise known as the land value tax or Single Tax).

Below are my responses to two questions that many are likely to have about the Citizen's Dividend.

Will it be either necessary or desirable for the federal LVT (land value tax) to be levied directly on individuals?

No and no. A Georgist author explains it this way:

    "The question naturally arises: How should Federal, state, and local governments obtain the rental value of land? The practical answer is that we should return to the constitutional provision that requires our Federal government to apportion direct land taxes among the states according to their respective populations. The states, in turn, should obtain this revenue and the revenue for their own support by apportionment among their counties, in the way Nebraska, Texas, Montana, and a number of other states still do. The counties, as agents of the states, should collect their revenue, and the revenue needed by state and Federal governments, from the rental value of their lands, using existing property tax collection machinery. These changes would reverse the trend of the last 50 years. Instead of lower levels of government becoming increasingly dependent upon higher levels of government for aid, thereby losing their independence, the higher levels of government would return to dependence upon the lower. That is as it should be if we wish to preserve our liberties."

-- Robert De Fremery, Rights vs. Privileges, pp. 39-40

How large will this rent-based Citizen’s Dividend (“Rent Dividend” for short) be?

This will depend on (a) what (if any) cuts are made to the federal budget, and (b) the rate at which land rent is taxed.

According to a study conducted by economist Michael Hudson in 1997 -- and subsequently cited by economist Fred Harrison in the book, The Losses of Nations -- land rent makes up roughly 14% of the national income, or what in 2009 was approximately $1.7 trillion. Even higher estimates have been made by economists such as Fred Foldvary and Mason Gaffney, but for now I’ll work with Dr. Hudson’s more conservative estimate.

Now, even if that $1.7 trillion had been federally taxed at a full 100% rate, then, all else being equal, it still would not have been enough to replace all other federal taxes.

However, if combined with both (a) the National Dividend discussed earlier, and (b) urgently-needed spending cuts, then even at a more modest tax rate of, say, 50%, it would easily have allowed for the complete elimination of what are by far the two most costliest and burdensome of all federal taxes -- the individual income tax and the payroll tax.

Now, what may surprise some to learn is that, of those two, the one that hits most American households the hardest is actually the payroll tax, not the income tax. And since much of the payroll tax goes to pay what is, in effect, a “dividend” of sorts (whatever actual money was once in the so-called Social Security “trust fund” was raided long ago and replaced with government IOUs), it only makes sense that this horribly regressive, job-destroying tax be replaced with the National Dividend. (This of course means that, during the transition period, the National Dividend will apply only to qualified recipients of Social Security and Medicare. But everyone else will benefit from it as well -- albeit indirectly -- due to the consequent elimination of the payroll tax.)

This leaves only the individual income tax to contend with, and that in turn brings us to the issue of spending cuts.

What again may surprise some to learn is the extent to which federal spending can be reduced without so much as touching Social Security, Medicare, Medicaid, or any of the poverty assistance programs (e.g., TANF) administered by the Department of Health and Human Services.

First of all, with regard to the so-called “Troubled Asset Relief Program” (TARP), although for obvious political reasons the actual cost of this program has yet to appear in the official budget, virtually no one (except, of course, for Wall Street bankers and both their puppet politicians in Washington D.C. and their lapdog apologists in the corporate **** “news” media) disputes that it has put taxpayers on the line for literally tens of trillions of dollars.

To understand just how outrageous and criminal the TARP really is, consider the following analogy. Let’s say that a casino gambler incurs a gambling debt that is so fraudulent that it exceeds not only the entire U.S. money supply, but the annual productive output of the entire planet. Since the gambler is obviously unable to pay, let’s further assume that he proceeds to have bought-off politicians use their taxing power to steal most of your future money on his behalf in order to pay down his gambling debt, and that he then adds insult to injury by saying you shouldn’t complain since he’ll likely “loan” some of your own money back to you at interest.

Would you consider that an even semi-“legitimate” use of your tax dollars? Neither would I.

Yet that is exactly what bought-off politicians from both major parties (including John McCain and Barack Obama) essentially did when they instituted and subsequently expanded the TARP, because the quadrillion-dollar derivatives bubble that created the apparent “need” for the TARP in the first place was (and is) nothing more than the accumulated gambling debt of Wall Street speculators. That’s why, in my “Monetary Reform” thread, I call for putting all derivatives-infected mega-banks through Chapter 11 bankruptcy and legally voiding all of their derivatives contracts. That, coupled with both the abolition of fractional reserve lending and the institution of a debt-free money supply in place of the current debt-based money supply, would render the TARP meaningless, and thus allow for its quick, unconditional and long-overdue repeal.

Second, with regard to our imperialist, terroristic, hornets’ nest-stirring foreign policy, by putting an immediate end to this policy, we can (and must!) reduce the parasitic war budget by at least $400 billion.

Third, the institution of a Greenback money system will, by eliminating the need for a “national debt,” free taxpayers from the burden of servicing the interest on such debt. This will generate an additional savings of at least $164 billion.

Other key cuts I advocate include the following:

* Abolish both FEMA and the CIA.

* In view of the fact that 9/11 was an inside job orchestrated by traitors within our own government (see this and this), abolish all post-9/11 police state expansion measures -- including the “Patriot” Act, Homeland “Security” Act, Military Commissions Act, and Presidential Directive 51 -- and with them the entire “Homeland Security Monstrosity.”

* Abolish the DEA (while ending the insane drug war).

* Abolish the BATFE (while repealing all federal gun control laws).

* Abolish the so-called Department of “Education” (while eliminating any and all federal involvement in education).

* Abolish corporate welfare.

* Delink the “ground transportation” function of the Department of Transportation from taxation, since this function will be financed instead via the process of “monetizing” (free of debt) the construction and renovation of roads, bridges and rail lines.

When combined with the minimum savings afforded by a non-interventionist foreign policy ($400 billion) and a Greenback money system ($164 billion), the above cuts yield a total savings of at least $861 billion.

Subtract this from the $1.061 trillion in revenue that the individual income tax is expected to generate in 2010, and we have a mere $200 billion in federal outlays (not counting those outlays currently financed by other federal taxes) to fund from a tax on land rent. Thus, if we assume a tax rate of 50% -- and hence a minimum of $850 billion in revenue -- we have a revenue surplus of at least $650 billion.

In the interest of making the transition to a Georgist tax system as smooth and graceful as possible, the first spending priority for that surplus will be to fund emergency relief tax credits to “fixed income” homeowners (i.e., retirees dependent entirely upon government transfer payments) who experience a net increase in their overall tax burden. But this will only be needed as a temporary transition measure, because the combined economic effect of a Georgist tax system and Greenback money system will (among other things) make it many times easier for the average wage-earner to save for his or her own retirement. So much so, in fact, that within 20 to 30 years there will be little if any need to devote most of the rent surplus to a mere segment of the population, because by then general prosperity will have been so much greater than now for so long, that it will be virtually impossible for anyone to be property "rich” yet monetarily "poor” (as is the case now among many “seniors”).

As to the question of homeowners still in the workforce, they will need no such “relief” during the transition phase. Why? Two reasons. First, because -- unlike low-income retirees on Social Security (who pay comparatively very little in federal taxes) -- the savings that workers and small business owners will incur from no longer having to pay either the federal payroll tax or individual income tax will completely offset the cost of paying a higher tax on land rent. Second, because the surge in pre-tax income they’ll experience as a result of the LVT-induced economic boom will offset said cost even further.

In light of all this, it follows that, once the transition phase is complete, the entire surplus can be safely distributed equally among everyone (not just retirees), and thereby become a true “Citizen’s Dividend.”

Returning now to the original question of how large the Rent Dividend will be, if we divide the aforementioned minimum surplus of $650 billion by the current number of adult U.S. citizens -- roughly 230 million -- we have a relatively modest figure of about $3,000. (Note: at the start of the aforementioned transition phase, it will of course be at least double this for fixed income homeowners and zero for those still in the workforce; but upon completion of said phase the surplus will be distributed equally among all adult citizens, thus reducing the per person figure by 1/3 to 1/2). However, when we take into account the estimate made by economist Nicolaus Tideman on page 147 of The Losses of Nations -- that the U.S. economy could (and almost certainly would) produce nearly 25 percent more than it does now if land rent were the primary source of public revenue -- and how this, in turn, would dramatically increase the market-based rental value of land -- and hence the tax base, and hence the surplus -- we find that the Dividend will start out closer to $4,000 per person, then rise slowly over time as the economy continues to grow.

Thus, if we assume the aformentioned National Dividend is $800 billion, then when we combine these two dividends we have a guaranteed minimum income of at least $7,000. That may not sound like much at first, but it must always be remembered how much lower housing costs will be under a Georgist tax system (see this and this).
« Last Edit: March 14, 2011, 11:34:51 am by Geolibertarian » Report Spam   Logged

"For the first years of [Ludwig von] Mises’s life in the United States...he was almost totally dependent on annual research grants from the Rockefeller Foundation.” -- Richard M. Ebeling
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