Category Archives: Taxes

Prevent another economic meltdown with a European Green New Deal

Social Europe is a digital media publisher which examines issues in politics, economy and employment & labour and is committed to publishing cutting-edge thinking and new ideas from the most thought-provoking people. It recently published this paper by Colin Hines (left), Convenor of the Green New Deal Group, former Co-ordinator of Greenpeace International’s Economics Unit and  author of several books, including Localization: A Global Manifesto (Earthscan). 

Extracts 

In the acres of recent coverage about the causes of the Lehman Brothers collapse and how to ensure it doesn’t happen again, there was much emphasis on changing the EU’s economic imperatives away from austerity policies that contributed to Brexit, the rise of the extreme right, increasing opposition to immigration and sluggish economic activity, particularly in the Eurozone. What was absent was detailed discussion of what needs to be done on the ground.

In a Green New Deal group report Europe’s Choice – How Green QE and Fairer Taxes Can Replace Austerity’ we proposed a comprehensive plan for a continent-wide sustainable infrastructure project to generate ‘jobs in every community’.

In answer to the usual question of how this will be paid for we proposed that such funding would come from a new round of Quantitative Easing (QE), but, this time, the e-currency would take the form of ‘Green Infrastructure QE’ to fund vital, labour intensive economic activity. In the medium term, substantial funding could come from a more effective and fairer increase in the tax collected in Europe from wealthy individuals and companies.

It has been estimated that tax evasion (illegal non-payment or under-payment of taxes) in the EU is approximately €860 billion a year. Tax avoidance (seeking to minimise a tax bill without deliberate deception), which is the other key component of the tax gap in Europe, is harder to assess, but an estimate might be €150 billion a year. In combination, it is therefore likely that tax evasion and tax avoidance might cost the governments of the member states €1 trillion a year.

The form such a programme would take in the UK was detailed in our recent publication Jobs in Every Constituency: A Green New Deal Election Manifesto.

It consists of a nation-wide, carbon emissions reducing infrastructure programme focusing on:

  • Making the UK’s 30m buildings super-energy-efficient to dramatically reduce energy bills, fuel poverty and greenhouse gas emissions;
  • Accelerating the shift to renewable electricity supplies and storage, given the dramatic drop in their price worldwide and increased availability;
  • Tackling the housing crisis by building affordable, highly insulated new homes, predominantly on brownfield sites;
  • Transport policy that concentrates on rebuilding local public transport links;
  • Properly maintaining the UK’s road and rail system;
  • Encouraging electric vehicles for business and personal use and sharing.

This is labour intensive, takes place in every locality and consists of work that is difficult to automate. It also contributes to improving social cohesion and environmental sustainability.

A Manifesto for Jobs in Every Constituency

This massive work programme in energy and transport would tackle many existing problems in our society. It would provide a secure career structure for decades. This would require a significant number of apprenticeships and the range of long-term jobs would provide increased opportunities for the self-employed and local small businesses. This growth in local economic activity would in turn create other jobs to service this increased spending.

The government should commit to a detailed programme explaining how to generate jobs in every constituency, using for example the energy and transport proposals in the Green New Deal. This would require extensive consultation with local government, businesses and communities to establish what such a programme should look like on the ground.

The government should commit to a massive training programme resulting in a huge range of skills to provide the ‘carbon army’ required to bring about a low-carbon future. A carbon finance sector would also be needed to publicise, advice and put into practice the range of large funding packages necessary.

The government must then explain how this approach would both mitigate the effects of any future global economic downturn and help compensate for the expected trends in automation. It must also make clear that a key advantage to such an approach would be to help meet the UK’s obligations under the Paris Agreement to curb carbon emissions.

Time for a Europe-wide Green New Deal: There is much handwringing by the greens, the left and centre parties about how to stop the rise of the right across the continent. A huge contribution would be for all these parties to adopt such a manifesto for jobs in every community, since it would return a sense of hope for the future, provide economic security for all, whilst fully protecting the environment.

For a summary of the GND spending proposals in this article, go to https://www.socialeurope.eu/prevent-another-economic-meltdown-with-a-european-green-new-deal.

 

 

 

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Universal basic income (UBI): a more cheering perspective

Amazon has revealed its latest plan to automate American workers out of existence with its futuristic machine controlled grocery store.

According to a study by Ball State University’s Center for Business and Economic Research, the use of robots and other manufacturing efficiencies was responsible for 88% of the 7 million factory jobs lost in the United States since peak employment in 1979.

The Economic Security Project (ESP) – a coalition of over 100 technologists, investors, and activists – has announced that it is committing $10 million over the next two years to explore how a “universal basic income” (UBI) could ensure economic opportunities for all. Elon Musk, the iconic Silicon Valley futurist, predicts “There is a pretty good chance we end up with a universal basic income or something like that, due to automation.”

With political uncertainty across the Western world highlighting rising levels of economic inequality, many others across the political spectrum are considering adopting UBI in the future, giving everyone a guaranteed minimum payment. In the 21st century to date there have been pilot projects in America, Canada, Namibia, Uganda, Kenya, Brazil, Holland, Finland, Italy and Scotland, described briefly in Wikipedia.

UBI – one of three main economic reforms?

James Robertson shared news (scroll down to 4.The Practical Reforms) about a meeting of the North American Basic Income Guarantee Congress at which there was co-operation between supporters of two of the three main reforms in total money system reform – land value taxation and basic income. Alanna Hartzok, General Secretary of the International Union for Land Value Taxation, expressed a hope for future meetings at which supporters of all three policy proposals could discuss the relationship between reform of the money supply, introduction of land value taxation and the replacement of welfare payments by a citizen’s income.

UBI – life enhancing?

Just as Green parties everywhere have said for many years, Elon Musk expects that UBI will enhance life with ‘ownwork’: “People will have time to do other things, more complex things, more interesting things and certainly have more leisure time.” Others, however, believe that without the need to pay for rent and basic necessities, people will not be motivated to work and will not make good use of their basic income and free time. Cynics will – and do – dismiss ‘the happiness agenda’ (Layard, Norberg-Hodge) and the recent Landmark study which found that most human misery in the Western world is due to failed relationships or ill-health rather than money problems and poverty.

If accompanied by a more comprehensive education?

The findings indicate the need for a broader education, giving some concept of good marital and parental relationships, an understanding of the country’s social and taxation systems and the development of expertise (until the Plain English Campaign succeeds) in interpreting official forms and negotiating online applications.

Increasing apprenticeships and retraining for those who become redundant is worthwhile but far more input is needed. The Sure Start focus involving parents and children from the earliest days was working very well until funding was cut by the coalition government in 2011, instead of building on its success.

Harrow mothers campaigning after 4 Sure Start centres had been given notice to quit

There are now 1,240 fewer designated Sure Start centres than when David Cameron took office – a fall of 34 % according to figures obtained by the Labour Party in a Freedom of Information request. The North East and London have seen the biggest fall in numbers, with over 40% of centres closing. The closure rate is increasing countrywide and councils have listed other centres which may well have to go this year.

Compensating for the cost of UBI

A total audit would balance the expense of an enhanced Sure Start programme and the cost of UBI over time, by quantifying:

  • reduced expenditure on the NHS and prison service due to the improvement in mental and physical health
  • and lower expenditure on policing and social services due to less stressful household and neighbourhoods, diminishing the intake of legal and illegal drugs and reducing crime.

So, in the foreseeable future, will 3D printers and robots take care of the necessities? And will basic income lead people to begin to improve relationships with each other and the rest of the natural world?

 

 

 

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Land taxation could fund basic income

Last month readers from 20 countries (listed below) were attracted to the site, many reading Richard Murphy’s review of Colin Hines’ book about Progressive Protectionism but even more focussed on basic income, as John McDonnell announced that Labour has set up a ‘working group’ to investigate universal basic income, with Guy Standing (SOAS) as one of its economic advisers, a co-founder of the Basic Income Earth Network (BIEN).

For some years, America’s Nicholas D Rosen, a Patent Examiner at the Patent and Trademark Office, has advocated land taxation. In a 2012 forum entry he cites a book by economist Joseph Stiglitz, ” The Price of Inequality: How Today’s Divided Society Endangers our Future”.

Though Joseph Stiglitz expresses concern about America becoming less egalitarian and mentions reducing rent-seeking as a solution, Rosen points out that he does not mention the ultimate form of rent-seeking: collecting the ground rents of land.

He continues: “If an increasing share of gross national product is going to the top 1%, it is at least in part because they are the people who own most of the valuable land, and the rents of land are absorbing a larger share of production”.

The revered laws of the market do not apply: Rosen (2008) points out that no one is making more land to keep the price down by competition. 

Rosen’s solution: tax the value of land, and cut taxes on earned income, sales and so on, making the tax system more progressive. He comments: “Unlike most schemes for doing so, it would not cause the productive to quit work, turn their efforts to finding loopholes in the tax code, or take their skills and capital elsewhere”.

Nine years later he has written a letter to the Financial Times’ editor:

Your editorial “Robot tax, odd as it sounds, has some logic” (February 21).

Regarding the possibility of taxing robots to preserve jobs, calls to mind Henry George’s Progress and Poverty. Writing in 1879, George noted that if labour-saving technology reached perfection, labourers would get nothing and capitalists would get nothing; all production would go to the owners of land, as land would still be needed despite automation.

Rather than proposing to tax robots, the great economist advocated a single tax on the value of land.

If we should ever achieve complete automation, this would enable people to be supported out of citizens’ dividends.

Short of complete automation, land value taxation still has important advantages, such as letting people keep what they earn by their own efforts, and putting the burden of taxes on those who enjoy the privilege of holding land that they did nothing to create.

He ends: “It would also help to make housing affordable and prevent the speculative bubbles in land prices that currently contribute to the boom and bust cycle”.

 

 

 

 

Is a new land tax needed to burst the housing bubble?

Edward Lucas, The Economist’s central and east European correspondent, thinks so. He fears a ‘smouldering generational resentment’: “The housing crisis doesn’t just throttle labour mobility; it crimps lives. People start families later than they want, commute longer distances and live in crowded conditions”.

One of his recommendations follows:

“We should introduce a real land-value tax. This would be levied not on the value of the house (as with current council tax, and the old rates) but on the value of the land itself.

“This has many advantages. First, it hits the rich (who own land) much harder than the poor (who don’t). In particular, it raises the cost of living in a big house, but hardly affects people in small flats.

“It penalises those who sit on land waiting for it to rise in value — as was scandalously the case for decades with Battersea Power Station. If you pay tax on land whether you use it or not, you are more likely to bring it into productive use or sell it.

“Most taxes depress economic activity; land-value taxation actually stimulates it. It is cheap to collect and hard to dodge.

“Land-value taxation also tackles the root of the housing problem: unearned income. The value of my house has little to do with my DIY skills. It has a great deal to do with the spectacular development of our once-grotty corner of London, notably the new Imperial Wharf Overground station — for which we paid nothing”.

land tax australiaA search reveals that land value taxation is currently implemented in Denmark, Estonia, Lithuania, Russia, Hong Kong, Singapore, and Taiwan. It has also been applied in subregions of Australia (New South Wales), Mexico (Mexicali), and the United States (Pennsylvania).

Left: latest book on the subject: https://www.qbd.com.au/land-tax-in-australia/vince-mangioni/9781138831254/

 

 

 

UBI: WMNEG member Jeremy Heighway writes from Leipzig

Conference: Universal Basic Income Network in Hamburg

UBI logo 16

Pathways of thought: common and uncommon ground, aims and direction when it comes to the environmentJeremy Heighway

Looking at the aims of the conference page, it says very clearly: “A basic income is therefore a route to a degrowth society, however, a basic income does not necessarily start the ecological transformation that is so urgently needed,” and continues, “… addressing this … needs to be thoroughly incorporated into any implementation of a basic income and its accompanying measures.”

The tracks appear to go cold right there, however, as a shift is made towards four other areas of discussion, none of which intrinsically address ecological transformation. It is perfectly possible for a supporter of a basic income to ignore ecological transformation; to some extent it is even possible to be in favour of increased consumption.

The degrowth movement is a mindset; the basic income is a mechanism. This provides a possible clash from the outset, based on the question of what you hope to achieve and how.

On the societal side I think there is quite a good overlap and it is a great idea to get the movements working together. But opportunities can be missed if two groups do not also look hard at what is not automatically going to be addressed if you work together.

One huge area is, as stated above, ecological transformation. My proposal looks at eco-taxation and suggests that all increased revenue be returned to everyone evenly in the form of a basic income. However, I do not believe it would be able to help finance the true basic living-cost foundation much. It is certainly much more of an easy attachment to a basic income than a direct source of finance. Strangely, it is almost something which degrowth supporters need to be vigorous about from an environmental benefit perspective and argue for with basic income supporters.

The semi-sideline nature is maybe one reason why basic income supporters have not been very supportive of this idea so far: if it doesn’t do much to actually finance the true basic income, why complicate matters and potentially alienate people along the way with an unpopular taxation device?

Now it’s your time dear degrowth supporters: why do environmental concerns need to be considered again? And, dear basic income supporters, you can actually gain some firm supporters and new friends if you take up this idea – “… addressing this … needs to be thoroughly incorporated into any implementation of a basic income and its accompanying measures”, remember these stated aims of the conference?

Jeremy Heighway currently lives in Leipzig, was an active participant at the degrowth conference in 2014, and took part in the basic income GAP sessions. He also wrote a stirring paper on infrastructures for a parallel GAP. In his day job, Jeremy mostly does translations from German to English in the field of renewable energy.