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FROM RED TO GREEN

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TURNING FROM POLITICS TO ECONOMICS, TAXING INCOME IMPOSES COSTS THAT SHRINK ECONOMIC OUTPUT AND GROWTH. COLLECTING RENT DOES THE OPPOSITE; IT DISCOURAGES ...

    USBIG Discussion Paper No. 008, February 2002

    Work in progress, do not cite or quote without author’s permission

    FROM RED TO GREEN

    From Income to Rents

    As the Funding Source for a Social Salary

Introduction

In recent years, cutting-edge environmentalists have with ever-greater frequency called for

    sharing Rents (capitalized to indicate not for use of buildings but for use of nature). They point to Alaska, which already does share Rent, the revenue from leasing oil. Besides resource Rent, they are quick to note that government, on society’s behalf, could also charge polluters a Rent for us-

    ing the environment as a dumpsite, then turn around and compensate long-suffering humans with shares from the collected Rent. Such proposals, notably the Sky Dividend by Peter Barnes (founder of Working Assets), draw more attention and support than do the usual income redistri-bution schemes of most BIGists.

Advantages of Tapping Rents

    As even capitalists admit, the key to amassing a great fortune is simple: privatize social values (i.e., Rents) and socialize private costs (so-called externalities) (David Landes in The Wealth and

    Poverty of Nations). An opposite policy might be called “geonomics”: socialize (share) social values (usually attached to locations and government granted permits) while holding private par-ties responsible for costs they would impose on others. Collecting (and hopefully sharing) Rents would shrink the current concentration of wealth. Alaska, by sharing Rent, claims a profit that other jurisdictions typically leave behind, unduly enriching mortgagors, oil companies, and other resource extractors.

    By hoarding Rents, owners and extractors of lands, resources, the EM spectrum, etc, grow not only excessively rich but also excessively powerful, polluting with near perfect impunity and dominating US foreign policy. It’d be in their interest to oppose a social salary funded from Rent, making the struggle difficult. Yet oil interests and their ilk cannot be left on their throne, if so-

    ciety is to unshackle government and have this agency for everyone defend the rights of every-one.

    So far, most BIGists propose taking from the rich and giving to the poor. The general public, be-sides not being overly enthused by redistribution, also broadly oppose taxing high income (even

    Jeffery J. SMITH, president of the Geonomy Society,

    publishes The Geonomist and organizes events in and tours to places considering reform of taxes and subsidies.

    geonomist@juno.com; www.progress.org/geonomy; 10731 SE Center St, Portland OR 97266 USA

FROM RED TO GREEN by SMITH, J.J. 2

    poor people opposed the “death tax”); like Lincoln said, “you can’t make the poor rich by mak-

    ing the rich poor”. Meanwhile, most Alaskans strongly support their oil Rent dividend (try re-pealing that!).

    While the BIG is redistribution, sharing Rents is predistribution; government merely (a) charges one the going rate for defending one’s claim to or use of a portion of nature (b) then divides the surplus revenue among its stakeholders, the citizenry, similar to the operation of a REIT. Collect-ing and sharing Rents before an elite or the state has a chance to misspend them avoids the bag-gage lugged around by the redistributionists. Opponents can fairly label BIGists socialists while proponents of sharing Rent can quote the Founding Fathers, Thomas Jefferson and Tom Paine.

    Even if BIGists were to succeed in taxing high incomes, they would still leave Rent uncollected upstream, empowering the elite that treats government as servant, and which government treats as master. On the other hand, were geonomists to succeed in sharing Rents, thereby drying up the source of overly large and undue incomes, they would not only level the political playing field but also leave no engrossed income for BIGists to tax.

    Turning from politics to economics, taxing income imposes costs that shrink economic output and growth. Collecting Rent does the opposite; it discourages speculative withholding of re-sources and spurs owners, having to pay Rent, to produce more. Unlike BIGists, geonomists can

    offer the public both a bigger pie and a bigger share of the pie, not to mention a cleaner environ-ment.

To enjoy the latter benefit, a healthier eco-system, “greens” have built a bandwagon that BIGists

    could hop on. Already BIGists do cite Paine and Alaska, but leave out the key element of Rent in both these references. To climb on board, BIGists must promote not taxing income but sharing Rent. They’d find themselves in plenty of good green company. While some environmentalists urge just a wider and higher safety-net for the poor (funded from Rents), others go all the way to calling for a universal dividend.

From Taking to Sharing: the Dole

    Some who advocate green revenue reform (shifting taxes and shifting subsidies) worry that green taxes may be regressive. Caring for people as well as other plants and animals, they note that in such cases another subsidy for the poor would be needed. Here are four such caring greens.

Europe's Business Council for Sustainable Development in their Changing Course (MIT Press,

    1992) critiqued spending and added, "Revenue raised (by charging users and abusers) above and

    beyond funds needed to finance a given (restoration) program can be recycled for other purpos-es, such as reducing taxes on such things as employment, investment, income, and savings. Where instruments prove regressive, affecting the poor disproportionately, then part of the reve-

    nues can be used to correct this effect."

Philip Shabecoff, founder of Greenwire, the environmental news service, in A Fierce Green

    Fire (1993; pp 63, 290): "A challenge to giving away publicly owned natural resources to indi-viduals or corporations seeking to enrich themselves was made by the journalist Henry George...

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FROM RED TO GREEN by SMITH, J.J. 3

    In recent years there have been an increasing number of proposals to restructure our tax system by partially replacing taxes on wages and profits ... with taxes on pollution and resource deple-tion. Such a policy would have some problems a pollution tax would be regressive and require

    rebates to lower-income families. But it would also raise revenues by taxing harmful things ...”

    David Suzuki, the British Columbia geneticist and TV show host, authored an article syndicated thru-out Canada (1995 Feb 11) that seconded Herman Daly: "Raise the bulk of public revenue

    from taxes on thru-put either at the depletion or pollution end. Keep progressivity by taxing very high incomes and subsidizing very low incomes."

    Yet are their worries well founded? Do taxes on depletion and pollution raise prices? Not neces-sarily. A tax on taking resources does not add to the price but subtracts from the profit. For ex-ample, while Alaska charges extractors 12.5% of the world price for its oil, Malaysia charges 90%, yet the world price is set by neither seller but by demand. (Greater competition among ex-tractors would drop the price even lower.) Thus taxing extraction changes not how much one pays but to whom. Taxing contamination, on the other hand, does impose the cost of acquiring and operating control equipment. Yet passing on these costs makes the dirty, “grey” methods and

    bads more costly and the non-polluting processes and products cheaper in comparison. To save money, producers and consumers would switch to the soft path. As the volume of green trade grows, green prices fall.

    Not only is the collection of Rent not regressive, but the disbursal of Rent is inherently progres-sive. How much residents pay in would differ according to the value of the nature they claim (and the rich own the most and the best of nature), yet how much each gets back would be the same; an additional $1000 per month would double the income of many people yet go unnoticed by the very well off.

    Rather than rely on a market that self-regulates organically, Michael Jacobs urged some controls to go with taxes. Social ecology founder Murray Bookchin in Remaking Society advocated lo-

    calized communism (municipalism) and paraphrased Karl Marx (p. 172; 1989): "The earth can

    no longer be owned; it must be shared. Its fruits, including those produced by technology and labor, can no longer be expropriated by the few; they must be rendered available to all on the basis of need."

    Yet is free exchange the problem or is biased policy? The Business Council for Sustainable De-velopment (above) noted the market "has never been given a real chance to work for the envi-

    ronment. The use, exploitation, and degradation of nature has not created signals of scarcity be-cause those who 'own' nature and its services society, expressing its wishes and intentions thru

    government have tended to give away environmental resources and services for free."

    These four advocates for a safety-net might logically join their fellow greens in pushing for a universal dividend, once such a movement gathers enough steam. Already, the safety-netters are far out-numbered by the environmentalists promoting a society-wide rent-share.

17 Notable “greens” on the Universal Dividend

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FROM RED TO GREEN by SMITH, J.J. 4

    Older advocates, the conservationists, cited proto-geonomist Henry George and called for shar-ing Rent from resources. Newer ones, the environmentalists, would share Rent of sinks (now that pollution is a more pressing problem). While the Europeans of all ages were bold enough to de-mand shares of Rent for raw land.

    The Australian aborigines, many of whom lived in harmony with nature, testified at a British Parliament hearing in 1988: "our land claim doesn't take one piece of land from anybody." How?

    They instead claimed a share Rent from which they could restore their culture. Midnight Oil,

    the rock group whose lead singer, (1) Peter Garret, ran for the Australian Senate as the nominee

    of the Aussie the anti-nuclear party (which later merged with the Green Party for which Garret works), promotes the aborigines’ remedy.

    (2) Gifford Pinchot (1865-1946), first head of the US Forest Service (under Teddy Roosevelt who once lost a race to George yet later began the US Park system), in the early 1900s chal-lenged the logging of public land, which was infamously corrupt. He said: "The earth … belongs

    of right to all its people and not to a minority, insignificant in numbers but tremendous in wealth and power… The people shall get their fair share of the benefit which comes from the develop-

    ment of the country which belongs to us all… with equal opportunity for all and special privileg-

    es for none." (Breaking New Ground; 1947; p 509-510)

    While arguing that producers waste way too much, environmentalists have long noted that con-sumers, too, could select for efficiency, were their income secure. (3) Warren A. Johnson con-

    tributed “The guaranteed income as an environmental measure” to the 1973 anthology, Toward a

    Steady-state Economy (p 175-189), edited by Herman E. Daly.

    Ex-World Bank Economist and co-founder of the International Society of Ecological Economists (to which this writer belongs), (4) Herman Daly, in Steady-State Economics (1977; pp. 64, 68)

    wrote: "the windfall Rent from higher resource prices would be captured by the government and become public income a partial realization of Henry George's ideal of a single tax on Rent. Using Rent to finance a minimum income could substitute for a considerable number of bureau-cratic welfare programs."

With support from Margaret Mead, (5) John McConnell founded the first Earth Day on the ver-

    nal equinox (proclaimed by the City of San Francisco in 1970 and UN Secretary General U Thant in 1971). Since 1980 he has pushed his Earth Bounty Program. "Those who own land, oil,

    gold, or other minerals should pay a 2% royalty to a fund that will provide the homeless a stake in their planet. Afterwards, distribute royalties equally to shareholders worldwide.”

(6) Robert Gilman in his magazine IN CONTEXT (1984 winter, now YES!) wrote: "George

    claimed that his land tax would be sufficient to pay for all the costs of government. (Yet) the ben-efits from government programs are generally unevenly spread. (So instead) distribute (Rent) directly to people as a Common Heritage Dividend (about $4,000 per person per year in the US)."

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FROM RED TO GREEN by SMITH, J.J. 5

    (7) The British Green Party's platform (1986) claims, "Rent should never have been allowed to

    fall into private hands... it should now go back to everybody: it should reduce the burden on ef-fort-based taxes in financing social services and the Basic Income Scheme."

(8) The Irish Green Party's Manifesto (1989) states, "The land tax, used together with energy

    and other ('sin') taxes (and user fees) as a source of funding of guaranteed basic income, is a means of ensuring that everyone shares in the wealth of the land by virtue of citizenship."

The Austrian Green Party joins the Irish and English GPs in pushing for a social salary, tho’ for

    the Austrians it need not necessarily come from rent.

Some assume common ownership is a prerequisite to public sharing. (9) German Green Margrit

    Kennedy in Interest And Inflation Free Money (1988, p 32) elaborates: "a combination of pri-

    vate use and communal ownership would be the most advantageous solution for achieving social justice and allowing individual growth... (society) would buy up all its land and lease it out to its inhabitants... The constitution of ... Germany describes land as an asset which carries a 'social' responsibility.” But why buy the land? If society is to compensate landholders, why not the land-less? That issue aside, Dr. Kennedy claimed that the increase in German land and building value from 1950 to 1980 was enough to give every German DM800 a month for life. One wonders how much the dividend would be from only the land value.

Ex-British cabinet economist (10) James Robertson, founder of The Other Economic Summit,

    in his Future Wealth (1989; p 105-6): "tax the site-value of all land in its unimproved state. This tax was first proposed by the 19th century American economist Henry George. We should envi-sage the eventual removal of all taxes on incomes and value added, savings and financial capital. Taxes will take the form of Rents and charges reasonably paid in exchange either for the use of resources that would otherwise be available for other people, or for damage caused to other people." In his 1994 essay, "Benefits & Taxes", he argues the feasibility of a basic income in lieu of other entitlements ("enticements" is more like it).

(11) The German Institute for Economic Research, contracted by Greenpeace, concluded in

    their Economic Bulletin (v 31, n 7) that "an energy tax returned to firms as a reduction in em-

    ployers' social insurance contributions and to private households as a per capita allowance ("eco bonus") would be feasible in legal terms and have positive effects even if implemented in a single country."

(12) Jakob von Uexkull, founder of the "Alternative Nobel Prizes" (the Right Livelihood

    Awards, who wrote us for more info), speaks for many when he says, "without fair compensation,

    all talk of the 'global commons' or the 'common heritage of mankind' will be seen by the poor as another attempt to expropriate their resources."

    Some taxes and subsidies are better than others, yet all are fatally flawed. They distort price, the DNA-like carriers of information, noted Michael Rothschild in his Bionomics (1990). Alter

    genes, mutate offspring; alter price, mutate output. Echoing Henry George, Paul Hawken in The

    Ecology of Commerce (1993) noted that shifting taxes from goods to bads and subsidies from bads to goods "does not depend upon a transformed human nature but extends to commerce the

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FROM RED TO GREEN by SMITH, J.J. 6

    interwoven, complex, and efficient models of natural systems ... so everyday acts of work and life accumulate into a better world as a matter of course, not conscious altruism." (13) William

    Ashworth (author of eight titles including The Late Great Lakes) in his The Economy of Nature

    (1995; the first book published by the Sierra Club on economics) noted that were we to replace taxes and subsidies, we'd quit distorting price. We could replace taxes with fees and subsidies with dividends. Responding to precise prices, economies could then harmonize with the rest of the eco-system.

    Common Assets promote a "sky dividend" paid to citizens from fees collected from corporations for using the atmosphere as a dump. AKA the Sky Trust Initiative, it’s a project of the (14) Cor-

    poration for Enterprise Development. (CED, 777 N. Capitol St. NE, Washington DC 20002.

    skytrust@cfed.org, www.skytrust.cfed.org) Conceiver Peter Barnes spelled out the moral prin-ciple perfectly: “from each according to their use of the commons, to each according to their

    equal birthright.” (YES! 1999 Spring).

    (15) New America Foundation publishes “Public Assets, Private Profits” by David Bollier in which he writes: “explore innovations in private law and technology that can keep the commons healthy and intact. (Tho’ we should do that not just for common property yet for all Earth.) Fos-

    tering the commons requires … a larger cultural vision of community and personal fulfillment…

    create stakeholder trusts that pay dividends to all citizens from collectively owned assets; and capture capital gains from public infrastructure.” Yet we’re all entitled to the Rent from all na-thture, not just the part held in common. bollier@essential.org NAF, 1630 Connecticut Av NW, 7

    Flr, Washington DC 20009, Andrew Harig, harig@newamerica.net

    Rather than give away pollution permits for free, why not auction them off? Better than a fine or tax or set fee, requiring bids would charge industry before they pollute and let them decide how to reduce their emission. Auctions even let environmental groups bid on permits. An auction could raise $100 to $500 billion each year for carbon permits alone. (16) Americans for Equit-

    able Climate Solutions suggests using one quarter of that in towns dependent on oil and coal to ease the transition to a clean economy and three quarters to fund a dividend which could be as much as $800 per American per year, a la the CED Sky Trust. (Christian Science Monitor, 2000

    Nov 24)

    Redefining Progress, which had a cover article in THE ATLANTIC MONTHLY (1995 October), has two main programs: (a) “correct the GNP to account for social and ecological costs” and (b)

    “replace taxes on labor and enterprise with ones on natural resources.” And with taxes on sites,

    too, they later added in their 1999 report. The founder of Redefining Progress, (17) Ted Hals-

    tead, added the capstone in “A Politics for Generation X”: "America could raise trillions of dol-

    lars by charging fair market value for the use of common assets the oil and coal in the ground,

     and the rights the trees in our national forests, the airwaves and the electromagnetic spectrum

    to pollute our air. Charge fair market value for the use of common assets and return the proceeds directly to each American citizen.”

This list of 17 keeps growing. If you hear of someone promoting some form of geonomics

    sharing Rent in lieu of taxing effort before we do, please, send us the clipping. We’ll add them

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FROM RED TO GREEN by SMITH, J.J. 7

    to the list. Soon as the number of geonomists reaches critical mass, then the environmental movement will win geonomics for all people, for the whole planet. And for the BIGists, too.

2002 February 12

Word count: 3071

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