Re: OWNERSHIP: redistribution 2 - absolute property rights

["Norman G. Kurland" <thirdway@cesj.org>]

I regret that I don't have more time to devote to the COG discussions,
but this exchange between Michael Bindner and Ed Dotson is a simple challenge
that binary economists cannot ignore.

I disagree with both Michael and Ed  for reasons covered in the Kelsonian tax philosophy section of my paper, "Beyond ESOP: Steps Toward Tax Justice" (available at http://www.cesj.org/homestead/reforms/tax/taxjustice.html).  Michael's tax proposals mistakenly assume that power over money should flow from government, from the top-down, leaving the citizens in too heavy a state of dependency on those who run government, a natural (and therefore dangerous) monopoly over society's coercive powers.  In my opinion, based on 43 years as a professional in Washington) Michael's ideas are not sufficiently sensitive to the evils and inefficiencies inherent in concentrated power, as Lord Acton warned us about.  Ed is clearly more of a populist, but his advocacy of Henry George's single tax on land rents is on the same slippery slope of the neo-Welfare State ideas advocated by Michael.

Regarding rent from land, why not structure land ownership (e.g., through the use of a "community investment corporation" or "CIC") so that all citizens own equity shares in the land and other natural resources, as Kelso proposed?  Then "rent" from development would take the form of appreciated equity values and dividend incomes that would be connected directly through private property stakes to all citizens of a community, region or nation, depending on the nature of the natural resource owned by the CIC.  This would build economic power and ownership incomes directly in the people, from the ground-up, rather than allowing the rents to flow automatically into the hands of the politicians and bureaucrats.

To the ordinary citizen a consumption income from rent and other natural resources is no different from that received from other forms of capital (assuming, as under Kelso's binary economic theories, that we define "capital" to include natural resources as well as all other non-human factors of production.)  Once the rent and other binary incomes flow into the pockets of citizens universally, as would automatically happen under the proposed "Capital Homestead Act", the government would then be forced to go to the people to meet the public sector's legitimate budgetary needs and not simply have a "pot" from land rents to play with to continue to make decisions from the top-down.

The fairest, most democratic and simplest tax (besides user fees where appropriate) is a single direct personal income tax on all forms of consumption incomes in amounts above the poverty level (including rent from lands under a binary economy).  Tax returns would be prepared on a single page, and the binary system would eliminate the current deductions, tax credits, exemptions (except for the Capital Homestead exemptions on personally accumulated capital assets below $1 million per citizen) and other features that complicate the current tax systems of America (creating expensive makework jobs for tax lawyers, accountants, tax preparers and IRS staff.)  Under a binary economy the tax rate would be set at a percentage of taxable incomes from all sources that will automatically balance the budget at any level of government (and possibly to pay down government debt over time as no-interest Capital Homesteading credit is supplied by the central bank through local banks to meet infrastructural and other productive assets now being supplied unnecessarily by the public sector at all levels.)  And politicians would be forced to be more accountable and transparent (and most lobbyists would be forced to seek real work).

On corporation taxes, Kelso and I would leave them in place but allow corporations to eliminate their taxable incomes by making full dividend payouts.  On estate and gift taxes, we would tax the recipients if their assets exceeded a "Capital homestead Exemption" for every citizen, reinforcing the policy of broad-based ownership.

During the transition to full production under a binary economy (and even after for those who fall between the cracks), the incomes of the poor could be supplemented by a negative income tax or a guaranteed annual income (both of which are useful expedients to provide an adequate and secure minimum income for all families, assuming imperfections of even the most rational of economic and social policies.)

I think Henry George's critique of the current system was brilliant, even if I disagree with the political wisdom of his single tax reform.  Attached for those interested is a paper I delivered to a Georgist conference several years ago on a new "post-scarcity" synthesis of the best of Kelso, Buckminster Fuller and Henry George.

Here is a brief excerpt from a note explaining the similarities and differences between Kelso and George, as well as other great economic theorists:
 

You are correct that Kelso advocates a wider distribution of capital ownership as a means of addressing the same problem that Major Douglas, Karl Marx, Henry George, G.H.
Chesterton, and Hilaire Belloc were trying to solve.  That problem was how to close the purchasing power gap between the growing technological capacity of the world's economy to produce in abundance for all and the lack of adequate purchasing power among working people, whose connection to the productive process was being displaced by labor-saving technology or workers in other parts of the world willing or forced to take less pay for the same work.  Douglas would create enough new money to close that gap and distribute an equal amount of it to every citizen in the form of a National Dividend (whether or not the citizen contributed his labor as a worker or his productive assets as an owner to the process of creating that wealth).  Marx would turn over the ownership of all the productive assets to ownership of the state, force everyone to become a worker for the state, and thus put all citizens in a state of total income dependency on those who control the state (what Marx called "the dictatorship of the proletariat.")  Henry George would solve the problem by imposing a single tax on the owners of land and natural resources, providing the state the revenues to provide its citizens the services they need, welfare checks, vouchers or whatever other means can be conceived by government officials to close the gap.  Chesterton and Belloc called themselves "distributists" because their solution was simply to redistribute all existing wealth producing property among the population from time to time, so that everyone would be able to live partially off the dividends or profits to which an owner is entitled.  Keynes came along in the Depression and advocated tax, government spending and monetary policies that generated "full employment" whether or not those jobs created anything useful that people wanted and would be willing to buy if they had money to spend.  Marx and Keynes assumed, like most economists today, that all wealth is created by human labor and that incomes should be tied exclusively to economic work.  Douglas, George and Kelso all accepted the reality that machines, structures and other forms of technology were increasingly important in the wealth production process, capable of producing more and more with less and less human effort.  Where Kelso made a major leap forward was in his insight that if everyone owned the means of production then they could be directly connected to production process through the historic institution of private property, which, among other things, entitled them to directly control or share control with other owners in the governance of companies and the undiluted right to the profits or share in the profits of any enterprise.  Thus, Kelso did show how everyone, mainly through socially created credit, ownership-friendly tax policy and changes in inheritance laws, could become an owner of enough income-generating capital over time that they would be totally liberated from the modern dehumanizing wage system to meet their consumption incomes.  While Kelso attacked economic monopolies and plutocratic concentrations of capital assets as the cause of the purchasing power gap that Douglas was rightfully concerned with, Kelso's approach would redistribute future ownership opportunities (i.e. new assets and assets transferred by deaths and sales). Kelso thus avoids the class conflict that is associated with the charitable or government-imposed redistribution of previously accumulated assets (as implied by distributism) or involuntary redistribution of incomes through taxation.  While Kelso would end the monopoly of access to future ownership, he would do so without deriving anyone of what they own, mainly by growing the asset pie and spreading the ownership and profit distributions to all citizens.

To better understand Kelso's vision of a market-based economic democracy, go to
http://www.cesj.org/binaryeconomics/kelsovision.htm

One of Kelso's best articles is his critique of Karl Marx's Das Kapital at
http://www.cesj.org/thirdway/almostcapitalist.htm

You might also enjoy our comparison of Kelso's "Just Third Way" with conventional capitalism and all forms of socialism on the web site of the Global Justice Movement (retrievable from the bottom of GJM's "Activities" page at http://www.globaljusticemovement.org/act.htm)
 
 

Michael Bindner wrote:

what is your proposed method of collection for this "rent"

EJDodson <ejdodson@comcast.net> wrote:

Ed Dodson responding...Michael Bindner wrote (7/7/03): As I have written on both my web sites, redistributional taxes and the empowerment of youth are a way to remove the concern of life versus property, by simply instituting a negative income tax in the spirit of the Earned Income Tax Credit (only larger by 6 times) to remove this concern.  Using corporate rather than personal income taxes is considered a better vehicle for this, as it more neatly integrates the payment into salary and by doing so hastens the day that employee-owned firms adjust salary for child birth as a matter of course, ending the need for tax incentives for this purpose.  Continuing to rely on personal income taxes, or even capital credit for each child, keeps the government's hand in this question forever.  Adjusting corporate taxes is therefore the more libertarian alternative.

Ed Dodson here:The Kelso-Adler vision of universal capitalism mitigates but does not replace, in my view, the potential for a citizens dividend to be collected and distributed out of the nation's rent fund. As the classic political economists all understood, rent is that portion of wealth accruing to those who control land that is better located or has greater potential productivity than what is available at the margin. As such, rent ought to serve as the primary source of public revenue; then, what is left over can be distributed as a citizens dividend. Potentially, taxes on productive economic activity (i.e., on earned incomes both personal and business and on commerce) can be reduced and/or eliminated.  

Attachment: HGeorgeFullerKelsoGeorgists990708.doc
Description: MS-Word document