Tuesday, June 28, 2016

Life Accounts (previously refered to as ULI) as a complement to UBI (basic income)

A Life Account is a term used by a Finnish politician in the context of basic income.  I have no idea what she meant by it, but its a great term to describe the concept of ULI (unconditional loan income) I've developed earlier.

ULI is especially useful in the context of pilot programs under discussion in many areas of the world, but has numerous other advantages compared to just basic income.

In the context of Ontario/Canada,

  • Every resident under 65 has the unconditional right to a government/ backed loan of $8000 per year ($750 per month if taken every month).  No restrictions or questions whatsoever related to use of funds.
  • There is a non-usurious interest rate of 2%/year applied to the loan(s).  Each loan (monthly or yearly)'s balance cannot grow to more than 100% of original value ($750 loan has max repayment of $1500, even if still due 80 years later)
  • There is no fixed repayment obligations. Instead, a 15% royalty/tax on income is applied as a loan repayment.  No income means no repayment obligations.
  • The 15% income royalty replaces the existing payroll tax system that is a fundamentally equivalent repayment burden.  There is no $50k salary cap for payroll taxes.  Investors and landlords and business owners, also fully repay ULI based on income.
  • The banking system can be directly involved in service delivery. 
  • If you have unused ULI borrowing capacity for the year, you may borrow from it up to March 1 of the following year for any purpose, or April 31st of the year to settle income tax or repayment royalty obligations. 
  • Spousal ULI balances are repaid at a 10% royalty rate, if your own balance is 0.
  • Incomes of $53400 would repay $8000 in ULI.  The amount equal to what can be withdrawn the same year.
  • Estate taxes would place liens on non-liquid assets (houses typically) of the estate, but the estate would still formally owe any ULI.

Life Account concept adds:
  • A $100k accumulated lifetime balance owed triggers adjustments to new loan eligibility.
  • Eligible new loan amounts can drop to $6000/year ($500/month) at $100k balance outstanding.
  • At $150k total outstanding, the royalty repayment rate can grow to 20%, and include new loan income as part of the royalty base.
  • It takes about 12 years of 0 income lifestyle to reach a $100k balance outstanding.  It takes another 7-8 years to reach $150k balance if 0 repayments are ever made.
  • At $200k, royalty repayment rate would go up to 25%, and new loan eligibility would drop to $4000/year.  It takes another 9-10 years to reach that cap.

Like a student loan without being tied to education

The life account is close to the familiar concept of renegotiation on US predatory student lending programs, where income based repayments are negotiated.  Even though they are not forced to, young adults would eagerly use the life account funds to assist in their pursuit of formal education.

But development isn't limited to accredited education programs.  STEM skills can be developed at a hobby/self directed learning effort.  Tools, machines, design time with access to food and healthcare is development.  Part time work, internships, 0-hour contracts, gigs is development towards hopeful full time middle class income.

But using the funds towards a car or food or home provides income security for any lifestyle or income level.  As a complement to UBI or GAI, the overall support amount is sufficient to eliminate all other income assistance programs.

The major difference with basic income

A life account loan balance repaid through an income royalty differs from normal tax funding of UBI in that "taxes owing" is more directly related to individual benefits received.  A successful doctor or other student that used 8 years of income support is likely to repay that income support.  Other successful people eventually eliminate their repayment obligation (through repayment).

The poor, in exchange, receive the unchallageable right to run up a high benefit balance, and choose or deal with a lifestyle that will not repay it.

The main justification for life accounts vs UBI is one of cost.  If 50% of the population repay their loan with 2% interest over 10 years, and of the remaining 50%, they average a  50% repayment of the loan amounts taken, then compared to the same UBI benefit level, ULI costs only 15% of the funding requirement.  A $8000 ULI/lifeaccount benefit costs the same as an $1200 UBI amount.

Complement to UBI or GAI

The Manitoba Green Party platform proposes a $6300 GAI (guaranteed anual income) that is clawed back at a rate of 16% from poor-middle income workers on their first $40k income.  The program is roughly revenue neutral with poverty elimination benefits completely justifying the very small tax increases affecting some people.

In the linked paper, obvious funding sources (welfare elimination, basic amounts turned into refundable tax credits, special investment income credits eliminated) for an additional $3000- $4000 in UBI without any low income clawbacks are made.  Enough for at least $9300 in GAI + UBI.  Enough by itself for very spartan poverty elimination.  (through for example, cohabitation)

ULI/life account supplement of $8000/year is both sufficient to eliminate, and a huge improvement over, EI (employment insurance).  While working, you may avoid withdrawing from life account.  If laid off/fired in July, you may take out $1500/month for rest of year.  If laid off at begining of year, you may use unused previous year's balance.  There is 0 impact on income security or income supplement strategies affected by taking a new job the day after you quit your previous one.  Insurance is pre-paid access to support possibility.  ULI is post-paid repayment of support received.  An obviously superior income security program.

Eliminating EI benefits allows either $1500 higher UBI payments, or elimination of 7.5% of payroll taxes.  Repaying ULI would be as burdensome as current payroll (EI+CPP) taxes.  The ULI benefit itself though is sufficient to fund a voluntary CPP (personal pension) program, or an even better retirement enhancement program of paying down mortgage or other debt.

The total unconditional income support of $17300 is enough for anyone to fund formal education or other personal/business/family development and income security/variance requirements.

Social/Citizen Dividend complement
Basic income is often thought as a citzen benefit rather than a resident/landed immigrant benefit.  The thinking is partially nationalist, but also has a cost rationale of reducing eligible recipients.  Still this is not completely fair in that  immigrants (may) pay taxes, and social services to ghetoize and oppress them are expensive, especially if they are needless.

Immigrants generally perform the function of slaves, a partial reason for their welcoming is that slavery is awesome (for the slavers), but a more important benefit to Canada is that all increases in the amount of people provides work/income to "pure" nationals.  It doesn't matter who pays to have them eat or housed, the payments get transferred through the economy.

So far, we've discussed a $17300 unconditional income support plan made up of $6300 GAI, $3000 UBI, and $8000 ULI.  Under this plan, the rich (ignoring full taxation of dividend and capital gains income) get a 15% tax cut on employement income! (due to payroll tax elimination and replacement with 15% royalty on ULI repayments).

The rich don't use ULI, but also don't have to repay it.  The GAI and UBI were all revenue neutral.  UBI/ULI is still a tremendous benefit to the rich in that it takes care of their family (spouse and young adult children), and further assists in their own income variability and its not impossible that they will need to access the safety net either.  More importantly, the rich benefit the most from the 10%+ in higher consumer spending that UBI/ULI generates (its always been trickle up economics).

For these reasons a 5% surtax on those who do not have an outstanding ULI balance is fair to allow higher income Canadians to bear some responsibility for the tremendous winfall that UBI/ULI provides to the successful.

The proceeds from this 5% surtax (from CRA 2012 data)  assuming its from those with incomes over $80k, 5% of $482B income from that group would be $24B.  If that surplus funding is used to pay a social dividend to adult citizens only, it would be enough for $1200 per citizen.  (Note that it is not a surtax only on income above $80k.  Instead, people either pay 15% royalty on all income or 5% surtax depending on whether or not they have a life account balance outstanding)

The citizen's dividend would be used to repay ULI balances for those that have them, and so effectively the only people receiving a cash benefit from the citizen dividend would be those that pay the 5% surtax.  Further enhancing its fairness.  Any other surplus tax revenue resulting from say economic growth, and the buffers built into the proposed tax/UBI code, should also go towards citizen dividend payments.

An immigrant unconditional income program
A $10000 ULI program with 40% royalty rate on incomes while having a balance, and "normal" tax rates if their balance is 0, would provide non-ctizens with $25000 after tax income on earned income of $25000.

This is actually extremely close to the 16% GAI clawback on $6300 + 22% "normal" tax rate.  Its 2% higher on incomes up to $25k, but 16% lower on income from $25k to $40k.  Ignoring the cumulative nature of ULI repayments.  The $3000 UBI funding comes from program/tax credit savings that include non-citizens.  The $700 difference with the citizen ULI/UBI program is negligible.

It would be prefectly reasonable to offer the same $9300 UBI/GAI program to all residents, and then for non-citizens, offer $2000 maximum annual ULI program.  One justification to offer lower ULI limit to non-citizens is the fear of collecting on loan balances if they leave the country.

The only reason to formulate it as a $10000 ULI only program is to soothe nationalist psychopathy about non-citizens paying their own way.  ULI has the general quality of  a social program framed to suit hate motivated reasons/falsehoods against human liberation.  It's loan-based self support where any losses from the loan program costs less than the welfare support it replaces, and the relatively modest support in the case of immigrants encourages their voluntary compliance into the slavery our overlords need.

While a 2 tier system tailored to 2nd class slavery promotion of immigrants may seem distasteful, $10k is enough to refuse slavery arrangements, and choose life independent of permission, and the choice to come to Canada is likely to be more attractive than any other option.  UBI creates massive job opportunities available to be filled, and so this 2 tiered pro-immigration plan would suit the slaver/business sector.

Carbon tax/dividends:  Another $2000-$4000 unconditional income support
The only effective way to combat climate change is through carbon taxes that direct their funding towards social dividends.  By definition the average cheque is enough to pay for the extra taxes if polluting behaviour is unchanged.  But every individual is motivated to change their behaviour and so solar panels and electric cars, and home insulation is an obvious money/tax saving choice available to anyone who'd prefer not to pay the taxes.

Carbon dividends should be available to non-citizens as they also use energy.

Summary of benefit program
  1. Citizens:  $6300 GAI (16% clawback), $3000 UBI, $8000 ULI (15% clawback), $1200 Citizen Dividend (repays ULI if owed), $2700 Carbon dividend.  $20000
  2. Non-citizens:  $10000 ULI (40% clawback).  $2700 Carbon dividend: $12700
Financial engineering of ULI for private participation
Detailed in original ULI whitepaper, the funding of ULI is independent from the guarantee of ULI principal.  The latter is guaranteed by government through funding the purchase of its own 30 year bonds.  The citizen's dividend repayment system would bring the expected guarantee cost close to 0. The arrangement permits the central bank to buy the guaranteed ULI funding loans under the same jurisdictional logic it can justify QE.  The ULI funding loans themselves can originate from a mix of private and public sources.

The appeal to investors for ULI loans even with a maximum 2% annual return is the 0% minimum return, and a very high cashflow yield.  Median income levels would repay 70% of a loan's balance in 1 year.  A $1200 citizen dividend would repay an addional minimum 14% of investment as cashflow.

ULI loans are made as shares in monthly pools spread among all borrowers for the month.  The richest and poorest borrowers are all in the same pool.  Of all existing loan products, ULI loans would have the fastest principal repayment rate (and thus cash yield) by far.

The 0% guarantee is paid at the time of estate lien resolution which may be years after the recipient's death.   But if an average 80% is repaid on a 20 year time frame (140% return on that 80% - 112% of original principal) then even if remaining 20% repaid 0, its a 12% return, and the guarantor would pay nothing.  Even if it takes a long time to resolve the remaining 20%, the ULI loan pool is a resellable asset, and so may be cashed out (at a likely discount) at any time.

ULI is a slight accounting trick on the same fundamental principle as UBI.  Both are investments by society in its people, paid by taxes/funding of the successful.  A national student loan program costs only the unrepaid/defaulted portion.  It has always generated net profits to private sector participants.  ULI would be tailored more as a break even proposition, but UBI is approximately the same principle of investing in youth and entrepreneurs under the hope that their future taxes repays the received assistance.

Potential for global ULI/Life Accounts
ULI can be a transnational loan, with repayment obligations administered by national revenue agencies.  This can mitigate the potential for individuals to use generous development assistance of one country but then move to an oppressive country to apply those skills.

Access to citizen's dividends may be contingent on residency, as a further incentive for citizens to stay in their country.

Banking system involvement
A life account can be just another banking product.  ULI funding loans (for lenders) can be products that are both sold as retail banking products similar to GICs and through bond markets, with institutional, private, and government funders.

Both the banks and government can offer backstop financing of ULI funding requirements.  In the banks' case, either as short term bridge financing, or simply a partial backstop of a few $Billion.  It makes more sense to use retail banking products as the primary funding, and bond markets as a means to resell the loan packages.

Due to guaranteed nature of ULI loans, and fast repayment yield, these products should be eligible for tier 1 capital reserve requirements.

Banks roles could also be used to resolve possible "residency fraud" requiring in branch visits from accounts with suspicious IPs.

ULI as a tool for pilot studies
The ULI concept was originally designed as a solution to pilot study issues.  Though I currently advocate for it as a general program.  The main difficulty with pilot programs are limited funding and also piloting the concept of/reaction to associated tax increases.  While original pilot program guidelines still apply, here is a simplified proposal.

Ontario Pilot program proposition(s):
  1. $12000 ULI at 20% income royalty pay back rate.  Accepting proposal rejects access rights to welfare/disability EI benefits for duration of the program.  This program is available to those 18 to 25 without post-secondary aptitude, and those 25-64.  ($60k income would result in $12k ULI repayments).  Any EI premiums paid will count as repayment.  ULI benefits will count as income for purposes of income based housing.
  2. $18000 ULI at 25% income royalty pay back rate.  Accepting proposal rejects access to welfare/disability/EI/Student assistance.  The program is available to those with University admission letters/enrollment.  A bonus $1500 towards tuition will be given to recipients who enroll in an Ontario University, but the $18000 is not conditional upon it.  ($64k income (likely in future years) will result in $18k repayments.
  3. Optionally, program 2 could be offered to applicants of provincial venture assistance programs, which tend to be far too competitive/rejectionist to be useful.

The 2 different tracks are meant to study groups that already separated as  investable vs. non-investable.

For program 1, it should definitely be offered to a large group of social assistance recipients.  Some may say no, and a questionnaire should discover their reasons.  For this social assistance recipient group, though ULI is a loan with permanent repayment obligation, if the program is discontinued, a portion of the ULI received may, at her majesty's discretion, be reclassified as non-repayable social benefits.

Program 1 should also be offered as a general lottery, and to a random selection of tax filers.  The difference between the 2 selection methods is the first group are people sufficiently motivated to receive UBI/ULI as to bother applying.  The lottery application level will also show general interest in the ULI program.  Both of these groups should select sufficient samples accross age groups.

Program 1 should also be tested in concentrated communities as well as in individuals across the province.   Concentration allows measurement of regional economic gains.  Isolated recipients provide better expectations for border towns and general happiness.

Program 2's lack of forced institutional attendance allows comparing success rates of alternate choices.

An alternative pilot design is to include the Manitoba Green Party $6300 GAI plan, and have a ULI program (same amounts less $6300) supplement that.   The GAI is a gift.  The ULI a royalty-loan.

The left hates ULI as much as they hate student loans
Even if there is political favour for UBI over ULI/life accounts, ULI as a pilot tool is the right way to measure tax and permanent consequences of the program.  Accepting the ULI has tradeoffs of long term tax implications even if the program could be temporary.

Any UBI pilot without permanent implications is going to have results, no matter how good, dismissed as "of course free money made people happier", or "they only behaved this way because it was temporary", and then used as an opportunity to shelve the program for another 40 years.

I'll close by repeating my position that pilot testing UBI is equivalent to pilot testing slavery abolition or pilot testing granting the vote to women and minorities.  Its an opportunity to avoid action, and fundamentally wrong. They pilot studied basic income in the 70s.  Shelved without analysis in Canada.  In the US, there was a small decrease in hours worked.  The US political response was the same as if they had pilot studied slavery abolition and found a 5% cotton production decrease.

To address fear and disruption, I recommend instead gradualism.

Saturday, May 28, 2016

moral inversions, fair markets, and absolute morality

Moral transformations refer to reframing propositions in a better moral light in order for them to be more morally palatable, though fundamentally providing the same/similar enough advantages.  Moral inversions is a process where morally unpalatable objectives and outcomes are pursued using moral transformations.   A moral inversion is a moral justification for (likely intentional) evil.  These topics should be the main focus of philosophy and moralism.  Though we can identify what is moral vs immoral, its relatively irrelevant to do compared to the easy process for corrupting  those identities to suit empowered wills.

Fair markets
Adam Smith's justification of free markets was entirely and explicitly dependent on fair markets:  equality of bargaining power and perfect information and competition.  Basic income is one promising policy to equalize bargaining power in the labour market.  Though markets are primarily thought of as transactional arrangements, they also apply to games, such as elections determining power, and fair markets is a subset of fair gaming systems.

I propose that fair markets are a more ideal and permanent solution to market/game corruption than is changing who benefits from the game corruption.  For example socialism vs capitalism is a war where the winner reaps the gains from a corrupt favouring game.

If I propose to kill and eat you for profit
You will raise 3 moral objections to the proposal:  I should not kill you.  I should not eat you, and doing so for profit is definitely not an exemption for the previous 2 moral imperatives.  An audience hearing your moral objections would be inclined to agree with you, and either through sympathetic rage against my evil, or merely to ensure a fair game where they are not subject to similar victimization, may seek to prevent or punish my proposal.

To pursue my goals of eating and profit I need to morally invert your losses through moral/situational transformations that will at least intellectually confuse the audience you need to make your moral case to.  For instance if a harsh systemic and natural balance kills you, and pigs eat you, then I may eat the pig with no moral (vegetarianism aside) objection to my actions.  Exploiting your desperation for my profit can be done with moral "blamelessness"/detachment if I have no visible hand in causing your desperation.  If state sanctioned moral authorities (usually the state itself) have not previously denounced profiting from your desperation in the manner that I can, then your audience is unlikely to be moved to your defense, and my media puppets may drown out your voice and confuse enough of the audience to side with me.

But who will pick the cotton
was a primary concern, and anti-abolitionist argument.  Abolition of slavery was a moral transformation:  An appeasement of liberal moral qualms, while fundamentally permitting the same profit/cotton opportunities, labour market exploitation independent of slavery, and perpetuating african american sub-equality.

A moral transformation is a solution to keeping the world the same while manufacturing a liberal headline.

If voting could change anything they'd make it illegal
Democracy was the minimalist moral transformation necessary to appease violent liberal rebellion.  Democracy is relatively recent mid 19th century development in Europe that stemmed from  a contagion of rebellions.  But a process to elect kings does not eliminate power and control.  It merely requires a slight sharing of power among aligned interests and those easily bought.

The key takeaway is that governance does not seek to maximize game fairness, and instead offers itself as a tool for moral inversions.  Individual moral inversion opportunities seem to trump fairness ambitions primarily because there is a win opportunity through moral inversion that will escape attention by the losers, and innattentive audience.

Even principled defense of fairness actions do not stop constant attack on them.  Abortion, Net neutrality, and 40 acres and a mule all received constant attack.  The latter was undone almost everywhere within 2 years.  Net neutrality has similar deep moneyed backers, and abortion is just vote bait, but vote bait is the main force upholding net neutrality.

What makes morality focus unhelpful
Winners from corrupt markets will call the markets free, and the outcome just and deserved, while losers will call the winners assholes.  The entirety of political discourse is about siding with and against assholes.

The fear of not doing the same thing tommorow
If you promised coal workers that for 10 future generations, they will be forced underground to risk collapse accidents and lung disease while contributing to the destruction of the planet and air environment, they would be very happy with the proposed income security.

Any change no matter how systemically/socially beneficial will disrupt someone's life in the short term, and create reluctance and resistance.

linguistics: fuckface
The ends justify what comes out of your fuckface to justify the ends. is moral inversions and transformations.

Fuckface politics is constituency advocacy dressed up as social progress or efficiency instead of the latter.

I'm unable to determine if fuckfaces are stupid or dishonestly resistant and evil, but these concepts do not seem that complicated, and the latter is presumed for public figures.  Stupidity would disqualify them from public influence as much as should evil.

Absolute social morality
is necessary to prevent moral inversions and transformations as a tool for political and economic power.  Either tyranny and slavery are absolutely bad, or they are something we say is bad while accepting as close a system to these as possible without rebellion.  Without absolute social morality standards, minds are too weak to prevent moral inversions that perpetuate or increase slavery and tyranny.

 These are sufficiently short, simple and clear for a court to strictly limit political moral inversions:
  1. Increased production is good to a society.  More things is more wealth, though external costs such as pollution are relevant.  Distribution of wealth is a separate question, but private property is the best known mechanism to motivate production.
  2. Savings is at best not always economically parasitic.  Corollary to 1.  Savings is parasitic as insurance, and is parasitic as excesses over productive investment requirements.  Spending always improves economic output more than saving, and nearly all future income (production) opportunities are inherently financeable if not foregoing food or shelter.
  3. Absolute equality of all social members as an absolute ideal.  The only controversial aspect here is refusal to consider a gender or class as handicapped children free of responsibility, or superior beings incapable of making accusatory lies.  Equality of rights and opportunity.
  4. Freedom is good.  The most important is the financial Independence to survive without any legal duty to society.  The ideal opportunity of living a comfortable life through sufficient after tax income as rewards for production should be maintained, but this is enough to dismiss outright right wing moral inversions on tax policy.
  5. Work is a privilege.  As opposed to a duty or entitlement.  If duty, then its slavery.  If entitlement, then its corrupt empire unrelated to production, and violating equality of opportunity.  The core understanding of privilege is that every good job has many denied coveters of that job's income, and if you can quickly and cheaply make 20M cars (through automation), then traditional car companies and workers are denied that opportunity.  Cultural pressure to contribute to society is permissible.
  6. Social dividends is a citizen's right and preference. It implies that the cost of all programs alternative to a dividend payment are paid for equally by all citizens.  It implies that citizens are equal and so deserve an equal share of social revenue.  The alternative is that citizens are some authority's servants.
  7. Within the absolute social morality constraints, governance should be structured as independent democratically accountable silos wherever possible rather than as unaccountable hierarchies.  Executive power/authority is recognized as a practical necessity (tieing your own shoelaces without democratic approval regardless of the idealized efficiency of technological democracy advancements), yet all possible oversight and democratic corrective options must be available.
Society should embrace fair markets/game structure, and reject all political manipulations to keep them corrupt.  First, recognizing moral absolutes, then some process for adherence to them is a necessary step in achieving fair markets and governance.

The basic income and social dividend framework
Taxation and equal redistribution of tax funds is the core obvious means of balancing these directives.  And not that difficult to do so, as several policy ranges are possible.  The key debate centers around UBI and accompanying tax level.  I favour gradualism, purely as a concession to disruptive discomfort, but reject low UBI as a mechanism to compel more work.  The latter is unnecessary, and will become obvious in the last "fair markets" section of this paper.

Issues of nationalism are mostly ignored in this paper, but will be addressed in another essay.

Increase production
Not that controversial except for the opposing view of creating more environment per people.  Sterilization and mass extermination is the alternative quiet but fairly widespread view that must be absolutely rejected.  It is a violation of the equality principle for an authority to inflict death, sterilization, and deprivation on those they choose.

Savings is not useful
 is important enough to be its own moral absolute, because it is an important source of moral inversion: "Extortion is good because it will allow us to fund medical research", and "wealth accumulation helps us fund production".  Savings is necessary to fight parasitic insecurity, but eliminating the parasite is more helpful.  Otherwise, savings is literally having more money than you know what to do with.  Though its not something deserving punishment, it is not acceptable to glorify it as a virtue.  Spending always fuels more production, and promotes more productive ideas.

Absolute equality
Should not be that controversial.  But separation of the deserving and undeserving is the most energy intensive political moral inversion efforts.  Entertaining the possibility of exceptions to absolute equality, entertains Ayn Rand's case for valuable people differentiation.  In the context of basic income and social dividends, this principle would avoid special payments to parents and disabled, though there is a strong case for UBI high enough to raise children and/or deal with hardships.  Universal medical device coverage complies with the equality principle as well.

Freedom in high taxes
The only valid objection to taxes is that they are used to advance kings' moral inversions.  Income taxes don't make anyone poorer if they are redistributed.  The natural spending cycle returns the taxes paid to anyone willing to work.  The important freedom everyone deserves is the relative financial independence provided by basic income.  It is a moral inversion of freedom to focus on the freedom from taxes.

Work as privilege
This is the most obvious and most morally inverted absolute.  Its inversion serves not only market supremacist greed and oppressors, but "worker paradise" socialists as well.  Producing/providing things is the social value, and should be done with as little work as necessary and possible.

Basic income and high taxation is a better system than socialism because it does not matter if the monopoly profits are made by evil capitalists or adorable worker cooperatives.  They are sufficient to compensate those locked out of the privilege of those profits.
A strangely stupid socialist objection to UBI is the prospect that UBI could subsidize employers and so increase their profits.  The complaint literally opposes circumstances that help you (more people can and want to hire you) on the grounds that they might benefit from the proposal.

The primitive world model of needing to mobilize every available volunteer for hunting and gathering infinite freely available resources no longer applies.  Basic needs for all can be provided by the few,  and whatever method selects the lucky few, must recognize a compensation duty to the unlucky unselected for the privilege.

No legal duty to society
necessarily avoids oppression.
  • The agriculture industry employs 1% of the workforce, and the only thing stopping it (and every other industry, fundamentally) from making more money is more mouths to feed.
  • Not contributing to society beyond existence lessens competition with other social members for contribution privileges, and increases the need for contributions through consumption demand.
Freedom from oppression is a positive reason to give back to your society, and a negative reason against mass gun rampages.

Fair markets
Fair labour markets is an inherent feature of basic income.  The freedom to refuse work, and still survive is the freedom to survive without obtaining permission to.  It creates more business competition by making it easier to start businesses including cooperatives.  It creates easier to find work and higher wages and profits due to less competitive pressures (some people will work less)

An inherently fair market is one that doesn't need regulation.  Rules for minimum wage, overtime, and whipping limitations exist because the labour market has obvious oppressive power imbalances, and policy bandaids must limit the extent of slavery within the moral transformation of permitting it.  Any reluctance for basic income by employers is an admission that oppression exists, and any reluctance by employees is an admission that oppression doesn't exist.  Wages can fairly go up or down in a fair labour market as the sum of all individual decisions and circumstances.  Its always the best possible estimate of the correct wage, too.

Self regulation of the labour market also makes the level of taxation and UBI and inflation and laziness mostly irrelevant and self adjusting.   The fear that high UBI levels might create inflation and withdrawal from work would simply lower the "real" value of UBI to the actual social surplus produced, and would motivate more to contribute in order to reach their desired consumption levels.  Inflation and work withdrawal increases the earnings, ease of income, and taxes paid for those who want more.  Humanity will work as much as it wants or needs to, and whatever level that is is the correct level, and one where individual freedom and wishes fully actualized.

The right UBI amount
Gradualism is a better approach than pilot studies or referendums to set "the right amount" because it is less disruptive, and not prone to dishonest manipulation and moral transformations of the research results (which will still result in disruption when implemented).

The right minimum amount to graduate to is an amount given to everyone that is sufficient to address what any lobby group has ever obtained as appropriate for what a narrow group deserves.  In Canada, this might be students or parent assistance levels.  Imaginary poverty lines are relevant, but not absolutely so.

A maximum amount depends on tax rates and money printing.  It is possible to set taxes too high, and an obvious hard maximum is a tax rate that reduces tax revenue.  This "tax target" changes with how easy it is for those privileged to work to make money,   It changes with automation level and need for "hard" work, and still has circumstantial considerations that imply a range of acceptable maximums, that need another paper to explain, but the main point of the next section is that absolute social morality restricts the range of policy debate rather than insisting on fixed permanent policy.

Purpose of absolute social morality
Absolute truths in social and economic policy exist.  "Constitutionalizing" them serves to limit morally inverted policy discussions.  Slavery and oppression is not something to be transformed to limit its perceived effect while maintaining the power and advantages afforded to those who extract them.  Slavery and oppression need to be eliminated.  Alternate absolute moral determinations could lead to our grade schools teaching democracy as "a neat trick to fool the niggers into thinking they are free so they work harder".  An absolute morality determination will eliminate the confusion in what society is supposed to be, and honestly outline the constraints of governance.  If there is a theory that a governance system is not corrupt, and made up of only individuals with the highest levels of integrity, then there could be no objection to codifying standards of policy and governance.

Absolute morality is the radical notion that how we explain democracy to our children is actually what constrains legislated policy.

A one sentence summary of absolute social morality is policy to maximize creation and happiness, minimize destruction and deception, and eliminate oppression and slavery.  There is equational multiparameter balance, but zero tolerance for oppression and slavery, and it is applicable as both a personal and social policy model.

Lying moral inverters will try to argue against each of the proposed moral absolutes, and that opportunity should exist if only to open and ceremonize the process and be certain of them.

Absolute morality exposes both left and right wing lies.  The main left wing lie is that "slaves (or the people considerate of them) are the good people and deserve to be the new kings."  While wars are motivated by the spoils, it is fundamentally a losing war proposition for the left and labour to be fighting due to their weakening power in the face of technology.

Absolute morality that focuses the equal  people quality of workers is the best hope for individuals to gain appropriate (balanced) social power.

Saturday, May 14, 2016

Over 90% of Swiss should vote YES on basic income referendum

Switzerland will vote on June 5 2016 in a referendum that forces their Government to consider a universal basic income.

A YES vote would NOT mean
2500 CHF is given to every adult citizen starting the following month.  There is no stipulated amount/details as part of the referendum question. In my view, it is an organizer mistake to have set the expectation of a YES vote so high, as it is too scary and disruptive to people.

A YES vote would mean
refundable tax credits hopefully totalling at least 1250CHF/month would be implemented soon.  The same politicians that recommend against UBI would be in charge of this implementation.  A YES vote simply forces them to make progress on the issue.

A 25%-78% average tax reduction
The 2500CHF/month plan has been costed out to  208Bchf (paid to Swiss)/year, with funding of 153Bchf (paid by Swiss) tax increases.  55Bchf is saved in social programs.  This creates an obvious taxpayer benefit.  26.5% of the 2500CHF UBI benefit or 662.50CHF/month is the average tax payer/citizen net benefit.

While I don't understand the Swiss tax system, I do understand that federal collections are 10% of GDP so about 70Bchf/year, and the 55Bchf in savings would be a 78.5% reduction of federal tax funding of operations  (even though actual funding changes are likely to be spread across multiple levels of government).

With the 1250CHF/month plan, the cost is necessarily 104Bchf (half), and savings would likely be over 35Bchf, as some of the 55Bchf of programs cut are meant only for those whose income is below 15Kchf/year, and all of the remaining programs can have funding cuts offset by the 1250CHF benefit.  This creates a net 400CHF/month average tax payer benefit or 33% of the UBI payments.  It is a 50% government funding reduction to taxpayers.

The net tax benefit and funding savings are entirely a function of program eliminations.  The higher the UBI, the greater possible program eliminations, and so the greater the savings and net tax benefits.  High UBI levels do not cost taxpayers anymore than lower levels because UBI is primarily a taxpayer to taxpayer transfer.

The magic of UBI funding
The government is like a store that is funded with say an average donation of $1000/mo/person who then distributes the goods it decides that cost it an average of $1000/mo/person.  Despite the averages some people pay more and some receive more, and that is not necessarily objectionable.

The objectionable problem of a store deciding what goods it should give you, is that the value of the goods is determined after subtracting the costs of deciding who deserves them, and also enforcing that no one cheats by pretending to be deserving.  The equally objectionable aspect is that providing the goods the store wants to give you does not get you the goods you would want to have.

Direct equal money provided by government still permits socialized funding of the store, but none of the stupidity of it deciding what to sell/give you.  There's no reason for people to remain deserving (poor) for extra benefits, and the entire bureaucratic overhead of deciding what is good for you is eliminated.  You can use the money at any store and get what you want/need.

The fear of other people not working
should really be the hope that other people stop working.  All of your work opportunities exist only because clients can't or wont do the work.   You buy indoor plumbing systems because you are too lazy - it is not worth your effort - to go to the river each day with a pail for your water.

If you were the only person in Switzerland that is willing to work, and there is UBI, then everyone else will give you all of their UBI to buy your work services.  The more people who might stop working as a result of UBI, the easier it is for you to find a job, as there will be fewer people competing with you, and the easier it is for you to get a pay raise if there are fewer people to replace you.

The people who gain from opposing UBI
are mainly those who own exporting businesses that rely on the exploitative power granted by miserable and desperate Swiss.  There are also a few people who are completely indifferent to the health of Swiss society such as some government workers and politicians, and passive trust and foreign asset holders.

Of these, only exporters directly benefit from exploitative power.  Government workers directly employed by social programs can wish to protect their payment for useless and unnecessary gatekeeping of social services, but if they are willing to work, UBI (+ severance packages) should be adequate compensation to move to an easier- less competitive- private sector.

The other groups are basically indifferent to Swiss happiness.  Their only cost to personal relative happiness is other people's gain of basic happiness and stress relief, such that their relative status and privilege.  Still only the very richest of these would face a tax cost as opposed to a tax benefit from UBI, and it is a substantial evil to stand in the way of Swiss progress and happiness for such petty and minor concerns.

The 0.1% that are export driven, the 5% government job holders threatened by program savings, and the 5% indifferent leaves 90% to benefit from UBI.

The 90% of winners
The average 662CHF or 400CHF per month net tax benefit can be structured such that 90% or more receive some tax benefit, and 10% or less face a tax increase.  Everyone who wishes not to work won't have to, and so gains a choice they value.  Everyone that wants to earn more money will find it easier, and even those in the private sector who face a tax increase will increase their after tax earnings as a result of both easier work opportunities, and the substantial economic purchase power of the Swiss as a result of UBI.

The economic stimulus from UBI is a very significant social (and individual opportunity) benefit on top of the individual tax benefits.  UBI will reduce the need for Swiss savings.  The new Swiss purchasing power will attract (employment producing) investment from all over the world.

The psychotic need for control
Switzerland is objectively the least politically corrupt nation in the world.  Permitted popular referendums, and resistance to military enslavement, appears impossible everywhere else in the world.  Yet despite the 90%+ self and collective interest for basic income, the YES vote percentage is likely to be less than this.  Sure, export focused sponsors of media manipulative lies misinform you, but it is psychotic hatred of other people's freedom that causes you to internalize the misinformation.

The 3 reasons to work:
  1. Self-interested compensation for work.  UBI frees all of you from the survival need for compensation.  You retain the freedom to work purely for additional compensation.
  2. The desire to help other's goals, with the focus on helping.  This is social motivation/manipulation that can be enhanced through UBI.  Removal of survival financing obligation opens up more opportunities.
  3. Goal oriented desire to create.  Focus is on the work/output itself.
We all have various levels of the 3 reasons in combination.  Support for compelling work in others through hunger, status, helpful attitudes or outright slavery is in service to those who need assistance for their goals, but there is no rational or moral reason to support the psychopathic distortion of markets in their favour.

Basic income inherently guarantees fair and free labour markets where the pursuit of money, in the context of voluntarily helping others is fully maintained without coercion or psychopathic manipulation.  It further permits the freer pursuit of your own goals, for which you may also enhance the prosperity of labour market participants who, for enough compensation, will agreeably assist in the pursuit of your goals.  UBI and automation permits more goals to be pursued, and it is the realization of goals that permits wealth increase in your society.  Not the protection of existing wealth or goal monopolies.

Your psychotic hatred of the other crabs in the bucket such that you clutch at them to drag them back down in the bucket is valuing hatred of their freedom more than access to your own.  Once out of the bucket, they could help you escape too.  Your relative happiness with not being at the absolute floor of the bucket, pales in comparison to the bucket destroying opportunity that a YES vote on the basic income question grants you.

After the YES vote
The significant citizen and taxpayer benefits from UBI already evident can be significantly enhanced.

Switzerland has one of the lowest interest rates (in fact negative interest rates) in the world done primarily for the financial and export sector.  40 or 100 years ago, this might have stimulated the "real" economy, but today the wealth created through automation is concentrated, and this inhibits the pursuit of new goals alluded to in previous section.

ULI (unconditional loan income) is a form of unconditional financial grants that is structured in such a way that central banks can assist the financing of universal income within their current mandates.  Central bank participation in the enhancement of Swiss citizen welfare would directly stimulate tax payer benefits even more.

After the YES vote, there will be infighting on how to distribute the taxpayer benefits of UBI.  ULI and central bank assistance helps create more taxpayer benefits, and so facilitate compromises. 

Monday, May 2, 2016

Refundable tax credits: an introduction to basic income financing

Unconditional basic income (an equal cash grant given to every citizen) can be modeled quite simply as a refundable tax credit, and doing so, obviates UBI as a policy to implement immediately rather than conduct pilot studies or other research.  I will also use this paper as a financing introduction useful for reading my other proposals.

Refundable tax credits
Most tax credits in Canada are non-refundable:  If they bring your income tax balance below 0, you do not get a refund.  A refundable credit is a tax credit that pays a refund even if your income, and thus tax bill, is too small to be larger than the credit.

The 2016 Canadian Budget: refundable child tax credit
The recent budget includes a fairly generous refundable tax credit. 

It has an associated 2 tier linear clawback tax rate.  The liberal government and other prominent politicians have characterized this as a form of basic inccome.  Normally, targetted clawbacks violate basic income principles, but this program is pretty good in that the clawback/tax only starts at $30k income, and there is a somewhat gradual cutoff at relatively high income rates.

Liberal Pronouncements on deserving, less deserving and undeserving Canadians
  1. There was no call for a pilot study or social research prior to implementing this refundable tax credit, to determine who deserved what amounts the most, or determine economic consequences .
  2. Non parents are undeserving of aid.  Parents with fewer children are less deserving.
  3. The kink in the curve from $30k to $70k income is regressive, and insists that lower middle class income parents are less deserving than higher income Canadians. (they deserve a higher clawback rate)
  4. Highest income parents do not deserve to pay for any part of the program (get 0 benefit, but don't have a negative benefit/tax)
  5. A straight line can be drawn from the 0 benefit point and $6400 benefit point, and it would perfectly overlap the benefits from $70k to $185k income.  Thus, the cost of increasing the benefit to the deserving under $30k income parents is entirely borne by punishing parents earning $30-70k.
  6. A different straight line that is steeper but provides a higher benefit at 0 income could have been drawn, and therefore, low income Canadians are fundamentally less deserving for not having a straight line benefit.
  7. One such straight line would cross the old conservative program (dotted line) at 28k income and $120k income.  It would cost less than the Liberal program, but provide more for everyone under $120k income (compared to dotted line), and more than the proposed for every parent earning under $18k income.
  8. That line could be shifted up with the same slope (clawback tax rate) until its cost is identical to the proposed program, and would result in even higher basic child benefit, and even greater benefit to those earning under $20k and $70k.
The inescapable conclusion  is that the Liberal government loves parents more than Conservatives, but has a special deep love for parents with incomes between $18-30k and $70-140k, and special deep contempt for parents with income below $18k, between $30-70k, and over $140k.

The value of progressive child benefits
From the perspective that raising children is a gift to society and necessary for its future prosperity, it is justifiable to offer progressive  or flat tax benefits to support such choices.  Yet every kink in the above curve that decreases in slope is a regressive kink placing more tax burdens on lower income groups below the kink.  Their claimed goal of eliminating child poverty is insincere if they fail to understand that parents with income below $0-25k need more help than those with income of $30k.  A perfectly straight curve (flat tax) better achieves poverty elimination, and doesn't demand an explanation for why the Canadian government hates people in the extra punished groups.

Does the Canadian government hate single Canadians aged 18-65?
Its not the case that this group does not receive tax credits and programs, and so just because they are outcast from some programs is not an expression of hatred from their government.  CPP is a direct benefit to the contributor.  OAS promises to one day free you from the slavery-equivalent-life-pressures you must experience until 65.  EI, disability, welfare, housing assistance, and labour laws (minimum wage, overtime) are fundamental acknowledgements that dystopian slavery pressures must be counterbalanced with conditional dignity patchworks.  Earned income tax credits, and student assistance are other conditional programs meant to encourage constructive social participation.

Replacing programs and non-refundable tax credits one at a time
Any program or tax credit can be replaced with a refundable tax credit at equivalent cost.  As a simple example the basic and spousal Canadian federal tax credits are equivalent to $1750 each clawed back at 15% of income.  As non-refundable tax credits these just work as if taxable levels of income start at $11500 for singles or $23000 for couples.  A refundable tax credit of the same amount would not affect those who earn over those levels, but would benefit those who earn less.  An equivalent social cost amount might be $1650 refundable tax credit to account for the slightly higher tax expense of providing refunds to those currently ineligible.  Canada has a patchwork of antipoverty programs, some with considerable administration cost and waste, and so noone has the (public) view that the poor should not receive aid.   If enough tax credits and programs can be eliminated (replaced with refundable tax credits), then poverty can be directly eliminated as well, all without bureaucratic burden on the poor or tax payers.

The US Food stamp program (SNAP)
Is a department of agriculture program, that by definition serves the agriculture industry, and provides those with income below $14000 and cash balance below $2000 (higher for larger families) that allows recipients to purchase agricultural goods with stamps.  An average benefit of $133.08/mo cost $76.6B (in total direct benefits) implies 48M Americans received the benefit in 2013.

These costs don't include policing individuals and businesses for failing to comply with Agricultural industry' subsidy mandate.  It is for instance, illegal to trade them for cash, or to try to buy toothpaste and tampons with them.  There is bureaucratic overhead as well.  The direct cost to 100M US taxpayers is $766/taxpayer/yr.  With policing/bureaucracy, lets pad this to $1000/taxpayer, for a benefit that averages $1600.

Replacing the program with a $1000 refundable tax credit would have equivalent cost, but would upset current recipients since it involves a $600 benefit cut.   However, that refundable tax credit would be $1000 tax cut to tax payers, and a $2000 refundable tax credit instead accompanied with a $1000 tax increase, would still be an average $1000 net tax cut ($2000 - $1000) to tax payers, and an average $400 benefit increase (2000 - 1600) to SNAP recipients.  All without bureaucratic and restriction hassles.  A $1600 refundable tax credit with $600 average tax increase is a net 0 cost/benefit option other than bureaucratic and policing hassles inflicted on people.  A $2000 or $2300 option better reflects the maximum possible SNAP benefits.  Each individual refundable tax credit policy replacement contributes to a holistic program that permit other programs and laws designed ot protect the vulnerable from a harsh world to be reduced or replaced when permission burdens for survival in the harsh world are reduced.

Profit potential in income equality
Those who work depend on as many people as possible being able to afford their wares.  Billionaires only want one car, phone, meal.  The largest and most profitable companies all depend on many small transactions to earn their income.  Income equality through taxes and redistribution directly enhances the profitability, amount and usefulness of work.  It helps those with the highest incomes the most, because by definition, they have the highest share of the economy flowing through them.

Useful alternatives and supplements to UBI
The SNAP replacing refundable tax credit proposal is a pure basic income.  Any tax hikes to pay for the refundable tax credits are general and universal.

GAI (Guaranteed Annual Income) is a refundable tax credit with a reasonably low targeted clawback rate that brings the benefit to 0 at a certain income level (The Canadian child benefit above is a GAI-structured refundable tax credit).  Compared to UBI, poorer residents pay a larger portion of the program.  And its less expensive.  I recommend a $4000 GAI (as supplement to UBI and other progams) with 10% clawback from incomes of 0 to $40k or $10-50k.

ULI (Unconditional Loan Income) is somewhat similar to student loans with income based (royalty) repayment terms.  There is no application/purpose criteria (other than perhaps citizenship), and additional loan amounts (the ULI limit) can be withdrawn  each year.  This is even less expensive than GAI for the same royalty/clawback rate as more of it is repaid individually over a lifetime.  It can be partially funded by private and financial sector, and is eligible for central bank intervention/funding instead of fiscal funding.  I recommend that ULI (with maximum 2% interest, and 20% royalty rate) be used to supplement minimum income alternatives such that expensive and wasteful programs (whose justifiable income support threshold is too high to achieve through UBI alone) can be eliminated: Student loans, affordable housing, R&D/Entrepreneurial tax credits and programs, farm and other corporate welfare assistance.  Business ULI would be a personal loan whose proceeds are used for direct business investment.  The personal responsibility avoids all scamming potential.

Citizens Income is a refundable tax credit for citizens only.  Refundable tax credits in general apply to residents (who have tax applicabilty independently of citizenship).  Nationalist appeal prefers a citizen only payment, and it is the best use of excess tax revenue collection.  I recommend a variable citizen dividend supplement over and above core minimum poverty and welfare replacing refundable tax credits.  It can also be used to repay personal ULI balances thus making that program even cheaper and private funding friendly, and without a citizenship criteria.

Carbon tax funding is singled out from other tax funding options because providing a refundable tax credit based on driving up the cost of gasoline to $6-$10/gallon and fossil fuel based electricity to 20c/kwh is an antipoverty program that directly incentivizes conservation, renewable electricity, and electric/alternative fuel driving.  There is no need for research promotion, or special renewable credits.  Simply, everyone interested in saving money/pocketing the carbon dividend just makes the individual choices necessary to save the planet and improve their individual economic outcome simultaneously.

Flat tax is singled out because refundable tax credits do not grant net cash to high income earners. Only low income earners.  A flat tax with substantial refundable tax credits creates a more progressive tax system than we currently have: negative net tax rates for low income earners, 0 for middle, and positive tax rates that increase with highest incomes.  It does so even when lowering the highest marginal rates.  A flat tax doesn't prohibit traditional tax credits but they are discouraged.

Elimination of investment income tax credits along with equalization of corporate and flat personal tax rates, business expense deductibility for dividends, and cashflow based tax accounting.  A substantial funding generator that lowers tax rates and increases refundable tax credits.

Surtax on investment profits is another substantial funding generator, that offsets better/fairer deductibility of investment losses.

Elimination of payroll taxes is justified by funding social safety nets from general taxes rather than personal insurance schemes.  UBI is a safety net that applies to people with all income sources, and so should not be funded purely from lowest income employees, and businesses should not be penalized for hiring employees rather than machines or contractors..

Recommended mix of policies
Combined Canadian Federal and Provincial tax collections as a percent of income is only 15%.  With the above tax changes and a 28% federal and "average" provincial tax rate (before consdiering investment surtaxes that lower this rate), $8k UBI/refundable tax credits and $4k additional GAI is funded for 21M Canadians, and without program elimination (or change to senior benefit programs).  ULI instead of GAI, would allow the GAI/ULI amount to increase to at least $8k at same cost.  Excess social revenue resulting from direct economic growth and earnings stimulated from refundable tax credit programs, would be paid as a social dividend that repays any ULI balance.  Savings from the elimination of EI, welfare, disability, cpp, business and student welfare can fund the social dividend and $5k extra education and business restricted ULI that could include coverage for text books, computers, and tools.

While it scares many people, a carbon tax sufficient to fund a $4000 dividend should be used to fund primarily non-citizen restricted refundable tax credits.  Though lower amount may be substituted.  EITC and child benefits have not been touched, though IMO, they should be lowered in exchange for higher general refundable tax credit.

Smaller plan options
While my plan achieves well in excess of $21k annual refundable tax credits and unconditionally-accepted loan access sufficient to eliminate poverty in all family sizes and budget discipline circumstances, refundable tax credits of any size are beneficial with the critical mass improvement point beginning at the level that eliminates the conditional welfare system.  The Manitoba GAI program at just $6300/yr is an excellent example of this.

Modifying federal tax credits at the provincial and municipal level
Refundable tax credits can be implemented at the provincial or municipal level by modifying/removing tax credits applicable at "higher" levels.  There is no obligation to follow federal or provincial tax policy, and leadership on refundable tax credits is required that likely necessitates correcting perversions maintained at other taxation levels.

No pointless delay pilot-study/research tactics
If you lean towards cautious, patient, and deliberate approach to UBI/refundable tax credits, then support introducing fewer of them initially, and then increase them as you become more convinced.

Opposition to refundable tax credits fundamentally is one in support of oppression and slavery
From the left, insisting on bureaucratic empires that determine deserving aid recipients, and on unions, minimum wage and other labour laws to combat employer oppressiveness, is still insisting on an oppressive system that needs to fund you to protect the rest of us if we ask for your permission nicely.

From the right, insisting on a harsh brutal world that forces the most desperate to beg for your permission to employ them, or give them credit, entirely on the terms you command, and terms made less generous the more harsh and brutal the world, is also more direct support for oppression.

Slavery is not evil because it affected black people or provides the owner the right to piss on you.  

Slavery is evil because it allows the slaver unfair market control over the slave's labour.
Not only is promotion of unfair markets evil, but so is accepting slavery but wanting to regulate it to an 8 hour work day with strict limits on the frequency of whippings.

Refundable tax credits sufficient to allow people to survive without the need for others' permission inherently provides a fair labour market with the power to refuse employment offers and compete, and a fair society without undue king's authority.

Beyond evil, opposition to UBI is economically stupid.  Taxes and redistribution do not harm the tax payer, as the funds flow indirectly (but assuredly) back to them.  That it is economically stupid, should not cause us to understand that mere education is needed to convince opponents.  Power, command and control thirst for small self centered empires can be more valuable to the self than participation in greater social financial  success.

The fear of laziness
Both those who want to work and those who do not are better off with refundable tax credits.  Everyone that works has always had all of their income indirectly paid by those who can't or don't want to do the work.  The more people who choose not to work due to UBI being sufficient for their needs, the more work is available to those who wish to work.

Even if inflation results from laziness, this substantially benefits workers, and incentivizes a sufficient number of work indifferent people to take easy to find well paying jobs.  So society gets all of the workers it needs.

Self driving trucks promise 75% cost savings.  Taxis and public transportation could save 90% if self driving.  Technology will fill in any labour supply shortages, and just as you prefer to live life without the need for manual collection of water and firewood, you do not want manual driving imposed on you.  If wages rise as a result of choices not to work, then automation that saves us all from work, gets accelerated.

Opposition to automation presumes the nonsensical desire to return to manual water and energy collection.  Generally, opposition to automation is an insincere euphemism for protecting the empire of work that you are trained to do.  For actual work that you want to do or have done, in comparison, technology and processes that make that work easier or faster are always welcome.

Friday, April 29, 2016

Linkedin Q1 - 2016 results

Linkedin is a company worth fairly $5B today, that could one day hope to be worth $7B-10B, if it performs perfectly.  Its market value is near $16B.

Continuation of my chronicling the eventual collapse of LNKD's stock value.  Previous entry


  • record low growth rate of 26%, excluding $55M in learning revenue that was not part of last year's operations.  $807M revenue.  Learning revenue was also 26% higher than 1 year ago's standalone Lynda.com revenue of $43.5M
  • record low mobile visitor growth.  Down to 25%.
  • record low US and Other Americas growth.  Even with learning revenue which has been explained as predominantly US focused, US talent revenue growth at lowest point since acquisition.  International talent solutions also show record weakness.
  • 2nd largest all time operating loss of $66M.  The record was Q2-2015 which included significant restructuring charges related to Lynda.com.  Its largest ever tax rebate keeps its net income loss to only its 3rd highest point.
  • 5th consecutive quarterly loss. At least, 9th consecutive quarter with income below $3M
  • Most expense growth matches approximately revenue growth.  30% or so.  The exception is depreciation and amortization which had over 95% growth.  Stock compensation up 40%.
  • Operating loss for the quarter increased $50M over last year.   Mostly due to the last 2 items outpacing revenue growth.  Equipment purchases were even higher than depreciation (assuring further increases)
  • record high depreciation ($95M  - 50% growth), amortization ($47M - 400% growth) and stock based compensation.($146M)
  • Free cashflow less stock compensation continues the negative quarterly string.  -$71M.
  • Comparing to Q4-2015 is appropriate because revenue was almost the same, but operating costs were $40M higher.  $10M more marketing spend to get the same sales.
  • Comparing to the entire fiscal year of 2013 is interesting because Q1 revenue is a little over half that of the entirety of 2013.  Depreciation and amortization in Q1 ($142M) was higher than all of 2013 ($135M) (still about 75% of 2013 without amortization).  Every other expense category is still a higher percentage of revenue than it was then.
  •  $890M revenue guidancce for Q2 is $865M excluding partial results for last year's lynda.com operations.  Record low 21.3% core growth.  The same poor guidance tone as given last quarter.  Roughly the same revenue performance as this quarter, with $5M more SBC, and $2M less depreciation.  For $29M more revenue, $23M in additional other non-amortization operating expenses:  $3M extra "profitability".
  • Full year revenue guidance is increased by $9M compared to last quarter's announcement.  But full year ebitda (bs earnings) guidance is lowered $2M. (explained in call intentionally as increased "investment areas, and building product" platforms in all 3 categories.)
  • Forecasts compared to last quarer include: an increase of $15M in full year depreciation.  A decrease of $7M in amortization..  So, last quarter's dismal $400M+ forecast operating loss is increased by $10M.  Somewhat surprisingly, LNKD expects $50M less in stock compensation compared to last quarter's forecast, and so an offsetting expense increase is expected.

Still very bad
The high net income loss without a special reason given for the tax gift, and so high operating loss doesn't make up for the slight uptick in its marketing and subscriptions business.  It did some TV advertising that would explain an uptick in those segments with profit deterioration.  The core deterioration of hiring solutions, its main line of business, accelerated rapidly.  Hiring solutions not only showed a record low growth rate, it is 5% lower than last quarter's record low growth rate. (27%).  It can't talk about how great all of its products and platforms are being engaged, and show this deterioration.

Comparison to Q4-2015
Sales were almost identical:  861M vs 862M.  Noteworthy mix differences include $10M Sales cost increases.  $8M increase in SG&A with $4M stock based compensation increase.  $11M total stock based compensation increase.  On the revenue side, talent solutions dropped its QoverQ growth from 10% last year to 5%.  Tracking its main business line to drop to 20% growth for the year.

Plans for future cost containment
While committing to losing more money through investment this year, and through "late 2017", there's a $50M reduction (from plan... still increase) in this year's stock compensation plan, and an expectation for the year of "only" a 15% increase over last.  This is cost containment compared to 24% revenue growth.  I congratulate them for the comment in the cal: "SBC is a real expense/"

Its overall expenses are likely to still keep going up at least through 2017.  There is a vague (relative to my ability to follow) reference that at the end of their through-2017 investment program, 40% operating expense savings will occur in cost of revenue, which would be a 548 basis profit margin improvement.  The problem is that it has a -767 basis point loss margin, (906 basis point operating loss + other expense margin) and so even that plan together with 100 basis points of stock based compensation savings, it is not enough to reach profitability.  Furthermore, continued massive depreciation expense increases are assured through 2019 putting pressure on profits until then.

Its also hard to understand that their equipment/datacenter investment program results in switching on a cost of revenue savings of 40% starting in 2017, rather than the less generous understanding that they have been benefitting all along from the equipment/datacenters they have spent a lot on, and the 40% savings is just the total cummulative benefit going forward.  ie. not 40% savings from current levels, but 40% from what it would have been had they done nothing, and so may be 20% or so from current levels, and offset by higher depreciation expenses.

Shareholder Performance Margin
SPM is a performance metric that gives credit to a company for its R&D spending excluding it from expenses.  LNKD's poor results this quarter can't really be blamed on R&D (expense did rise a bit more than revenue), and so its SPM even worse than if its loss was due to intense R&D spending.

LNKD's SPM this quarter is Net income (-$45M) - Other expenses (12M) + after tax(35%) cost of R&D ($154.7M) = $97.7M or 11.3%.  This is deterioration over Q3-2015 (12%), but an improvement over Q1-2015 of 10%.

One interpretation of SPM is the imaginary profit ($97M) that would have resulted if 0 were spent on R&D, but the more useful interpretation is that the SPM determines the break even revenue benefit required for each $ spent in R&D.  At 10% SPM, each $ of R&D must create $10 in revenue.  11.1% SMP: $9 revenue.  12.5% SPM: $8 revenue.   Companies such as FB, GOOG, and MSFT all have SPMs above 30% which means they only need $3 in extra revenue to break even for every $ spent on R&D.  LNKD is a sales intensive company with no profitability potential, and so a much higher bar for its R&D efforts.

LNKD's SPM isn't even as good as calculated if we consider their mysteriously large income tax benefit.  In fact, the company has warned that it will take a $100M tax charge next quarter.  The default explanation is that previous tax deductions were overstated.  So, its tax policies aren't necessarily sustainable.

An alternate way of calculating SPM is to do it all pretax, and then take the normalized (35%) tax rate off the total to get a shareholder relevant result "exclusive of tax games":  Operating income (-66M), other expenses (-12), R&D (238) total:  $160M.  $104M after tax.  12%.  This looks better than the initial calcualtion but compared to Q4-2015, (0.65*185/862 =) 13.9%, and Q1-2015: (0.65*134/638 =) 13.65%, it is a significant deterioration to both.

Companies such as Twitter can have hope that their platform catches on more, but also have imaginable monetization of products such as periscope.  LNKD, however has no major growth drivers or potential.  Similar to YHOO, EBAY, YELP.  It can iterate new versions that drive engagement in the short term, but it has to keep loosing money to get these pops, and even if it makes the service better, its unclear how it drives revenue and profitability . Its low SPM means its innovation efforts have to have big payoffs, but none of them appear to have that potential.  Though Twitter is still losing money, it has shown a pretty consistent trajectory of losing $80M less year over year.  So it is getting useful growth.  LNKD is going in the wrong profitability direction, with no growth headroom.

Last quarter, I calculated an optimistic $7B 2027 valuation based on annual sales increases of $600M, and after tax profit increases of $35M per year starting in 2018.  $7B valuation is based on $350M annual profit ($500M pretax) with 6% sales growth.  Without sales growth, double the profitability is needed to have the same valuation.  I was assuming cost general containment similar to what was announced.

Information provided this quarter suggests that there is at best a delay to profitability start.  Its possible that the steps they announced eventually are part of a higher profitability plan, but it will be 2019 to more likely 2021 before depreciation expenses come down enough for break even without other measures. (this conclusion is based on tea leave parsing of comments and not completely reliable).  8 years of $50M profitability increases ($75M pretax) is an $8B valuation.

The case against such a success story is the sales expense growth it has pursued to achieve its current struggles.  It must find 1267 basis points of profitability from here to get to a $7B valuation on $10B sales.  1767 points to get to $14B.  Sales expenses will be a headwind in this as it expends more chasing higher hanging less ripe fruit.  The most generous possible reading of their 40% cost of revenue improvement would still have high continuous equipment replacement capex, and the announced "plans" only create 648 profitability points of improvement.

There's no information given this quarter to materially change previous valuation.  LNKD is stepping up its futile overspending efforts.  Though it claims investment in some future cost savings, it is also overspending in sales and administrative categories.  In my opinion, the company is trapped into chasing growth in order not to be perceived like Yahoo (stagnant money loser), but Yahoo's problems are also based on seeking not to be perceived like Yahoo.  They have to promise something and then spend to achieve it.

Wednesday, April 27, 2016

Class C shares at Google and Facebook

Even though FB and GOOG are extremely valuable companies that are well run, their stock is worthless to outsiders due to centralized ownership of the companies.  The issuance of Class C stock is the most tangible diversion of social (corporate) resources for private (concentrated insider owners) benefit, and corruption of regulatory structure that permits such publicly listed stock scams to exist.

Classes A B and C stock
At companies such as FB and GOOG, class A, B, and C differ in each having 1, 10, and 0 votes per share respectively.  Class B shareholders are the real owners of the company.  At FB and GOOG, the founders have over 50% the voting rights, but even when class B shares are distributed more widely (still among insiders) there is an alignment of interests that include paying as much as possible to class B shareholders (stock compensation, and whatever other favour trading that is possible to get loyal voting).  Class A shares are the ones that trade on the stock market.

If there are 100M class B shares, then you/they may issue up to 1B class A shares while still maintaing 50% control by the class B holders.  They can issue all of those class A shares to themselves, and then sell them, and create free money for themselves with no loss of control.

As awesome (for them) as that is, 1B of class A shares is still a finite number of free money printing opportunity.  Class C shares with 0 votes, is the infinite free money printing opportunity.

The only right that a minority stockholder has is IF the majority approves a takeover or dividend declaration, then you have the right to an equal share of the proceeds.  But for dual/triple class share structures, why would the insiders ever accept an offer that pays the muppets as much as them, incstead of keeping control over their golden goose?  And issuing more class C shares is always a more attractive option to them then reducing the piggy bank they control by paying out dividends.

Wanna buy 49% of my house?
I get to decide who lives here (me), and when and for how much to sell it.  When I sell it, you will get 49% of the proceeds.  Its a bad deal for you, but you are welcome to contact me if you want.  With class A and B shares, I get to sell 89% of my house with the same control power.  And with class C shares I get infinite dilution opportunities.

The Google Class C offering
was interrupted by a lawsuit which was settled (details next paragraph).  As I understand it, only class A shareholders were given a class C share as dividend which implies there was no direct profit by class B insiders from the class C split (I am not 100% clear that this is the case.  I am going by the media whitewash of the scam).  Another measure that is a relatively strong shareholder protection is a provision that forces conversion of class B shares (to A) when new class C shares are issued.  These provisions are reasonable limits to to full greed infinite money printing, but still entrench the intangible control benefits of Class C flexibility.

The lawsuit settlement  likely involved undisclosed benefits to the plaintiffs, as the concessions made only prevent the C shares from becomming worthless quickly.  For 1 year after issued, there was a "price cushion" guarantee on their value relative to A shares.  For 3 years, there is a mandatory internal review of new Class C issuances that mostly needs to meet Delawares, more corrupt than Panama, standards for non-egregious dilution.  Class C shares achieve complete intrinsic worthlessness.  The plaintiffs can deny receiving undisclosed benefits on the basis that they ahve a long enough window to liquidate Class C shares.

The Google Class C offering is a modest scheme to extract a couple of $billion or so for its founders without loss of control.  Google C shares currently trade at a 2% discount to A shares.

The Facebook Class C offering
is much more nakedly greedy (page 57).  Giving 2 class C shares for every class A AND B share means that it allows Zuckerberg an opportunity to liquidate about $8.5B without diluting any of his 54% control stake in FB.  (assuming $320B~ current market cap, and that class C shares trade close to A value, and that Zuckerberg has 5.4% of shares).  The proposal explicitly intends to use C shares as printing dilution permitting acquisitions.

Mr. Zuckerberg has ample further opportunities by chanelling his shares through "shell corporations", mainly through borrowing money against their collateral value.

The philanthropic justification
I believe Mr. Zuckerberg has a sincere interest in helping the world, and also believe that the world, in aggregate, would be a better place if we permit him to pull of this stock scam.  The arrangement lets him spend say $150B+ on improving the world instead of a mere $20B to $50B.  Internet basic (free internet limited to wikipedia and facebook in developing world) is a better option that improves the lives of people with no other choice than no facebook/wikipedia, but there are obovious commercial side benefits to such philanthropy.

The pharmaceutical industry is the most blatant justifier of extortion on the philanthropic grounds that the extortion will fund research into life saving (extortion) processes.  It is not a legitimate justification for extortion.  First, their pile of money will be invested based on the profit/extortion potential of research results.  Second, profitably, socially sanctioned, extortion models are fairly easy to finance with other people's money.  The extortion only buys the freedom from having to share the proceeds from future extortion by forming partnerships for those ventures.

So, even if I consider Mr. Zuckerberg a sincere philanthropist, its not a justification for stealing from shareholders.  There is also a distinct possibility of not achieving commendable or worthwhile philanthropy despite portrayed intentions.

The case for class C shares
Just as we trade for green coloured paper on faith that tomorrow it will be worth the same as today, class A and C shares have pyramid scheme value even if they have little or no intrinsic value.  There is a muppet who will still buy the share tomorrow.  The same argument should have made what Bernie Maddoff did just as regulatory approved as these stock scams (which are in fact illegal in most countries).  Those who got in early enough with Maddoff made money, and the total money made = total lost.  So what if the promises traded are intrinsically worthless?

30 to 60 years from now, the shares will convert (succession clauses) into a real share with dividend potential.  In my opinion though, its too long to wait and tech, even more so than other, companies do not have sufficiently good longevity track records.

Bad precedent for society
Google's class C offering was the first bad precedent.  FB's severe escallation should not be excused on philanthropic grounds, because that is a precedent that will allow other companies to duplicate it on any grounds.  The SEC and public stock exchanges should not be allowing dual share structures at all, but congress and regulatory intervention should be used to stop this Facebook plan.

Tuesday, April 12, 2016

US Presidential election and primaries: Sanders endorsement

The president of the US has significant power in regards to foreign policy, but his power domestically is limited to cheerleading for legislation, and blocking "bad" legislation.  The media is far more powerful than the US president on domestic issues because they can ridicule and ignore championing of causes, and pressure for "evil" causes.  The media and political establishment are controlled by agents who need you to accept evil that advantages their masters.

Independence from the political establishment is an important quality in a candidate.  But that only premits blocking evil from the political establishment's masters.  The other important quality in a presidential candidate is their thirst for power and warmongering.  Philosophical glimpses and attitudes and moral compass are the dominant qualification for president.

Obama 2008: Hope and Change
He ran a very progressive campaign, and voters assumed that universal healthcare was the goal/campaign promise.  Sanders' campaign is more progressive than Obama's.  HRC's less so.

Obama's campaign was also highly critical of Bush's warmongering and police powers.  Policies that HRC supported.

Obama Presidency
While the ACA is a progressive improvement over the state of healthcare prior to 2008, it was strongly influenced by compromise with the medical and insurance political establishment.

Obama's administration progressively normalized relations with Iran and Cuba.

The miltary and oil establishment
US middle east policy is primarily concerned with destabilizing the region, both to justify military budget and keep oil prices high (preventing oil production and investment through chaos).  This is aligned with Saudi Arabia's interests for the region, and their friendly US military purchases.

In this light, normalization of relations with Iran can contradict 40+ years of demonization, and non-humanist motives for doing so must be that Sunni control over middle east chaos is out of hand, and Iranian cooperation is seen as essential.  Anti-Syrian ramp up is primarily influenced by pipeline project proposals.

HRC has entirely internalized establishment's world policy views.  The difference between Republican and Democrat establishment view on world domination is overt aggressiveness vs passive-aggressiveness-coalitionism.  Obama's campaign had more independence than HRC, and it still turned into a relatively belligerent establishment administration.  It of course could have been much worse, and it would be somewhat worse with HRC.

Power breeds thirst for power
That police wish to have more power is a natural thirst.  Service to National power and security interests naturally leads to confusing every personal ambition with national ambition.  Indoctrination can drive corruption, but service to the establishment can't have an idiotic zombie defense.

HRC's psychiatric deficiency to be president
"Women have always been the greatest victims of war" is a statement only an extremely self centered psychotic can make.  It internalizes the importance of how other people's real suffering could affect one self and then replaces that moment of empathy as the central harm at issue.

In my global power ambitions, I would feel really bad if you had to die to serve them, but I also want my global power ambitions.   Crying at your funeral is a sacrifice I'd be willing to endure.  If I must instead submit to your presidency, then I am concerned about you defending my sacrifice with how sad it makes you that I must die.

HRC would be a better president than any republican
HRC has mirrored support for most of Sanders' domestic policies after Iowa and New Hampshire primaries.  Concern about her sincerity is valid above and beyond every politician's tendency to say what we want to hear.  She has never expressed anything thoughtful publicly.

Yet every republican presidential candidate would not block every stupid republican congressional idea proposed in the last 8 years, and she would block some of them.  She would still stop the most anti-social destruction of America all republicans aim to inflict.

Democratic establishment view on financial regulation
The Democratic party establishment's view on financial regulation has catered to financial lobbyists choice of their own punishment.  HFT (high frequency trading) is not an establishment practice, and a distraction issue.  Hedge funds while not providing any constructive value to the world are not destructive either.  They have little to do with the financial establishment, and so are the offered scape goats to sacrifice.  Financial transactions taxes are stupid ideas designed to sound tough while failing to pass legislative action due to they being stupid and giving republicans the opportunity to show they are stupid ideas.

HRC supported (prior to New Hampshire primary) extending the "vest time" for long term capital gains deductions.  This is clear coziness with the financial establishment, as these current tax incentives are already stock market supporting scams that trap investors into locking up their money with wealth management services through "tax carrots" and permit insider knowledge predictability of funds flows in their trading practices.

After New Hampshire, HRC proposed the essential progressive normalization of investment and employment income.  I have not heard Sanders agree.  This usefully raises significant revenue, equalizes investment return opportunities for non banks, closes fundamental loopholes in the tax code, returns excess corporate cash to the economy so that new good ideas or consumption can be funded, and is the first step to eliminating tax penalties for employment (corporate and personal tax rates must also be equalized).

Other effective financial industry regulation are maintaining or raising the reserve requirements to ensure low financial crisis risks (no need to explicitly break up banks, but a "too big to fail" premium on reserve requirements may incentivize those affected to restructure).  Instead of a transaction tax, an income surtax on financial profits (that applies to every company and investor) is an excellent revenue generator model, mitigates income inequality, and has absolutely no propensity to cause capital to be put under a mattress instead of invested.

It is irrelevant whether Sanders's financial regulation stump speech lacks workable policy details, or doesn't yet include the only effective proposed reform (made by HRC).  I trust that Sanders, after he is president, will listen to both the financial industry and progressives to find reform proposals that increase revenues and protect the financial system.  HRC is more likely to shift towards financial industry pocket proposals after the primary.  The financial coziness with the establishment is a disqualifying factor (except when considering HRC against republicans).

Oil and environmental establishment policy
Coziness with the oil industry is another disqualifying factor for HRC.  Obama is very much closer to Democratic establishment views on oil and climate change, than on progress:  Say progressive things, and do nothing, other than propose research grants to donors.  A carbon tax and dividend scheme is the only progressive solution to climate change.  Allows a higher tax, that necessarily better shapes behaviour, but returns the tax proceeds to citizens so that they can invest their own money in energy savings.  It permanently obviates the personal advantages of conservation, non-pollution, and mutual preservation instead of pointless hypocritical peer pressure while personally profiting from destruction.

Sanders is most likely to prevent inaction on climate change, and the most likely to be persuaded to adopt carbon tax and dividend policy, or end up with that compromise (compare to carbon tax and empire proposals).

Trump's establishment independence: Hitler or centrist?
 Trump's "Make Trump great again" campaign expresses childish views on "America as a sport team" that must run up the score on all others.  Its unclear whether it is more important to Trump that the US continues to dominate and control NATO and the UN, or that the US's minions pay more for the privilege of being dominated.  Someone would explain to him that belligerence is counter productive, we could think.

The US and its allies have the same monetary policy as Zimbabwe, and the explanation for their financial sustainability so far is cohesiveness and support from the private banking sector.  Too polarizing and belligerent a US president would risk lowering cohesiveness or reducing subservience.

Trump's establishment independence will either cause US economic and military influence to declline through alienation, or will make tough sounding international deals that make Trump look good and strong while giving away money and power in the fine print.  Its a very unpredictable outcome.  There is strong risk that bribery and kickbacks would be the purpose of his power ambitions.  It is fundamentally disqualifying to threaten opponents and their families with worse than waterboarding.

National socialist populism platform ensures domestic oppression if Trump gains the presidency.  International relations implications are too unpredictable, but its unfair to give him credit for belligerence being a mere opening negotiations statement.

Sanders for President
I am told that the explanation for HRC's polling strength with African Americans is their support for continuation of Obama policies and religious loyalty and values.

Religious loyalty in politics has made the state of race relations everything it is today.  It is a right wing manipulation tool.  The Pope has invited Sanders, not HRC, to speak at the Vatican.

President Sanders would try improve on Obama's progressiveness, and better address wealth inequality that I understand affects African Americans disproportionately.

While I disagree with the politics of jealousy that drive wealth inequality as a political issue, it is essential for economic growth that the successful are taxed more, and  that those tax proceeds are used for redistribution.  (The result though is not less wealth inequality, it is more spending, production and less poverty).  Sander's openness to UBI creates the opportunity for compromise with those opposed to using taxation to fund leftist empire.

Republican Job Destruction
 Politicians pandering to job creation is a goto stump point.  Tax cuts have the opposite effects though:  It lowers corporate spending incentives, and less redistribution lowers consumer spending which further lowers corporate spending/investment.  The biggest problem with republicans is the complete disconnect with productivity advances that continuously reduce the future need for menial labour.  Sure, driving down wages to match China, then Vietnam, then Gabon by increasing the pressures that make submission/slavery a rational voluntary choice, essentially forcing labour through limiting alternatives to coercion, can increase labour participation slightly.  But aggregate wealth is increased by productivity advances and redistribution.

Tarrifs aren't job creators either as the domestic manufacturing starts that do occur are heavily automated, and a 40% cost increase on imported goods might make Apple US made iphone and computers $200 to $500 more expensive, or $50 to $100 more if just assembly of US models is done here.  But assembly work would most likely be done through Chinese imported robots.

(Useless) Job creation and job protection is the wrong policy.  Tax those fortunate enough to have work income to redistribute to (UBI) those who do not so that they both support production through consumption and can find meaningful opportunities of their own.