Monday, June 4, 2012

The imperative need for social dividends

Social dividends are a citizen's basic right to an equal share of surplus tax revenue.  This is a variation of basic income.  Basic income is a fixed entitlement to all citizens designed to be an amount to meet survival needs.  Social dividends are a variable entitlement, that likely includes a fixed basic income amount, which is based on actual tax revenue collected, and any savings from government program reductions.

The simplest implementation of basic income in Canada would be to lower the Old Age Security eligibility age to 18.  Social dividends and basic income are both taxable benefits.

Equal share of taxes instead of equal share of economy
Communism (the entitlement to an equal share of all economic output) has the significant and insurmountable disadvantages of eliminating individual motivation, and requiring a permission based bureaucracy for any investment.  An equal share of tax revenue models a nation or society as a an equal-partnership corporation where its revenue is the tax income from its members.  Maximizing shareholder value becomes running the society as efficiently as possible, and actually paying out (social dividends) the social tax revenue surplus to its members.  Tax-based market societies protect individual motivation of rewards from effort, and eliminate permission-based restrictions on activity.

The classical definition of social dividends is one of all business profits (or 100% tax rate) being redistributed equally to citizens.  That is not politically viable in many jurisdictions, and provides no economic confidence that individual motivation to contribute economically will be sustained.  At any rate, a democratic process can determine tax rates, and if there is consensus certainty that a 100% tax rate is desirable, that option pursued.

True democratic philosophical justification
The fairness of democracy is based on the presumption that it is a quasi-market force (voting) that will cause the "best" or correct leadership and policies to be enacted.  Because, both revolutionary justifications and grade-school incodtrinations for democracy place heavy emphasis on equality, brotherhood, and citizen empowerment, these best leaders/policies are supposed to respect such values.  Social dividends is the only perfect egalitarian social spending item, because every citizen receives the same benefit.  Every other program has at least some bias in rewarding some groups over others, even if in some cases that bias is minimal.

Eliminating the war on youth
One of the most despicably evil policy mistakes ever implemented is Old Age Security programs.  The evil has nothing to do with socializing the care for the elderly, which is perfectly noble.  Rather, the evil was the creation of a pyramid scheme whose sustainability was dependent on 4 children per women birth rates.  The solvency cliff scheduled in 20-40 years in every OECD country is creating a political crisis that pits a monolithic senior and baby boomer voting block into a war on youth, where political forces, in order to preserve existing senior entitlements, are destroying welfare and education, labeling youth political movements as terrorists, expanding prison infrastructure to contain and ruin their lives, while at the same time, enslaving the remaining youth to support current seniors, near retirees, and prison confinement, and  eliminating these taxpayers' future retirement benefit opportunities.  Politically connected older citizens are merely postponing the solvency cliff to preserve the current entitlements for their voting block.

The only moral solution to this sustainability crisis for civilization is to extend retirement entitlements to adults of every age.  Essentially identical to basic income.  Every other alternative selectively protects one age groups' benefits while destroying the benefits of the young.  Basic income doesn't eliminate the solvency cliff that civilization is headed for, but it spreads out the costs evenly, rather than motivating one generation to cling to the current path on the backs of the young.

The superb economic benefits of taxation and wealth redistribution
If 40M people receive $15k per year in social dividends, then 40M people can afford most goods and services, since they all have at least $15K income, and so there is a large addressable market for any good or service.  If we instead cut all taxes and wealth redistribution and let 10M people starve, then it creates a strong deflationary spiral, and collapse to a primitive society.  The immediate effects are that 25% fewer employees are needed to provide goods and services to 25% fewer living people, and sales and profits are 25% lower.  Then those people starve and die, and so on.  The value of land, homes, resources shrinks rapidly as there are fewer people and fewer people that can afford them.

For the middle class and rich, having $10k-$15k in guaranteed future annual income, allows them to spend or invest more, instead of saving, allowing the economy to grow even more rapidly.  Poorer people can group together in order to share large purchases such as homes and vehicles.  With $10k-$15k in guaranteed future annual income, everyone is more credit-worthy.

Spreading the benefits of productivity increases
It is much better for any society if 20 people are able to provide for 100 people's food, shelter and clothing needs than if 95 people are required to provide for 100 people's basic survival needs.  If further productivity gains are capable of reducing the number of required workers even more, that is also always better for a society.  The rest of society can be employed in transportation, health/child/domestic care, technology, finance and entertainment.  If some people are not needed for anything obvious, they remain economically useful as consumers.

Productivity gains are innevitable, and technology will continue to destroy hopefully as many jobs as possible.  Social dividends provides a simple formula to tax the wealth concentrators and redistribute the benefits of productivity increases throughout society, and so social dividends softens the burden caused to any single person as a result of productivity gains.

Great benefits to wealth concentrators
If one person is ever able to create machines that provide for the needs of 40M people, then that person will be far more useful and far wealthier if 40M people are able to afford those needs, than if there is only one person able to afford them.  The wealth concentrator would be far wealthier even if taxed at 99%.

General benefit to taxpayers
When wealth is redistributed as broadly as possible through taxes and social dividends, it trickles back up.  Middle class employee tax payers get to keep their jobs through the sustainability of higher consumer spending, and the highest taxpaying owners of successful enterprises, have any income that is taxed away, trickle back up to them through future sales.  Even seniors and babyboomers benefit if they have stock market holdings, because social dividends will create extra sales, profits, stock price increases and dividends from large corporations.

Small government wealth redistribution
Big government wealth redistribution is permission-based filtering bureaucracy designed to determine who can and cannot receive welfare, unemployment benefits, and other social services.  Including their salaries and office space costs, removing any permission filtering bureaucrat could provide basic income benefits to 50 people, and allow the bureaucrat to contribute to the productive economy instead.  Social dividends provides an alternative to a left-wing political hierachical empire, and should appeal to conservatives.

Advantages for the poor
Permission based filters for social aid cause the poor to be trapped into those services.  It is too easy to choose to stay poor in order to continue qualifying for the aid.  Because there are ominous clawbacks on any official employment income earned while under social programs, there is an incentive to engage in dangerous underground/criminal activities.  Social dividends not only removes the welfare traps associated with permission-based social services, it removes the need to shame or ghetoize the poor into social housing, and any and all restictions for aid, including arcane rules that force people to stay in difficult employment areas.  Even if basic income were less than the maximum welfare subsidy available to someone, the choice/freedom to keep work income, and to live their lives like any other citizen, should provide self-esteem and opportunity for upward mobility.

Advantages for labour-left
Social dividends eliminate labour oppression by empowering labour to refuse underpaid or oppressive work.    If people choose to get out of the labour force, due to social dividends being sufficient to support their desired lifestyle, then the competitive position of everyone remaining in the labour force is improved and wages will be better.

Reduces crime, and need for police and prisons
In addition to eliminating the root of most crime, desperation, social dividends also provides all citizens with something to lose.  An alternative to expensive prisons can be forfeiture of social dividends, or better, assignment of social dividends to a victim of crime, from a victimizer proven through due process.

Social Justice
Income innequality is a serious issue that brings political unrest, and creates an abusive and expensive police and judicial response.  The same senior and baby boomer political block that pushes for wrong and short-sighted tax cuts are responsible for this un-necessary war on the young and poor.  Social dividends by removing the state/political responsibility and discretion in providing income equality, makes the government blameless in the process and outcomes.  Similarly paternalistic charities also become much less necessary.  Citizens are provided with the means for survival, and participation in the economic success of society through social dividends.  Social responsibility to individual citizens can end there.

The proper structural adjustment mechanism to productivity gains outstripping job growth
There is no reason to believe that high paying union jobs lost in the last 20 years are comming back.  In the competition between labour and machines, 15k in annual social dividends, not only keeps economic spending up, and therefore demand for labour up to meet economic demand, but someone who was earning $30000 in wages before social dividends, can earn $15000 in wages, and still have the same total income.  Minimum wage laws become no longer necessary, and so, labour's competitiveness with machines is improved if they want to work.  These adjustments are automatic, and occur only if productivity increases occur as expected.

Any economic argument for tax cuts has a better argument for increased social dividends.
Arguments of tax cuts for the rich are all selfish lies, destructive of society and the economy.  Arguments for reducing taxes on lower income earners has a similar argument to social dividends:  Lower income earners are likely to spend any extra available cash, and so both social dividends and low income tax cuts substantially boost economic activity.  Social dividends provide a greater economic stimulus than low income tax cuts for the same reason that low income tax cuts provide a greater economic stimulus than tax cuts for the wealthy.  They affect more people, and people tend to need/want just one of anything.

Government efficiency
Social dividends are paid based on the surplus of tax revenues over government spending.  This means that every citizen pays an equal share of any government program.  The alternative to spending $1000 per citizens on expensive fighter jets with a broken design is to give $1000 to each citizen as increased social dividends.  There is likely to be popular support for cutting most programs, and it forces government to provide excellent value in any program if its people are going to tolerate them.

Entrepreneurship and education
Most new economy new jobs are technology and software based.  Even low tech startups will usually involve some pre-revenue development time.  Social dividends provide the means/self-funding for people to pursue entrepreneurship or training.  In the case of poorly funded startups, paying co-founders with equity (promises of shares of future profits) can become viable, since co-founders will have their subsistance needs met by basic income or social dividends.


In combination with natural taxation policies....
Natural business income-taxation is a new philosophy with 2 key features.  First, it separates taxes on sales from tax rebates on expenses, such that exports and imports have different tax impacts on a corporation in any country, with no relevance to where a corporate head office is, and it provides for simplified process of obtaining tax rebates in the event of income/investment losses.  The benefits are that a high tax jurisdiction can outcompete a neighbouring low tax jurisdiction because taxes are paid in the jurisdition of sales, and expenses and investment losses are subsidized with tax rebates in the jurisdiction that they are incurred.  High tax rates encourage investment because they generate high tax rebates if those investments fail.  Natural taxation prevents setting too high of a tax rate, because the rebate system may cause a net tax drain as companies develop and manufacture in your jurisdiction in order to export to others.

Improvement in international competitiveness
The same benefit to labour of being able to compete with automation through social dividends, provides the same competitive benefits with 3rd world globalizaiton.  Wages can adjust downward to meet any problematic unemployment without an oppressive force feeding on labour's desperation.  With natural tax policies, a high tax economy can also compete with tax havens.

Social/Volunteer service
Under natural taxation the distinction between investment and donation is blurred.  Whether an organization fails to achieve a profit by design or by accident, investments/donations made to it are tax deductible.  This means that complicated laws on what a non-profit or charity is allowed or not allowed to do are unnecessary, and any organization can include a social component to its mission.  Social dividends allow people to volunteer or work at below market rates for social causes without necessity making the choice impossible.

A start to eliminating politics
Political control is a form of war.  Whether fought through perfectly fair elections or more deceptive or violent means.  The winners gain the control of resources to spend on themselves.  Social dividends is a key way to remove the prize sought to be controlled, while still providing the key economic benefits of tax-based market societies.  Natural taxation is a means to depoliticize corporate welfare, by subsidizing any investment loss.

The 3rd option in the austerity vs. spending debate
Spending austerity is being recommended in most economies at this time, because without it, sovereign credit will dry up, and eliminate the option of future spending.  Paul Krugman passionately notes that spending cuts are depressing world economies and thus making debt levels relatively worse.  Higher tax rates with social dividends would increase economic output in a budget balanced manner, and natural tax policies permit higher tax rates without fearing flight of capital and wealth.


Frequent criticisms and questions over social dividends/basic income....
While there is no valid criticism of social dividends and basic income that can survive democratic review or economic analysis, concerns are frequently brought up....

Will basic income create inflation?
Inflation results from any economic growth.  While large employers, and senior citizen stock holders, can see a selfish advantage in destroying the economy and employment in order to reduce costs, the position is short sighted and misguided because such actions also reduce sales.  Inflation that is the result from economic thriving is a normal byproduct of growth, and should never be a basis for avoiding economic health.  Even retired citizens benefit from taxation and investments sustainability.

I would rather have $20000 in guaranteed income instead of lower basic income or social dividends
That is because you would prefer not to work at all.  Guaranteed income is exactly like Canadian welfare system, except for no application process, and a much higher social subsidy.  It discourages work because all earnings up to the guaranteed income level ($20000) are effectively taxed at 100% because any earned income replaces the government subsidy.  This creates a significant reluctance to join the entry level labour force, and creates significant resentment from people who receive no benefits (due to having earned income above the guaranteed amount).  Another issue is the affordability of the program becomes uncertain.

Even if finding work continues to be increasingly difficult, it is critical that there be no disincentives for working, and that people continue striving to participate in socially useful activities.  Basic income is meant as a survival stipend that frees you up to do anything.  Not a social subsidy that permits you to do nothing.  Social dividends are meant as your deserved egalitarian share of social revenue surplus, and rewards the collective contribution to the economy.

Basic income should be higher than $7000
The level of basic income should be whatever the majority of society agrees it to be.  I demonstrated that for Canada, $7000 would be revenue neutral, meaning no new taxes are required if obvious alternative social programs are eliminated.  The $7000 number is a near status quo policy, assuming that there is tolerance for current taxation levels, and so prevents arguments that it might be too high or too expensive to implement any basic income.  Tax increases or other program cuts would fund supplemental social dividends.  Each province can choose to supplement it as they see fit, and with natural taxation, even individual cities can  add income taxes for the purposes of providing social dividends.

Wouldn't this enable drug addicts?
For some people, spending double or triple the cost of direct cash payments as social services is worth it if it is spent trying to prevent spending on drugs by the beneficiaries.  While encouraging people to make good choices is worthwhile, there should be no preconditions for survival.  Better choices become automatically more viable when individuals have fewer problems, are not discouraged from earning income (welfare trap), don't need to steal or join gangs to support drug habit, or profit from prohibition without losing social benefits, are not burdened with criminal records, and are not persecuted/harrassed for potential drug involvement or welfare fraud.

3 comments:

  1. True. Better choices become automatic when the public have few problems as well as encouraged to earn. This is synonymous with creating fringe benefits that will benefit the government, the employees and the employer as well. It would be beneficial to turn our heads into the benefits men and women in the military and police service enjoy, such as police novated leases for cars. This further motivate enlisted men to do their job well.

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  2. I agree with Zane, if only all companies will give the benefits their employees should have, this will make them motivated to do their respective jobs. I, for example is motivated everyday to go to work because of the benefits our company is giving to us.

    Bruce DeJerz

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  3. They're incentive, in other words. Employees will feel obliged to exert all their effort in working properly because they wouldn't want the superiors to think that those benefits would to go to waste.

    -Jade H

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