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Mutualist Blog: Free Market Anti-Capitalism

To dissolve, submerge, and cause to disappear the political or governmental system in the economic system by reducing, simplifying, decentralizing and suppressing, one after another, all the wheels of this great machine, which is called the Government or the State. --Proudhon, General Idea of the Revolution

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Location: Northwest Arkansas, United States

Tuesday, March 07, 2006

Not by Bread Alone

Here is the idea I entered in the Since Sliced Bread contest.

Most social and economic evils we face exist because tax policy punishes good behavior and rewards bad behavior.

We should shift taxes from products of human labor to unearned wealth, and tax pollution and the consumption of natural resources. At the state and local level, sales taxes and property taxes on buildings and improvements should be shifted to a property tax on the unimproved value of the site. At the federal level, severance taxes should be imposed on petroleum and other natural resources (the source of Alaska's Permanent Fund), and the revenues should be offset by increasing the personal income tax exemption. All corporate welfare should be eliminated, and the savings likewise put into bottom-up income tax cuts.

Such policies would reward labor, and discourage pollution and waste by including the real social cost of goods in their price. Incentives would come from the market, not bureaucrats. An increased personal exemption would leave workers more of their wages. Local tax shifts onto land value would cause explosive economic growth, and reduce housing costs and sprawl.

I didn't expect it to get anywhere (hoped, but didn't expect). But out of all those thousands of ideas, with a committee of "progressive" policy wonks sorting through them (and with Andy Stern's involvement), I expected at least that the winning ideas would involve some fundamental systemic changes.

To be fair, the first prize idea was concerned with the big picture, rather than simply tinkering around the edges. Peter Skidmore proposed a "resource tax" on pollution and fossil fuel consumption to promote sustainable energy technology.

Globalization of labor, production, and ideas and an industrial economy based on subsidized fossil fuels have set the stage for economic and social instability, continued outsourcing of jobs, and marginalized quality of life. We can create a new economy based on environmentally benign industries and energy.

Impose a “resource tax” on pollution, development, and fossil fuel to pay for development of renewable energy and environmental restoration. Promoting sustainable localized energy industries (solar, wind, hydro, tidal, biofuels) will provide reliable, clean homegrown energy, exportable technologies, and bring energy jobs home. Funding widespread environmental restoration will expand existing industries (farming, recreation, tourism, and commercial fisheries) that are dependent on ecological services and will foster research, design and technology industries.

I consider this a mixed bag. As I suggested in my own entry, I agree that so long as taxation exists at all, it should be on things that impose costs on society, as a way of getting rid of externalities. But using the revenue to subsidize market distortions in another direction, like subsidies to alternative energy, is a bad idea. If fossil fuels and nuclear power are heavily subsidized at present, the best way to promote alternative energy is simply to remove those subsidies. As for promoting "environmental restoration" and sustainable energy, if the full costs of energy and transportation (including liability for pollution) are internalized in the price, the market price system will take care of it. When prices internalize all the costs of bad behavior, good behavior will be a matter of self-interest.

But at least Skidmore had a vision for fundamental structural change. The runners up not only limited themselves to tinkering with small areas of policy, but also relied on increased statism as their sole method. Filippo Menczer, for example, proposed indexing the minimum wage to the inflation rate.

Worse, the other runner up, Leslie Hester, proposed a massive infusion of new state involvement in the education system:

The future of American workers in the global economy depends on the quality and equity of today's public education. From kindergarten to college, our public institutions represent the capacity of our society to provide adequate income, healthcare, and security for all Americans. In this light, the following three reforms will return public education to its original mandate:

1. Restructure public funding of schools to redirect local property taxes to a general state fund that is then equitably distributed among all schools on a per student basis. This measure would break the cycle of poverty endemic to those areas without a large property tax base.

2. Control tuition at public universities to better reflect the traditional statewide median income-to-cost of attendance ratio. This will provide all willing students the ability to receive a top-notch in-state education regardless of their families' economic status.

3. Increase teacher salaries to recruit and retain some of America's brightest. If we invest in high quality instruction, we give ourselves the best chance for an intelligent, entrepreneurial, and confident workforce.

Public education's "original mandate" was to process human resources into docile servants for both government and employer. Hester's first proposal, by shifting control of schools to a higher administrative level, will simply consolidate the hold of the educracy (professional administrators and products of the teachers' colleges) over local education, and make it even less responsible to local voters. The main reason for poor quality education is not a lack of funding, but the gang of nitwits in charge of it. Hester's solution is even more control by an even higher-salaried gang of nitwits. Her second proposal, by lowering the cost of post-secondary education, will simply promote further overproduction of scientific-technical personnel, and thus make them even cheaper for corporations which rely most heavily on this "resource." The effect will be not only to further subsidize the profits of high-tech industry, but to promote continued deskilling and upward shifting of control over the work process, from the shop floor to the salariat. And the best way to get "America's brightest" into teaching would be to break the power of the present educational establishment and its professional culture: specifically, burn down all the colleges of education and normal schools and start over.

So long as taxation exists at all, the most revolutionary and positive way of reforming it is through some sort of Geolibertarian tax shift (at the local level, eliminating all sales taxes on necessities, the personal property tax, and property taxes on buildings, and replacing them with increased tax on site-value), and through streamlining other taxes to eliminate differential tax breaks (in a revenue neutral way). The result of such policies would be an explosion of prosperity, from the bottom up for a change. And just searching the Sliced Bread archives for phrases like "land value," I found at least twenty such proposals from Georgists around the country. But the judges, unfortunately, preferred corporate liberalism and bureaucratic empowerment.


Anonymous Anonymous said...

KC, do you remember that I cced you an email I sent to Norman Singleton on this general area on 23.2.06? He has asked to post it, so I'm copying it in below for your readers too. It brings out an issue on which I disagree with you, in terms of means to ends.

If you follow up the materials on my publications page that I give in my email signature, also below, you'll see that the transitions I have in mind don't violate the principle of never bringing in new taxes or increasing them in order to get out from under - at least, in Australia where we already have a GST and all its funds go to the states who could means test the services they provide.

The same goes for winding back income tax with a wedge approach, that I also describe.

Here's the signature and then the material:-



I.e., a Goods and Services Tax (or almost any other broad based production tax with a Negative Payroll Tax, promotes employment.

See http://member.netlink.com.au/~peterl/publicns.html#AFRLET2 and the other items on that page for some reasons why.


A couple of problem areas in Fred Foldvary's "Why aren't you an anarchist?"

I recently came across this material at http://www.freeliberal.com/archives/001869.html .

One problem area, the biggest, is the idea that people could effectively secede as individuals if they didn't like what was on offer in a geoanarchist community. This wouldn't be true if - like landlords - all communities were pretty much the same and had taken up all resources. It would be a hollow mockery like pointing unhappy bank customers to the availability of other banks; in a country like Australia they are all much of a muchness.

The problem of states would re-emerge in a different form, with the communities working like ground cover plants to make a network externality preventing any shift in the system of uniform geoanarchist communities. The only way there could be true choice is if there were other communities around that were anarchist without the "geo-".

The second problem area is that it is false that using different revenue bases than land tax would make people pay twice, once for the revenue base and once for increased rent arising from the associated services.

For one thing, any such rise would of itself indicate that the group had acted to thrust costs onto individuals indirectly; they would not have individually wanted those services if they disagreed with the cost, so it reflects a failure to connect - a creation of something that governs.

But we can see more than this. The assertion would only be true if by some chance the community were a meaningless cover, allowing absentee landlords to laugh all the way to the bank. Most likely, even with a landlord and tenant split, at least the landlords would be part of the community that was not caught in this bind.

But before denouncing even that as a mockery, consider that - done properly, say with a distributist approach - there would not be that split. People would not be paying rent but rather owning their own homes and resources. Geoanarchism, or even anything with that much of a Georgist base, presumes an enduring problem with landlordism and gives up on it, preferring palliative care.

Yet clearly the most that would be needed is a decent way for the younger generation to become owners in their turn, without building any concentrations of land resources. The only practicality of a Georgist solution is to deal with a transition, but it risks seducing people into abandoning a principle of non-intervention.

The most I would concede against principle is to work within existing tax bases to reduce them, rather than ever raising any part or introducing a new one. At least that way, like Orpheus, we would be leaving without ever looking back.

That of course begs the question of what should be done instead, to provide a revenue base. One, it is no criticism of a critic to ask him to fix a problem before he has the right to point it out (although, as it happens, I can fix it - read on). Two, it presumes too much in a collectivist direction, rather than letting the atomist/individualist approaches have a go first; it makes a presumption in favour of collectivism. Maybe nothing should be done instead, for most things.

Three, there is no reason why a community should not, itself, have a pool of revenue generating resources - apart from the very issue of whether there should be ground covering collectivities putting us all at risk anyway. This, after all, is how mediaeval religious foundations used to work, even the commanderies of military orders working at the edges of Christendom. But even they could be oppressive.

I could go into detail on this approach, but it would be going into a new although related topic, and as it happens it would amount to reinventing checks and balances for something quasi-governmental. Far better to adapt Henry Ford's advice for car components and not put it in in the first place because "that way it can't break and it can't fall off".

March 08, 2006 7:50 AM  
Anonymous Anonymous said...

Here's glory for you - Norman Singleton has just posted that material I described above here.

By the way, I should have htmlised the link in my signature like this:

GST+NPT=JOBS I.e., a Goods and Services Tax (or almost any other broad based production tax with a Negative Payroll Tax, promotes employment. See http://member.netlink.com.au/~peterl/publicns.html#AFRLET2 and the other items on that page for some reasons why.

March 10, 2006 6:35 AM  
Blogger Kevin Carson said...

Thanks, PML. As usual, your "mind dumps" are better than what most of us keep in there.

As it happens, I'd just stumbled across the Foldvary piece myself. My own reaction was that if people could opt out--be "outlawed" in the sense of being refused service by police and fire departments, libraries, etc.--but they weren't prohibited from organizing their own alternative services through voluntary association, all his Georgist community would amount to would be a private association with membership dues based on land rent. But if it allowed such exceptions to the territorial basis of organization, it would bleed revenue: those with enough land to be paying more in rent than the value of the services they consumed, would be the ones most likely to find it in their interest to secede.

The coexistence of other forms of taxation would not necessarily lead to double taxation. Funding of public services on a cost basis through some sort of user fee might actually--by internalizing externalities--reduce the amount of collectible land rent. A great deal of site value results from externalities in the form of subsidized public services.

I totally agree with what you said about the Georgist approach taking landlordism as a given, and attempting to correct it by palliative measures. My own approach to land value taxation is that it's great as a transitional measure, so long as taxation exists at all; and that, in the case of rare resources, it's a transitional measure to treating them as a common. But in the end state, aside from such especially rare resources, it would be much better to resort to what you call "distributive" means first (I prefer the Ingalls-Tucker system of property), and to reduce externalities by cost-based funding of services. I suspect that what site rent is left over, after these two measures are taken, won't amount to much.

But as a purely transitional measure, compared to other existing tax regimes, I tend to agree with the Georgists that LVT is the best thing since sliced bread. It's certainly had amazing effects, even when applied so half-heartedly as only to reduce the tax on buildings somewhat compared to unimproved site value.

March 10, 2006 6:38 PM  

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