Tuesday, February 2, 2016

Thinking Beyond The Conventional

We are regularly told, both by governments and their corporate confederates, that these are tough times, and that only patience and a freer hand for business will bring about eventual relief. To the seasoned observer, such a prescription is utter nonsense, of course. Neither an expansion in good-paying jobs nor a contraction of the income gap has occurred under that roadmap.

The fact is there are solutions to many of the problems we face today, whether it be climate change, the grinding poverty that so many contend with, or the sad plight of our native peoples, to name but three. Yet these solutions, while well-known and well-researched, always seem just over the next horizon, never to be realized.

Consider the matter of the guaranteed annual income, which I have written about previously on this blog. A recent piece by Glen Hodgson and Hugh Segal suggests the time is right for such a program, especially since countries in Europe are giving it serious consideration.
How does a guaranteed annual income system work? Basic income support would be delivered as a tax credit (or transfer), administered as part of the income tax system. Existing social welfare programs could be streamlined into this single universal system, thereby reducing public administration and intervention. Earned income for GAI recipients could be taxed at low marginal rates, thereby lowering the existing “welfare wall” of high marginal tax rates for welfare recipients who try to break out of welfare by working and providing a stronger incentive for recipients to work and increase their income.
The benefits of such a program would be many: poverty reduction, better health outcomes, greater labour force engagement, etc. And to top it all off, it would likely save money since it would replace the siloed benefit programs that currently exist, thereby significantly reducing administrative costs.

Even if you don't believe that a guaranteed annual income would be cost effective, there are other untapped sources of revenue that could fill the gaps and do much, much more. One of those sources is a form of the Tobin Tax, a tax on financial transactions.

The New York Times writes:
A financial transaction tax — a per-trade charge on the buying and selling of stocks, bonds and derivatives — is an idea whose time has finally come.

A well-designed financial transaction tax — one that applies a tiny tax rate to an array of transactions and is split between buyers and sellers — would be a progressive way to raise substantial revenue without damaging the markets. A new study by researchers at the nonpartisan Tax Policy Center has found that a 0.1 percent tax rate could bring in $66 billion a year, with 40 percent coming from the top 1 percent of income earners and 75 percent from the top 20 percent. As the rate rises, however, traders would most likely curtail their activity. The tax could bring in $76 billion a year if it was set at 0.3 percent, but above that rate, trading would probably decrease and the total revenue raised would start to fall.
As the editorial points out, it is already being applied in a limited number of countries:
There are already financial transaction taxes in Britain, Switzerland and South Korea as well as in Hong Kong and other developed markets and emerging nations, generally at rates of 0.1 percent to 0.5 percent on stock transfers. In addition, 10 countries in the European Union, including Germany and France, have agreed to apply a common financial transaction tax starting in 2017, though relentless lobbying by investment banks and hedge funds threatens to delay and even derail the effort.
That last sentence, of course, epitomizes the main obstacle to implementation, the opposition of the moneyed forces who seem to see any taxation as a capitulation to some kind of socialist scheme. Unfortunately, those forces seem to almost always have the ear of government.

So despite the propaganda, there are ways to bridge the yawning gulf that separates those who have a lot, and those who have little. Don't let anyone tell you otherwise.


  1. There finally seems to be a breakthrough in awareness of the essential role of income distribution in maintaining an healthy society and a successful economy. Even Marx foretold the situation in which labour wages were suppressed giving rise to a collapse in consumption and the accumulation of unmarketable surpluses. We hear some of the 1% speaking out about this today but nowhere near enough of them.

    Henry Ford knew he was looking after his own best interests by ensuring that his factory workers earned a wage sufficient to enable them to purchase his cars.

    Will we see a return to sanity - capital controls, duties and tariffs (linked to essential public policy goals), restrictions and regulation of trade and access to markets.

    Two books I'm reading (Ralston Saul and James Galbraith) convincingly make the case that free market fundamentalism has failed, even if most of us don't recognize that, and we'll eventually adopt new models. The thing is, there's no guarantee that means something better than the economic scheme neoliberalism ushered in. It could be worse. It's up to us.

    1. An informed, aware and engaged electorate seems crucial to any new model that may emerge, Mound; otherwise, your apprehension that something worse could come along could well be realized.

  2. Hugh Segal has been fighting for a Guaranteed Annual Income for a long time, Lorne. It's time may be coming. As Shakespeare wrote in King Lear, "the ripeness is all."

    1. A guaranteed annual income and pharmacare would do much to ease the lives of many in this country, Owen, included the much-publicized precariat. The time is indeed ripe.