Re: Guaranteed Income Ahead of Guaranteed Pensions

["John O'Donnell" <jackodonnell@xxxxxxxx>]

Barry Brooks wrote:
>
> John O'Donnell commented that...
>
>   Anyone who thinks that the liabilities [i.e. --
>   Payroll and income taxes.] of work don't contribute to
>   negotiated wage increases and that wage subsidies wouldn't
>   decrease wage rates is living in fantasy land.
>
> Guaranteed Income could be varied to stabilize wages, instead of using tight
> money.

Yes, but the trick is to find a rational measure to
determine the optimum level of the guaranteed income. That
is the function demonstrated by the "Sharing Nature" chapter
in my _Three Steps to Economic Freedom_ posted on line
beginning at:
http://www.geocities.com/jackodonnell.geo/c00r4.html

> Guaranteed Income will allow policy makers to forget the goal of full
> employment which will make resource conservation possible, because a GI will
> end the "need" for economic growth to make up for jobs lost to
> automation/productivity.  A GI can stop hyperactivity.

Providing a GI can help in a society's freedom to seek
education [or, for that matter, leisure] instead of food but
it is unlikely to in any way affect resource conservation or
reduce the desire for economic growth. The very disparaging
way you describe this desirable propensity of people to
improve their standard of living shows a confusion of
equating damaging third party costs that are often imposed
by others than those benefiting from a particular economic
activity.

With a little thought it can be seen that discouraging these
third party costs can be accomplished with taxes that
resolve to variable costs of production. I mention this
because I do not address this issue in _Three Steps, etc._
but only address the benefits of changing the tax system to
transfer these costs to forms that would increase the fixed
costs of production while reducing the variable costs. As a
practical matter I would classify this use of taxes as a
police function of the state as it would, in fact, under my
tax scheme actually reduce economic production as do all the
present tax schemes, however unintentionally.

> As for the money, since 95% of "investment" is really the buying of existing
> assets all that money could be taxed with no loss to the economy. Such
> speculation bids up the price of existing assets without
> adding any productive capacity.

Not without loss to the economy. Also, the premise that such
taxes would reduce speculation is seriously flawed. [See
Davidson's many bellicose remarks to this effect.] However,
the "monopoly tax" I propose in _Three Steps, etc._ would,
by increasing taxes with the increase in market value
exacerbated by "irrational exuberance" of speculative
fervor.

> This might not provide enough revenue if
> low interest rates had dropped return on investment to such low levels that
> the investing class's surplus income only covered the 5% of investment
> representing real asset building.

Return on investment does not decrease with low interest
rates, it increases. You are confusing so called "economic
interest" with "money interest." They are entirely different
things even though economists tend to blur the distinction
in their teaching of economic principles.

> Without sufficient surplus income of owners the workers would have to be
> taxed too.  Why not tax where it doesn't hurt, the income above what one can
> spend or invest is the place to look.

You're getting close to the truth here, but still off mark.
Taxing personal income causes an increase in variable costs
of production while taxing corporate income is has no effect
on either fixed or variable costs. [i.e. -- Sometimes called
non distortionary taxes.] However, to "tax where it doesn't
hurt" would be a step in the right direction but it would be
better still to tax in a manner that  causes greater
economic productivity. That's the approach recommended in
_Three Steps, etc._

> Try this thought experiment:
> if increased productivity had reduced the human labor to one worker and
> if the concentration of wealth reduced ownership to one person then
> if income was split between capital and labor at 99:1 still those two guys
> would have to be taxed for all the money they can't spend if demand
> deficiency is to be avoided. Their tax rates would have to be just short of
> 100%.

Thought experiments are a good method to find truths but I'm
afraid this specific one falls a bit short. Under such an
extreme example just who would have sufficient strength to
impose taxes of any variety?

--
			-- jbod

		Tax Privilege, Not People
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