Book: Tax Justice and the Political Economy of Global Capitalism

I mentioned in a previous blog that the book Tax Justice and the Political Economy Of Global Capitalism, 1945 to the Present (Leaman and Waris, eds) is out. I didn't include pictures, so I'll do that now. 

Here is the cover:

And here is me with a copy of it:

Visualising Interpretations of Egalitarianism

I thought I would share the way I have visualised two different forms of egalitarianism when thinking about and teaching them. It might be useful to others, or spark off a useful debate. I start with a simple representation of the role of the state or government in distributing or redistributing resources to maintain a just distribution.

The question for egalitarians is how the state should work out how to adjust the resources people have in order to have an equal outcome. I'm sure there are many candidates, but I will focus on two very prominent ones; equality of resources and social egalitarianism. The former was first presented by Ronald Dworkin in the early 1980s and discussed in detail in his book Sovereign Virtue (2000). It may be possible to present other versions of 'luck egalitarianism' in this same way. The idea is that a distribution of resources is fair if every individual has no complaints that another person has been treated better than them. Differences in resources should therefore be justified to all. I will illustrate this by emphasizing that the individual in question should look to the resources that others have received.

I have highlighted one of our citizens in yellow and drawn arrows to indicate how that person is to judge whether she is equal to others. She would consider whether the amount of resources that she obtains are fair when compared to those of others. Of course this will not require the resources to be exactly the same; people are different and this should be reflected in the resources that they obtain. So one person might work more than others and earn and save, while others enjoy a more leisured existence. Furthermore, some people might receive additional resources because they have some disability relative to others which everyone accepts would entitle them to additional compensation. 

The second approach to equality been suggested under several names, such as democratic egalitarianism (Elizabeth Anderson, "what is the point of equality?" Ethics, 1999), and relational egalitarianism. In some ways this latter name is the most accurate since the approach focuses on relationships between people, not the different treatment with regard to resources. However, the first approach is also relational and so it is potentially misleading. The motivation for this approach is that people should all members of society should feel themselves to be equal to others. The challenge to resource egalitarianism is that it might produce distributions of resources that enable some people to look down on others, that are in some sense hierarchical (see Scheffler, "What is egalitarianism?" Philosophy and public affairs, 2003). 

According to this theory, what matters is that our yellow person considers herself an equal to all others in society. No one should look down on anyone or feel inferior to others, and resources should be distributed in such a way that such judgments would be avoided. 

The social egalitarian charge against resource egalitarianism is that it might result in this kind of inequality for several reasons. This could be because people have to claim extra compensation for their disabilities which means they have to consider themselves inferior to others. In addition, there can be large differences in resources as a result of people's different working and spending choices, which would allow big differences in wealth which would result in hierarchies.

Must we choose between these two different approaches? 
Yes - they are different interpretations of egalitarianism. It may happen to be, of course, that the two approach would coincide; the equal outcome according to one could be the equal outcome according to the other. However, this doesn't seem likely. Furthermore, even if they did coincide, we would be interested to know which of the two was the reason for wanting this (then less controversially) equal outcome.

What are the differences between the two approaches? 
Well, the first emphasizes that what matters primarily is the way the government treats its citizens while the second emphasizes the relationships between people in society. So if we go with the second then it could be that the government should give some people extra resources at the expense of others in order to stop those others from looking down on them. 

I find the former approach more attractive. It is an empirical question whether the two approaches would require different distributions, but I do not think that the distribution should be so influenced by how people might judge one another based on their resources. I'd also question whether the relational approach would not be self-defeating since people would resent those who get additional resources solely because they would otherwise be looked down upon. This seems exactly against the spirit of the approach - I would not feel like an equal if I got extra resources because I wouldn't otherwise have as much as others and others may well resent me for getting resources because I chose not to work as hard as them. The response to this would presumably be that in a large society people most people are strangers and will be judged based on appearances and so these are what matter.

Perhaps more importantly, the former approach allows people responsibility for their resources and what they want to do with their lives. If I am concerned with how people perceive me then I can focus on that, but if I am concerned with other things then I accept that people might judge me as they see fit. Personally, I don't think that these judgments are that important when compared to this idea of people being entitled to do what they want compatible with what others want to do. 

I recommend Zosia Stemplowska's writing in this area, such as ‘Responsibility and Respect’, in Responsibility and Distributive Justice, Oxford University Press, 2011, 115-35

Collection on Taxation

About three years ago I presented a paper at a very interesting and informative conference at the University of Loughborough on Taxation. The book that follows from this conference, Tax Justice and the Political Economy Of Global Capitalism, 1945 to the Present (Leaman and Waris, eds) has now come out. I look forward to reading through it once I get it in my hands.

I took the opportunity to make some improvements to my paper in the intervening time and hope that my proposals will gain some traction. I'll briefly summarise my position, though I will also describe it elsewhere including my forthcoming book on taxation.

I begin by highlighting certain problems regarding international taxation. These are tax avoidance and tax competition. Tackling tax avoidance requires greater international co-operation, as many have acknowledged. However, tackling tax competition is also an issue. This could be done by limiting states in their power to set tax-rates, either insisting on a global tax rate structure or by setting minimum tax rates.

I do not think that tax competition is a bad thing, per se. There are many legitimate reasons why states might want to set their taxes higher or lower than other states. However, tax competition has bad effects, in that it encourages a "race to the bottom" whereby states have to set lower taxes than they otherwise would in order not to lose business or workers to rival states. This is a particular problem for progressive taxation, since the most of the tax-bases that are ideal for progressive taxation (tax on economic rents) are often the most mobile (workers with rare talents and skills, ownership of valuable copyrights, brands and patents).

I propose that the only way to stop this from occurring is for states to have a holistic solution - all states would need to a agree to a common framework for taxation. Assuming a comprehensive lifetime personal tax base, I suggest that states should agree to share tax information on international citizens who pay tax in multiple jurisdictions in order to calculate a global tax rate for that person. This rate would be determined by calculating what the individual would have paid in each of the states which which she has some economic or personal relationship, taking account of the strength of that relationship.

The global revenues from our international citizen would then be shared in accordance with the strength of the relationship with each state. However, the system would have a counter-incentive mechanism in order to deter states from setting tax rates too low. This would work by rewarding states who would have taxed the individual at a higher rate with a larger share of the revenue for that individual. Low-tax states on the other hand would receive a lower proportion of the tax revenue than their relationship would otherwise imply.

This proposal has several virtues. It would stop states from setting different tax rules for their own citizens and outsiders since the calculation is based on the tax that local citizens pay. It would also hold individuals to their past relationships - if someone leaves a country to go elsewhere then their tax revenues will be shared with their past states and therefore fellow citizens. This would reduce the impact of "brain-drain" that afflicts so many countries. As I have emphasised it also counteracts damaging competition over tax rates and tax bases while still allowing states the option of setting very low tax rates if they wish to do so for their own citizens or to encourage economic activity.

The proposal is clearly not immediately ready for real world implementation given the lack of global agreement on taxation. However, with increasing technological prowess it should become more feasible to have an automated global tax calculation system such as this. I argue that political feasibility will come about because states are going to be increasingly vulnerable to revenue loss as current trends continue, with risks and costs falling on states and economic rewards being spirited away through tax havens rather than being shared through taxation.

Governments and their citizens are gradually losing power and they really need to wise up and fight back. Hopefully they are starting to realise this and will support sensible multi-national efforts. My proposal anticipates the need for practical policies at some unspecified future date. However, as I emphasise in my paper, the proposal is also useful as a way of testing the justice of current international tax arrangements. As things stand, we are a long way from justice.

Basic Income or Job Guarantee?

(3/3) So if both the BI and the JG have many overlapping advantages (assisting the worst-off, ensuring there is demand in the economy), how are we to choose between the BI and JG? For one thing it will be necessary to emphasise their differences. The way to judge these differences, however, is from the perspective of distributive justice. The fairer approach is the one we should prefer.

I indicated some of the differences between BI and JG in my first post on this topic. The BI is provided to everyone without any conditions, while the JG is only provided to those who perform what is required of them by the programme. BI will be cheaper to administer, but the JG will not pay out to those unwilling to work. It is difficult to say in the abstract which one will be cheaper, but there is an important difference. The JG will make people more likely to seek work in the market, particularly if it is combined (as I argue it should be) with a generous earning subsidy for those on a low hourly wage. This will push more people into work, whereas the BI will push more people into a life of leisure.

The greater amount of work performed in a JG society should broadly reduce prices (as more will be produced), and also ensure that socially useful activities are performed by those who would otherwise be unemployed. These are benefits of the scheme not accounted for in the cost to government. Advocates of the BI may claim that the BI will produce these positive outcomes anyway – if people get money for nothing they will spontaneously do something useful with their time. I’m sure many would, but I’m equally sure many wouldn’t. Indeed, a very small minority might cause more trouble if they have more leisure than they would if they were working.

Coppolla makes a very perceptive point regarding the differences between proponents of the JG and those of the BI. One difference might be that JG supporters are “managerialist” and want to make sure people are doing something useful. BI supporters love freedom, on the other hand (like Van Parijs), and are happy to leave it up to people to decide for themselves what they wish to do with their time. As a liberal myself, my sympathies here are on the side of freedom. However, the likely extra costs to society of this freedom are what tip me towards the JG approach. Furthermore, there is something democratic in asking people to do what their community has decided (perhaps via public suggestions which are voted upon) to be useful work projects.

My primary reason for preferring the JG relates to the economic advantages it offers to low-paid workers. Giving more resources to leisure-lovers will mean less resources available to support low-earners who are keen to work (whether because they want to consume more, save more, gift more, or just have a strong work-ethic). Better to channel resources to the low-paid rather than to leisure-lovers.

In the post-scarcity economy, of course, it might not be necessary to impose the work requirement. If there really was nothing that people had to do to make their society a better one in which to live then there is no point in forcing people to work. However, I imagine that it will always be possible to improve things, and it would be fair to apportion the corresponding work (and any ensuing pay) as fairly as possible.

The argument for the JG with earning-subsidy approach arises where there is tax revenue scarcity, particularly if there are useful things that people could do if they were appropriately directed. In this case the JG approach is superior unless we assume that a particular notion of freedom is of primary importance (as it seems to me Van Parijs does).

Automation and the post-scarcity economy: The economic argument for basic income

Many people have argued for a basic income because they think it would make for a fairer society. The work of Phillipe Van Parijs since the early 1990s is no doubt the pre-eminent example, and a comprehensive bibliography is available online. However, I have more recently seen arguments for basic income premised on its superior economic performance, at least in the long term and if certain trends continue. I will follow my previous blog on basic income and job guarantee programmes by, belatedly, writing on this topic.

There are certain links between Van Parijs’ argument in Real Freedom For All and the economic argument. Both begin from the premise that jobs are scarce and that some people get this scarce resource while others are left out. The economic argument begins by extending trends in robotics and computerisation that seem to reduce the employment available in many sectors. Robots are increasingly cheaper or more efficient than human workers, and so capitalists will gradually replace their workforces with these robots. This is the post-scarcity economy that Marx thought would lead to communism (though he thought that socialism would be a stepping stone to this rather than an economic and political disaster).

If robots are producing more and more it would seem that we would be entering a wonderful utopia, indeed a post-scarcity economy. However, while there would plenty for all many people would have no access to these bountiful goods. The haves will keep it all and less will be shared with workers, since workers will be employed (and presumably at lower wages if there is a surplus of workers). However, if most people have no resources and cannot find work, then who is going to buy all the items that are produced by the robots? The wealthy might well run out of things to buy – there are only so many hours in the day in which the rich can consume. This is the intuitively sensible idea that the poor have a higher propensity to consume their income on which Keynesian arguments are usually based. Coppola therefore refers to this robotic cornucopia as a “demand-constrained economy”

The economic argument for the BI is that it will redistribute to those who are unemployed and thereby increase demand. This demand will be good for the economy as it will provide a market for the produce of the robots, as well—presumably—as increasing demand for non-robot services as well.

One counter-argument to this is to point out that technological advances have been happening for centuries, and people have still been able to find employment. This has largely been through the creation of new products and services, which create jobs which replace the old ones. Indeed, I am unconvinced by the article by David Rotman which seems to have been a catalyst for the economic argument. Rotman mentions this counter-argument in his article and does not really rebut it. Technological advancement might just change the nature of work but not remove the need for it entirely. For example, if there are lots of robots then someone will need to make and fix them. Furthermore, if consumer prices are much lower then paid work could be shared around much more, with more people working much fewer hours than they currently do. If it is cheap to consume then many people might be happy to earn a little and then to retire to a life of leisure.

A further point to raise in response to the economic demand argument for a BI is that the BI is not the only way to redistribute resources. Another policy that will do just as good a job is a state-funded job guarantee scheme (JG), which I presented in the previous post. I prefer the JG to the BI and recently argued for the superiority of the JG in my PhD thesis. I will contrast the two approaches in the following post as well. For now I will highlight that the economic argument applies just as well to the JG scheme in a post-scarcity economy.

If the state were to employ the involuntarily unemployed then this would also redistribute income and create demand in the economy. Coppola of course admits as much. The problem is not that there is a lack of useful work to do, but rather that there is a lack of people wanting to buy the products of labour in the market.

So, if there is a demand-constrained economy then the BI and JG are two equally valid options to improve economic performance. In the final of the three blogs on this subject I will discuss the choice between the two rival policies.

Basic Income, Guaranteed Jobs, both, or neither?

Certain corners of the internet have recently been engaged with discussions about the relative benefits of two rival policies to provide help to the less fortunate; basic income and the job guarantee.

I will be advocating a job guarantee scheme in my forthcoming book (rethinking taxation), to complement a novel form of earning subsidy, and so I have a horse in this race. I will therefore take this opportunity to weigh in on the subject. However, before doing so I will devote a post to setting out the terrain for the benefit of those who are less au fait with the discussion.

Basic Income (BI)
This is the idea that people with a low income should receive an income from the state, whether or not they are actively searching for work. The unconditional aspect of the basic income therefore contrasts with the conditional nature of unemployment benefits as they currently exist. Indeed, this unconditionality indicates why it is sometimes referred to as a UBI for unconditional or universal basic income. This and similar proposals have been proposed under a number of names such as a demogrant,  stakeholder grant.  It is related to similar proposals for basic capital,  or a “property owning democracy.”  The basic income was also proposed by the libertarian pin-up Milton Freidman, under the name of a “negative income tax.”

Job Guarantee Programme (JG)
The job guarantee is a programme whereby the state provides work to those who are unable to find it in the job market. This has also been referred to as state being the Employer of Last Resort (ELR),  or an Employment Assurance Policy (EAP).  These schemes all attempt to ensure that everyone is able to find work in society at a decent rate of pay. There are various methods of achieving this aim. One is obviously to have a centrally planned economy, though the programmes above assume a broadly capitalist job market, as do I. The proposals usually therefore require the state to create jobs for the unemployed. These jobs might conflict with “private” firms, and advocates usually indicate that this should be avoided where possible. Workers should therefore be employed to provide services that would not be provided by the market or would not be provided as a matter of course by government (central or local). I imagine that it is usually possible to create such work as it is always possible to improve the local environment and provide services that will benefit less well-off and vulnerable members of society—improving the quality of life and/or education of schoolchildren, the elderly, the disabled and prisoners. I imagine that people should be able to propose local projects that could be voted upon by the local populace, with administrators also setting schemes of the sort mentioned above.

How do the proposals help the worst off?
Basic income helps the worst off by providing a safety net. This will improve the bargaining position of workers as employers will have to ensure that the package they offer to workers is better than the default option of not working at all.
Job guarantees are beneficial to the worst off to the extent that they provide a higher income than alternative jobseekers benefits (such as the jobseekers allowance in the UK). It would also provide workers with more work experience, and the self-esteem benefits that follow from productive employment.
Both proposals should therefore improve things for the worst off in society, though they might be expected to be fairly expensive for the government. Basic income may be taken up by many people who are capable of work, thus increasing the cost of the scheme (or the amount that each person on it will receive). Job guarantee schemes are expensive to administer as they will have to create schemes to keep people working.

Conflict?
Most people advocate either one scheme or the other, and so advocates of the schemes often argue against the proponents of the alternative option. However, as many have acknowledged, the two proposals are not mutually exclusive. It is perfectly possible to provide both schemes in parallel – a JG programme for those who wish to work but cannot find any and a BI for those who do not wish to take any of the forms of employment available. However, few people advocate both schemes because this would then involve the higher costs of both schemes at the same time. Furthermore, since both schemes are aimed at benefitting the worse-off members of society there is a degree of duplication if both are provided together.

Differences
The differences, then, are as follows. One important issue is the conditionality of benefits. BI is unconditional whereas JG is conditional. JG is therefore closer to present benefit proposals in this regard. However, the JG goes beyond these existing schemes by more actively attempting to improve the position of the worst off.

Both of the proposals are fairly niche, and it seems that the passive and ungenerous schemes currently existing have a fairly widespread support in our punish-the-poor, reward-the-successful society. However, if one proposal were to win out with those interested in such things it would be easier to get more mainstream attention as an attractive alternative.

Further complementarities
BI and JG are intended to improve the position of the worst off in the labour market, though they are also compatible with other policies intended to achieve the same ends; the minimum wage and earnings subsidies.

I mentioned at the outset that I would suggest providing funding for the JG through the provision of an earning subsidy (a negative hourly tax). This means that every hour someone works below the 'minimum net wage' the state/society would subsidise that income to ensure the person receives a decent amount. This would enable a drop in the 'minimum GROSS wage' (i.e. the minimum wage as it is currently called). Most advocates of the JG do not imagine the scheme to work in such a way. Instead the national programme would itself pay the workers a reasonable wage, and so the minimum wage would need to be kept (or would not even be needed since firms paying less than this would struggle to attract workers from the JG scheme).

Hopefully that provides some background to the issue for those who are less familiar with the debates. In the following two blog posts I will engage with some recent debates on the subject.

PhD Thesis

On Friday I passed my viva subject to minor corrections. Phew!

I've created a word cloud for the thesis.

Contents list for book

I have (finally) started doing some proper work on my book "Rethinking Taxation: An introduction to Hourly Averaging"

Here is the chapter listing as I currently conceive it:

1. Introduction/Features of a good tax system

Part 1: The Basics
2. The Lifetime Hourly Averaging Calculation and Tax-Rates
3. Hour Credits
4. Why Introduce Hourly Averaging?


Part 2: Further Details
5. The Tax-Base 
6. Lifetime Tax accounts

Part 3
7. Constitutional Requirements 
8. Would it be Vulnerable to Fraud? 
9. Transition


End Matter
10. Conclusion 
11. Appendix: Equations
12. Endnotes

References will be available online