The Universal Right to Capital Income

https://www.project-syndicate.org/commentary/basic-income-funded-by-capital-income-by-yanis-varoufakis-2016-10

by shinryuu • 10 years ago

23 21 10 years ago

pliny2• 10 years ago

The idea that you work hard and pay your income taxes, while I live off your enforced kindness, doing nothing by choice, is untenable. If a universal basic income is to be legitimate, it cannot be financed by taxing Jill to pay Jack. That is why it should be funded not from taxation, but from returns on capital.

Capital is savings is unconsumed income.

"Universal dividend" is another name for tax on investment which is another name for tax on income. Whether confiscating income to pay for leisure is "untenable" shouldn't depend on the name you give the act of confiscating income.

In the end, a corporation is a machine that takes investment now and distributes dividends later, and the reason why the investment occurs is the promise of dividends. A corporation has to distribute $100 in dividends to get $75 into the hands of its investors (given a tax on capital gains of 25%), or it has to distribute $100 in dividends to get $75 dollars into the hands of its investors and $25 for the government because the government confiscated 25% of the IPO... what's the difference? I guess in Varoufakis' model people can still buy, like, gold as an investment and enjoy preferential taxation.

sooheon2• 10 years ago

Not posting to disagree, necessarily, just to state my somewhat muddled thoughts and ask for your critique.

Capital is savings is unconsumed income.

If you think of it that way you can pretty much equivocate capital and income tax. The way that they differ in reality is that subsistence laborers generally have no reason to pay capital tax. For the rich, capital tax is a huge proportion of their tax burden. Picture an heiress who does not earn a salary a day in her life. Modern trends of decreasing capital tax leads to effectively a regressive total tax structure. I think the author is essentially arguing for a more progressive tax, in a way that feels more "fair".

pliny2• 10 years ago

If you think of it that way you can pretty much equivocate capital and income tax

They are equivalent. Income is only good for consumption and investment (which is just deferred consumption), so if you tax income and you also tax everything that income is used for, you have taxed the same income twice. In fact income used to buy equity is taxed three times, first when it is earned, second every time the company reports a profit and then third every time the company issues a dividend. But all of these are collected on the "same" money.

If you want the rich to have a greater part of the tax burden, that's fine, but Varoufakis pretends he can argue against income tax in one paragraph, and argue for a functionally identical revenue scheme in the next.

jawbone3• 10 years ago

Well no, with the hich capital concentrations we have now, most captial is inheritance and so cannot be counted as saved income of the individual that owns it. Further, saved wages merely seed capital accumulation, so that most capital comes from investment returns and not wages. So the critical question here is if investment is different frome wage work?

empath75• 10 years ago

The only problem with this is that it would concentrate ownership of all industries in the hands of the government, eventually.

usrusr2• 10 years ago

The fixation on IPOs seems more than fishy to me. Corporations that already exist would get to pay 100% tax free dividends, whereas corporations that IPO after the watershed moment give the unnamed percentage of dividends to the "Commons Capital Depository"? What about private companies? This would just create uncalculatable incentives. Corporations are already going far too much for war-chest over dividends as it is.

So why not at least tie it to estate taxation? It seems so obvious to me that Varoufakis not mentioning the possibility looks like him being all too careful to avoid stepping on certain feet.

Seize that percentage when they are passed on from someone who (maybe) earned the capital to someone who by definition did not. Convert shares to special "dividends taxed for CCD" shares if you don't want to repeat for each generation and/or you don't want to mess up voting. It would certainly create an imbalance between public corporations and privately held ones, but according to the usual anti-estate-tax arguments that is exactly what you want: don't split up the family farm. But share portfolios are inherently splittable. If the next AT&T or Standard Oil turns out to be a private company due to abuse of this imbalance, forced IPO beyond a certain size might be an emergency hatch option. But that is one of the few problems where i think it is perfectly reasonable to not put too much thought into before they happen.

I do however like the idea of something UBI-like that is not defined by needs (with all their inherent negotiability and the destructive bickering that comes with it) but directly by the capability of the underlying economy.

(edit: removed concrete numbers which i somehow thought were inside the original article, but which i only accidentally picked up from a peer comment)

twoodfin4• 10 years ago

If you squint at the right angle, this is essentially the argument for "privatizing" Social Security. Even in that limited form it's a huge political loser (for a mix of good and bad reasons, IMO).

usrusr2• 10 years ago

An interesting observation. The way i squint at it, i see a separation of concerns between need-based welfare (e.g. disability support) and purely redistributive aspects intended to avoid collapse by the combined forces of capital concentration and shrinking demand for labor.

Defined rules instead of making up decisions as you go. That is always a tough sell, because it considerably reduces the scope of activity for politicians. Less for them to decide or promise. But that does not mean that we should not try. Imagine the opposite: a state that engages generously in welfare, but only ever in one-time handouts. It would be a perpetual repetition of those in power feeding of all critical mouths.

I think that this is exactly how the Roman Empire dealt with the "automation problem" of their time (a massive increase of forced labor imports -slavery- completely wrecking the domestic labor market). Now where again did fascism's namesake originate? Not really the point, I am convinced that everybody would agree that one-off welfare is a power politicians should not have (even politicians, as long as they are not in power).

No matter where you stand on the question of more or less welfare, I think you should always fight for it being more regulated. Which in the case of welfare, means "de-politicising" it as far as possible.

curun1r• 10 years ago

Why do all discussions of basic income omit the best argument in favor of it?

I would think, especially on a site like HN, that people would realize just how valuable BI would be to entrepreneurs. Many people don't pursue business ideas for fear that they'll burn through savings or have problems paying for the necessities of life. With BI, that concern goes away. You may have to scale your lifestyle back a bit, but you basically start at ramen profitability.

And yet all discussions of BI tend to frame it as an extension of welfare given to people who can't earn enough to support themselves. I'm not against taking care of the poor, but when you frame the argument like that, you miss the benefits to society from all that extra entrepreneurship.

twoodfin4• 10 years ago

You have to counter-balance that benefit by the fraction of adults who otherwise would be working productive jobs but instead decide to spend their hours and BI rock climbing, playing video games, or writing bad poetry.

Would extra entrepreneurship make up for their loss of production? Maybe, but I don't think entrepreneurship and employment levels in nations where welfare provides everyone with guaranteed "ramen profitability" are encouraging on that front.

MacsHeadroom2• 10 years ago

Sounds like there may be entrepreneurial opportunities for rock climbing gear, video game design, and poetry sharing.

paulddraper• 10 years ago

Many people don't pursue business ideas for fear

A very appropriate fear, given that most business ideas are terrible.

There is a balance between risk and reward. Good ideas are worth risk; bad ideas are not.

Removing the fear of failure (or correspondingly, the rewards of success) damages the decision-making process.

jhayward2• 10 years ago

This is an unproven assumption. Individual perception of risk, and psychological risk orientation vary quite a bit. Decision-making is largely not rational, rather more based on pattern-matching, personal biases, etc. the idea that fear of failure is somehow useful in marking the likelihood of success is simply not supported by fact.

Tnere is just as much reason to believe that randomly trying various entrepreneurial efforts would be just as fruitful.

otini3• 10 years ago

I think Varoufakis is profoundly misled in thinking that basic income can be a left-wing policy.

It is a well-known fact that there are two versions of basic income out there: the right-wing version, where welfare is removed and replaced with a single allocation that isn't high enough to live of it; and a left-wing version, where the distributed amount is sufficient to live a decent life and thus gives "real freedom" to people.

Here is why I think the left-wing version is a fantasy: I start from the assumption that capitalistic economies like ours mainly relies on coercion. In other words, critical parts of production depend on people who would rather do something else, if it wasn't their only way to eat. Under that assumption, any policy that gives people a real choice between being employed in a factory and doing the things they really want to do removes in fact the coercion — making the economy collapse.

The form collapsing would take could for example be the following: low-paid, exhausting and low-considered jobs are not taken anymore, and yet society depends on them. The only way to make the workers come back is to pay them much better. But this can only lead to a combination of dramatic price rises and cuts in shareholder profit (and I am not an advocate of capital income, but sadly it is currently one of the main incentives for investment).

For these reasons, I am convinced that any attempt to implement a left-wing basic income will inevitably result in the right-wing version taking over, meaning less rights for the workers and a destroyed welfare.

MacsHeadroom2• 10 years ago

That's clearly a faulty assumption. If production depends on a job and supply is short, then the value and pay will rise until supply meets demand.

The assumption also ignores advances in automation. Factories of the future may not need a single human, except the capitalist to sign papers.

otini3• 10 years ago

That's clearly a faulty assumption. If production depends on a job and supply is short, then the value and pay will rise until supply meets demand.

I don't disagree with your statement about supply and demand. But as a matter of fact, the supply is never short, because structures of society force a large fraction of the population into jobs they cannot let go, whether they like it or not.

It is common knowledge that people of low social status are given a choice between shitty jobs and starvation. Saying "if the job is not good enough, supply will fall and wages will have to rise" does not take into account the highly competitive character of the job market, especially for those with low educational capital.

jhayward2• 10 years ago

Our economy relies much more on consumption than on production. The current top-down, militaristic control structure of most companies is more a result of path dependence than any fundamental requirement. There is no reason to believe that not forcing people to do certain jobs would be fatal economically.

otini3• 10 years ago

The current top-down, militaristic control structure of most companies is more a result of path dependence than any fundamental requirement.

I strongly disagree. In a corporation, the relation of the employee to the employer is intrinsically one of subordination. It is defined as such in the labour laws of most countries.

Of course, this subordination is not necessary militaristic — but it can be, and naturally tends to be in a context of financial pressure on the company.

The point I want to make is that an employment relation is not symmetric (although it may be experienced as such by those of middle- or upper-class position) but happens on a background of economic depencency, and that is more and more true as the job is less paid and less considered.

The Universal Right to Capital Income

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