The Platinum Tax-payer card

We people pay money.

1. We people pay money if we are forced to do so. We pay our taxes, we pay fees.
2. We people pay money for items we need. We pay for food, we pay for cloths, we pay for housing. 
3. We people pay money for items we like. We pay for a new TV, a smart phone, going to a restaurant, going on vacations.
4. We people pay money to show off our status, or to feign a status. We buy brand name clothing, brand name cars and travel to hip locations. Sometimes we do that because we enjoy the holiday destination or we like the feel of a certain shoe or the look of a certain T-shirt, but often we do it to pretend. 

Whether it's poor people, average people or rich people, there is no difference in that behavior. Except maybe, that rich people are more avaricious, because that's one ingredient to becoming rich in the first place --- apart from inheriting wealth.

Taxes

For a wealthy Person there is no immediate gain in paying taxes. They gain more if all the other citizens pay their dues and s/he does not. Someone with a lot of money has also more possibilities to avoid paying taxes. Just pay a little to an advisor who knows how to circumvent taxes and jump through loopholes to drastically reduce the large tax payment. 

People have to WANT to pay taxes

That sounds ridiculous, because who ever wants to pay taxes. I personally understand the need for me to pay taxes and the need for everyone to pay taxes. Still the deduction of the taxes from my salary hurts a bit.
Of all the reasons to pay money we only exploit the reason number 1). We are forced.

We probably will never like paying taxes for we don't get the immediate return of investment we get if we buy new shoes.

But what if we exploited reason 4)? What if paying taxes meant that people could show off their status?

The platinum tax-payer-card

The pay-more-premium based on this premise is all around us. We can see it with credit cards, we can see it with the "miles" in flying. It is nothing new to provide a bit of status which makes people feel more special to those who pay a lot with their credit cards. They get "gold member cards" or "platinum cards" and they are happy to pay more, just so that other people can see that card and can assume wealth and status. For all the "Senators" with loads of miles can just skip the long lines of common people waiting to be checked and go through the special entrance where they are patted down a little bit less humiliating and then sit down in the VIP lounge where they are invited to pay double prices just to sit in the fake leather chairs and to feel special. 

I propose to create a very visible tax payer status. Someone who pays 1 Million Euros or Dollars in taxes a year should be given the opportunity to show this to all the people around her/him. If it's more than 10 Million the sign should be more special. And for someone who paid 100 Million Dollars of taxes in his lifetime there could be the platinum tax payer card.

Invite them to a very special dinner to those who reached the status this year the first time or again. Give them a valuable pin reflecting his contributions. Provide them with incentives honoring their contribution for society.

And then ask everyone who claims to be rich: "Hey, aren't you supposed to be rich? Didn't you claim to have a status? If so, why don't you have at least gold-tax-payer-status?" and "hey look over there, he's a platinum-tax-payer. Whoooa!" Everyone can see it at the big charity event, because the bit tax payer got his pin and his card.

This --- at least that's my thinking --- provides an incentive to wealthy people to not dodge their tax payments because of peer pressure within the group of wealthy people.





The platinum tax-payer card by Peter Speckmayer is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Good taxes

(public domain)

Working for the society

People in some jobs do good and important things for society. And people in other jobs clearly don't. Sounds pretty obvious.

I'd like to give some examples of jobs of which I think, that they are good good for society: nurse, teacher, medic, sewerman, fireman, ...

As discussed already in a recent blog post, the amount of money people earn mostly depends on their proximity to the source. The source being the flow of money. People who work in the financial industry can deviate a lot of money into their own pockets, and because they can, they do. Nurses on the other hand---to name a specific example---are far away from the source and thus are not able to deviate money into their pockets. Hence, they have to live of the leftovers trickling down.

I consider this as a problem for society. But there are ways out.

Ways out

IMO, there are basically two solutions to this problem:

1. Regulate the wages of the people
2. Regulate the taxes people have to pay

Regulating the wages directly would deprive the employers of the possibility to provide reward those who do good work. Since I think, that rewarding good work is a necessary ingredient to get good work done, I therefor don't like the this option.

The second option is the regulation of taxes. This is already somehow implemented in progressive tax systems where the tax rate rises progressivly with the income. Whilst this provides a redistribution of some of the wealth in the society, it treats the nurse equal to the stock market broker. The broker just earns so much more, that even with a progressive taxation he still goes home with so much more.

What income taxes should depend on

My proposal is, that taxes should not only depend on the income, but as well on the type of job which is done and its value for the society. I imagine different tax rates depending on both, on the income and on the type of job. Maybe it should be even depend on the work the company does as well.

It is of course difficult to set for each type of work the value the society gains, and probably nobody wants to give that power to a small group of politicians. Especially as today's politians don't seem to be too resistant to lobbying or even being bought completely.

But there is one entity in each nation which could have the power. It's the people. I imagine one default progressive tax by for all jobs. But all citizens can then up- and down-vote for the taxes for a specific type of job in a specific salary band. The votes of all the people and those who didn't vote is then taken. The tax for a bankster earning 10 Million Euros a year could then be set to maybe 99% by the people, if they got the feeling, that banksters don't do any good for the society. On the other hand, the fireman who saves lifes or the staff of a retirement home, who earns much less might be awarded with only 10% taxes, or maybe even 0%, who knows what people think is a fair value.

I think, this could be a really fair system. It would provide an incentive for people to work in jobs where they would help the society instead of in jobs which are just there to rip off a large share of money from the financial stream for their own profit. We are the society after all, that's why we should aim for improving our all wellbeing, ... not only mine or yours or his.

Technicalities

Of course, there are some technicalities to be solved, such as which groups of jobs are there and which job belongs to which of the groups. There is as well the issue, that some bankster might try to redefine his job description from "managing a large equity fund and firing people at will" to "cooks food for the poor". Certainly this is not desired and has to be avoided.

Ideally voting would be over the internet, but it has to be ensured, that as well computer illiterate persons can have their say. How should the calculation being done? In what time-spans the tax rate should be held constant after a change; a week, a month, a year, not at all? Hence, there are technicalities, but hey, technicalities have to be solved each and every day. I don't see any reason why such a system couldn't be implemented.

(CC BY-SA)

(public domain)

You are very welcome to leave your comments! Let me know what you think.


Good taxes by Peter Speckmayer is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License.

Tax Transactions!

Ditch ideology: a more technical viewpoint of taxing financial transactions

Introduction

First of all, although this is only the third line of this post, I already I lied once. It's just not possible to ditch the ideology part of questions concerning taxation. But it's still possible to add a technical viewpoint to it which is not derived from common business thinking. Not derived from common business thinking---I'm repeating that, because that's important.

Why?

[ideology warning]

The objectives of business on a global scale are skewed (You can feel, that we're here wandering around in the ideology terrain) and thus the outcome of a business thinking centered view is bound to be skewed as well. Skewed means: Whilst business should serve humans, it's humans serving business. And whilst business should provide welfare to the masses, it's the masses which through business provides the big money to some few. In developed countries, the differences between the rich and the poor are usually less dramatic, but there are still some people earning in a year what other people could not earn in a lifetime. This occurs, because people getting a lot out of the system usually are closer to defining how much they themselves and all the others should earn. Because we are greedy, the ones who have the power to give themselves a lot and others a little most of the time do so.

Taxes

It is sad to see a part of the hard-worked-for-money being taken away already before it appears on the bank account. But I admit: Taxes are necessary.

But, whilst taxes are necessary, there is a big handle in there to steer how business behaves. Taxes increase the cost of something. And this something can be chosen. Currently---especially in Europe---the one thing which is taxed the most is workforce. In a sense, a company gets punished for each of its employees. The more employees, the larger the punishment. This is of course an incentive to reduce the workforce and increase the amount of work for the remaining employees. Is that the effect we really want to achieve? Another important tax is the tax which is payed on buying things. This is not so bad. The more money you have, the more money you can/will spend, the more taxes you will pay. As long as no-one with a lot of money can avoid to pay this tax it is quite social, in a sense that those who have more pay more.  Other taxes focus on the wealth of the persons. But at the end nearly anything which can be taxed will be taxed. In this domain, politicians are very very indeed very creative.

The Aim

Before discussing what could be taxed, what should be taxed and what should rather not be taxed it is useful to define the goals which should be reached by these taxes.

The first goal of every tax is, to move a lot of money from the tax payers to the government. Many discussions are centered around the amount of money the state should take or should not take, but this is not the point I want to discuss here. And then there is the hope that the government will spend the money A) wisely and B) for the citizens. This is as well a different question.

There are some properties of taxes which I consider good ones and important ones.

• A good tax makes you pay for doing things which differ from the objectives of the society

• A good tax makes you pay for not protecting the environment (This could be seen as part of the first point if one of the societies targets is the protection of the environment)

• A good tax prevents you from getting overly rich while others get overly poor.

• You cannot escape a good tax which is designed to target you (e.g. you cannot flee from paying the tax by formally moving to a tax harbor).

I take it as given, that preserving the environment is, above being beneficial for the environment as well beneficial for the society. Hence, my favorite tax is the one on energy from non-sustainable sources (e.g. gasoline). It's easy to apply, and hits the nail right on its head. The more you damage the environment, the more you pay. Tit for tat.

My other favorite tax would be a transaction tax (also known as Tobin tax). I would not exempt anything. Plain 0.1% tax on every movement of money. While people paying their rent and buying their food wouldn't feel it at all, it would certainly hurt millisecond traders and other people who get wealthy from just moving around money from A to B as fast as they can and as often as they can. But I don't want to argue in favor of such a tax only because of my "wealthier should support the poorer" thinking. I want to bring in a more technical argument. It boils down to stability. In millisecond trading in the financial market, computer algorithms decide on buying and selling. Those algorithms are involved and complicated and are certainly non-linear. Whilst one algorithm already is complicated and its behavior is difficult to predict (although they are designed to make money, it's not what will happen all the time) there are many of those algorithms working for different companies at the same time. The authors of one algorithm don't know what features are implemented in the algorithms of the competitors although he surely tries to anticipate that. This leaves plenty of possibilities for feedback loops and thus unstable behavior. Think of one algorithm selling in panic mode, because some market markers touch the sensitive spot of the algorithm. Other algorithms recognize, that there is someone around selling like mad and start selling themselves. The market breaks down within a few trade cycles. And since all happens within milliseconds the stock index goes awry before anyone can hit a red button for full stop. There are rough cut offs in place which close the trading of the stocks of a company if the changes of value are too large, but this is just a safety net which has been put into place to save the rest of the market. This is not really a solution.

Absorb the shocks

As it works now, the stock market is kind of like a car without with a suspension consisting only of springs and missing the shock absorbers:
bad shock absorbers, broken shock absorbers

But since there are no limits on the stock markets comparable to the laws of physics which cars have to obey to (e.g. energy conservation), the algorithms can push themselves up and down mutually. Then it looks even more like that:
feed back loop

What does such a shock absorber do?

It adds friction to the system and thus reduces the energy which is stored in the springs at a bump. By removing energy from the system (dissipating the energy as heat) car will not jump up that high and will not go down so low. The car will have a better contact to the ground and the journey in the car will be more controlled and safer. The harder the shock, the more energy will be dissipated.


In my opinion, a transaction tax would be such a shock absorber, removing "energy" from the financial market system. The traders would have to think beforehand if their movement of money would be worth it---the anticipated win would have to be larger than the loss due to the tax. Some transactions would not be done and for all others a tax would be payed to the benefit of the people and the society.

As a car runs much more stable with shock absorbers, so would the stock market. Longer term investments would be favored over short term trading. Traders and their bosses would probably earn less---which I consider to be a good thing. Taxes on workforce could be reduced by the amount of taxes which is generated from a transaction tax and thus penalize less the companies employing more people (I admit, this is not very realistic).

The only losers would be those who earn a large bunch of the money in the stock (options, futures) market gamble now. They certainly would earn less (but still get stinkingly rich). Those are the ones who do control a lot of money now and everyone knows: money makes politics. Hence it is not easy to overcome their blockade. But we have to try until we get there.



You are very welcome to leave your comments! Let me know what you think.


Tax Transactions! by Peter Speckmayer is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License.