Carbon and Toxins Tax

Summary:

There are a significant number goods which have an external cost associated with their production; pollution.  This can be measured in real dollars due to the associated work that is involved in addressing the externality: the cost cleaning up the pollution, the cost of purifying the air or water, or the storage of waste.  This cost is normally borne by taxpayers through government run clean up programs.  Instead, a pollution tax placed on consumer goods will reflect the  total cost of the product when these considerations are included.

Long Description:

A carbon and toxins tax adds a cost to products which cause carbon or toxic pollution.  The tax collected is to cover the costs of clean up or the loss of natural capital.  The tax rate is adjusted per pollutant based on the cost of clean-up that occurs.  This would cover the external cost of pollution.

(Definition of External Cost: A product will cost money to create because you must pay for labour, materials and machinery to create it.  However, an external cost is a side effect of the process which you do not need to pay for.  For instance, a factory may have left over copper sludge and then simply dump it into a lake.  It would be up to the government, an external entity and hence the name, to then pay to clean up the copper sludge)

(Definition of Natural Capital: Natural capital is a relatively new concept which attempts to measure the dollar value of natural habitat.  Forests, for instance, produce clean air and purifies water, which would normally cost money at a water purification plant.  Therefore, the loss of forest has to be made up for with artificial machinery that accomplishes the same goal.  This costs money and this amount of money is used to determine the value of the natural habitat.)

Different pollutants and the method of polluting costs different amounts of money to clean up.  Generally the ideal goal is to have corporations pay for the clean-up costs up front, and not require any taxation thereafter.  However, for goods that are imported, an equivalent tax must be placed on these products to put them on a fair footing with locally produced (and monitored) goods.

For domestic industries, environmental inspectors can determine the level of pollution (and method of pollution) and then place a tax rate on the products.  The added bureaucratic cost can be reduced by having an assumption system where products are assumed to have an associated pollution cost and corporations only give information on their processes to show that they are more efficient.  Otherwise, products are assumed to be maximally polluting.

The bureaucratic reduction could be achieved by registering a factory.  Or there could be a general tax rate levied against corporations (who can then raise the price of their products if they choose to cover the cost of the tax) based on the number of tons of each type of pollutant they produce each year.  For instance, a $30/ton tax rate for carbon, $80/ton tax rate for sulphur and so on.

Imported goods could face the maximum tax rate for their good if they do not choose to identify the level of pollutants their factories create each year.  Bilateral trade agreements can help offset the damage to trade through the nomralisation of pollution monitoring systems.

Overall, it is an attempt to fairly assess the full cost of a product.  The loss of natural capital or the clean up of pollution have real costs associated and consumers can shop more wisely when these costs inherently built into the price of the products they buy.  Afterall, if taxes must increase to pay for the side effects but taxpayers do not know what is causing the pollution they cannot change their spending habits to lower government costs.

Rationale:

In terms of real world examples, a recent audit by the Canadian Environmental found that federally owned will cost 7.7 billion dollars.  That is 7.7 billion tax dollars being used for contamination site clean up due to lax environmental enforcement by the government over the last 15 years.  Considering that the Canadian government is heavily in debt and has a significant deficit in the budget, it is not a cost that it would like to have but without a tax levied against the producers of the pollution it is the taxpayers that must shoulder this cost.

If tackled well, a generalised tax placed on high pollution goods will raise their cost and thus push consumers to buy more eco-friendly items without any special incentives.  This cost is "fair" in the sense that if a corporation contaminates a lake with toxins with a clean up cost of 10 million dollars, then they should pay to remove the toxins from the lake.  It makes little sense to ask an organisation that had no relation to the pollution to pay for the cost of clean up.

The tax will also incentivise corporations to act more responsibly.  So long as they have to pay for the cost of pollution, they will act in a manner that produces less pollution.  This may be different processes, more efficient machinery or simply more responsible handling of nature.



Tools:

Generally, this is an issue that revolves around the implementation of a new tax bureaucracy.  Therefore it is best to keep the process for imposing pollution taxes as lean as possible without harming market fairness.

First is attempting to create a schedule of costs of different toxins.  A statistics agency is likely to compile this information regardless of a pollutants tax, simply because it is useful information both for public policy and for private entities.  This is helpful in determining the cost per ton of pollution when levying a tax.

Second, are trade disputes that may arise due to the taxation.  Generally, countries may become agitated if they feel their exports are being taxed more heavily than local goods.  In this sense, the most fair solution is to simply build a system in which both countries monitor their respective businesses for pollution levels.  Although problems may still arise, such as spotty inspections in one country but not the other, the cheapest bureaucratic route is to tax goods at the "expected pollution level" rather than waste money attempting to properly calculate a business' pollution levels.

Third, large corporations versus small businesses are more easily able to compile information on their pollution levels.  It may be better to offload the inspection costs onto the government who then incorporate the cost of inspections within the pollution tax to avoid an unfair cost of accounting between larger and smaller businesses.

Fourth, the government must be clear with a clearly published schedule of costs for pollutants.  With the internet, this can be achieved through a government wiki (the best solution) or alternatively simply on the Environment Ministry's website (or the equivalent government agency).  They must also be clear on the bureaucratic cost of the inspections and regulations.  This would incentivise keeping the bureaucratic cost low.


What I'd like to talk about later:
Corporate Tax Revisions and Business/R&D Grants
Healthcare - Preventative Care
Nursing Home Funding
Incubator Program
Criminal Justice Lawyers

Minimum Income

Summary:
Ensure that every citizen or permanent resident of a country maintains a minimum level of income, in place of the current welfare system.  The overall competing welfare systems and bureaucracy will be completely eliminated and instead replaced with a tax-based system where everyone is guaranteed a level of income.

Long Description:
In many countries the welfare system is a bureaucratic department where one must prove themselves destitute in some way via paperwork and background checks to then qualify for certain types of income assistance.  In Canada, this would mean income assistance cheques and subsidised housing.  In the United States this could mean food stamps or healthcare insurance subsidies.

However, the process for acquiring welfare assistance is usually tedious, involving a high amount of paper work and bureaucracy.  This, by itself, is also costly to the government when each dollar spent in welfare-type assistance has a reduced effect because of the bureaucratic cost. 

Minimum income seeks to avoid the bureaucracy by integrating income assistance with income tax processing.  This may require changes in a country, for instance in the United States if you do not file a tax return the government actually does not process anything at all whereas with this welfare system the government must always process the tax for every person in the country automatically.  When income tax is processed, you then receive a flat amount of money from the government.

For example, if your income for the year is $23 000, as is typical for someone working in the service industry, you then may also receive $5000 from the government, for a total income of $28 000.  Then you pay taxes on $28 000.  This would mean that those with high incomes would receive less benefit since the marginal tax rate on the additional income is higher.  We may wish to introduce a surtax on the $5000 for people at the highest tax brackets but that may not be strictly necessary.  We could also add income deduction of $5000, on top of whatever we is already in place, in order to cancel out the income tax on the income at the lowest tax bracket.

[Edit] For any income tax calculation that attempts to "claw back" the minimum income assistance there are two key considerations.  First, for every extra dollar earned that is not through government assistance, the amount of assistance that is reduced should be less than a dollar, therefore making no negative incentive for working more hours.  Second, the marginal tax rate at any income level should not be perverted to become regressive (for instance, if you immediately clawed back one dollar for every two dollars earned, then the tax rate at the lowest bracket would be 50% + state/provincial tax rate + federal tax rate, meaning that you'd be taxed at a rate that is so high even the highest tax bracket doesn't even compare)

Rationale:
The real cost of bureaucracy dampens the desired effect of welfare in a country.  If only 70% of the money spent on welfare goes to the actual workforce that seriously hampers efforts in combating poverty.  Additionally, from recent studies in Europe, it would appear that minimum income arrangements do not have a major effect on productivity, in fact the only groups to have reportedly worked less in experimental minimum income policy areas were pregnant mothers and teenagers.

We want the youth to focus on obtaining skills for future jobs, whether that be apprenticeship or university, having them work in low-wage jobs is not helpful for increasing human capital.  For parents, allowing a temporary decrease in productivity during a pregnancy would likely have a net positive result due to improved parenting.

Lastly, by giving individuals cash rather than restricted assistance (such as strict food stamps), it allows them the freedom to climb their way out of poverty in a way that suits their individual situations.  It's generally less helpful to give restricted income.  However, some structured assistance, such as housing, is still necessary because giving a minimum income to individuals may not help with that issue (if for instance the problem is that housing is simply too expensive).

Tools:
Generally, the tools used to implement this policy revolves around a robust income tax system.  A computer system is necessary to calculate the income return for all permanent residents and citizens.  This is necessary to determine who is eligible to receive minimum income assistance.

Statistics agencies usually already keep data on worker productivity, split by age or occupation, which would be helpful in ensuring that there are no significant negative side effects.  Data on absolute poverty levels would also be helpful.

In trying to determine whether poverty is being effectively fought, there should be statistics to look at the level of poverty of the next generation (child poverty rate), employment rate among those who have a higher proportion of their income composed of income assistance, income movement amongst the poor (whether the poor are able to find better job opportunities over time).


What I'd like to talk about later:
Corporate Tax Revisions and Business/R&D Grants
Healthcare - Preventative Care
Nursing Home Funding
Carbon and Toxins Tax
Incubator Program
Criminal Justice Lawyers

Automated Tax System

Summary:

An automated individual and corporate taxation system requiring no active input from citizens/organisations to conduct their yearly taxes.  Everyone receives a receipt in the mail for taxes paid and a detailed description of the deductions/credits used.  The tax system automatically adjusts taxation from year to year, keeping tax data for up to 5-10 years, in order to minimize the tax paid for an individual (for instance if it was possible to shift credits to lower taxes paid, then you will receive that benefit the next year).

Long Description:

The vast majority of labourers in the work force operate on a salary/wage income earned by working a job at some business.  This is a very simple process and one should expect the tax system to be simple.  In fact, it is usually so simple (using the example of a Canadian T-4 style employee), a computer should just be able to do it automatically.

The essential component to an automated tax system is the ability to instantly collect information from employees/employers.  In the past, the lack of computer systems prevented easy automation of these systems.  A technologically savvy government can provide software to businesses to participate in (or else they must do it the "old way").

For Canada, this is a matter of automating the collection of donation receipts, income slips (such as T-1, T-4).  Most people are simply copying the numbers from those slips into a computer tax program or the paper tax form and then sending it to Revenue Canada.  For these people, this is nearly an entirely redundant step.  Some people have more complicated tax returns because of dividend income, donations, tuition fees and other special tax credits or deductions.  Their concern is maximizing the use of tax credits and deductions based on their expected marginal tax rate from year to year.

Definition of T-1, T-4: These are the names for tax forms in Canada.  A T-4 slip, for example, indicates the income you earned from a particular job, the amount of Canadian Pension Plan contributions you've made, the amount of Employment Insurance contributions you've made and even income (and tax paid) on stock plans at the company.

In both cases, an automated tax system can function well.  For simpler tax returns, it is just a matter of processing the taxes through a computer without requiring user input.  For complicated tax returns where tax credits can be shifted from year to year, the simplest solution is to retain all tax information for up to 5 years, so that each year you can attempt to minimize tax paid across a sliding five year window.  This means that if you "should have" shifted tax credits to the next year, the automated tax system does that automatically, allowing you to pay the least taxes without expending any effort.

For both Canada and United States, the primary obstacle to implementing an automated tax system, from a technical perspective, is to be able to provide the software to businesses so that they can easily collect data and send it to the government.  In Canada, businesses already compile this information and merely would send it to the government and not need to send it to employees.  In the United States, itemized deductions requiring receipts cause the greatest issue, and the best solution is a tax reform.  The easiest solution would be to eliminate of every single tax deduction/credit that requires receipts and instead lower the tax rate of the lowest bracket to maintain revenue neutrality.

Given the proliferation of computer systems at even the smallest business, this can have a fairly high penetration rate in the business world.  The old system would still have to be maintained for anyone not sufficiently computerised.

An automated tax system requires a few changes to the tax code:

• Tax credits/deductions that require proof need to be eliminated.  Shifting these into tax rate reductions on the lowest tax bracket is the simplest solution.
• Overly complicated tax shifting adds burden to the automated tax software and are typically only available to high income individuals.  It's likely simpler to just lower the tax rate in general for everyone.
• Tax credits for special cases can still be maintained if they're mostly associated with public services.  These include tax credits for tuition (post secondary education or skill labour training) or age-based credits.

At the end of a fiscal year, you are sent your tax bill.  It clearly indicates how it was calculated, how much was paid and your contribution rooms for various registered government plans.  These would include your registered retirement savings plan (RRSP, 401k), or your education savings plan (RESP) and for Canadians, your tax-free shelter room (TFSA).

Rationale:

Currently, the more financial resources you control, the better accountant you can hire and subsequently pay less taxes than someone who has a worse accountant, or no accountant.  This creates a divide most typically seen in the corporate world where small businesses do not have the capability of using so-called "tax loopholes" in comparison to very large companies.  The United States is the primary example of this problem where a company such as GE can pay a negative tax rate on twelve billion dollars in profit while a small hardware store in a small town pays nearly 40% tax rate on profits.  That is not an equitable situation and damaging to market competitiveness.

For individuals, the difference is less marked but if we consider that in Canada, on average a person takes 1-2 hours of time to do their income taxes (for most T-4 employees the time is fairly low), but upwards to days of time for those who are self-employed or own a business, it is a lot of lost labour hours.  In the United States, filing income taxes takes considerably longer and thus impacts productivity even more (especially for itemized deductions in America where one must retain receipts, a concept which does not exist in Canada).  An automated tax system saves many hours of work and most importantly, ensures everyone receives tax credits/deductions as they were intended to be used rather than by crafty manipulation of the system.

Recently, the Canadian Association of Accountants had levied a complaint that the Canadian tax system is convoluted and is taking time away from accountants who would rather be growing businesses.  This system should reduce the amount of accountant time spent toward tax issues.

Tools:

The most helpful tool in this case is software.  If the government maintains free tax software for everyone it makes the system cost less and easier to maintain.

This requires a tax infrastructure to handle the storage of filed tax returns (for the purpose of properly calculating tax levels for each individual/business across a five year period, giving back money as needed when tax credits/deductions could be used more wisely in later years).  It also requires an infrastructure for receiving tax data through a fiscal year (for Canada these are receipts such as T-4 slips and for the United States, the equivalent would be sent to the tax servers).

What I'd like to talk about later:
Corporate Tax Revisions and Business/R&D Grants
Healthcare - Preventative Care
Nursing Home Funding
Minimum Income
Carbon and Toxins Tax
Incubator Program

Government Banking and Investing

Summary:

A banking institution with shares 100% owned by the government that operates in all neighbourhoods to provide low-cost banking services and tax-funded venture capitalist funds to aspiring entrepreneurs.  This allows the government to directly target specific industries for investment.  It is also a lever upon which the government can press upon the industry better operating standards.

Long Description:

The government can create a banking institution (like a TD-Canadatrust or BMO, or for something relevant to Americans, a Wells Fargo or Bank of America) which operates independently at arms-length and competes with private banking institutions.  

The primary aspects of this bank:

• Far higher capital reserve and more strict investment options
• Firewall between this bank and the central bank, just like any other bank
• Disallowed from risky investment opportunities (except for the venture capitalist department)
• Performs venture capitalist investments with special repayment options for government loans

This bank operates in all neighbourhoods, including the rich and the poor.  For poor neighbourhoods it can perform micro-loans, something which most large banking institutions would not do.  This gives the poorer sectors of society the opportunity to explore more options.

The most important factor about this bank is the investment side.  As a government operated bank it can offer a special type of loan for entrepreneurs.  It can provide a very large loan that is repaid via a tax on the income earned off the business.  It can also place special restrictions on corporations formed by the investment funds.

As an example, a group of 200 steel workers feel that they can run a factory far better than today's competitors.  Unfortunately, they cannot find 1 billion dollars to build the factory, and most certainly do not have the connections to normal venture capitalists to secure that type of funding.  Instead, they turn to the government bank, present their case and are approved and given the money to start the factory.

The factory workers create a business that is profitable, so the government levies a special income tax on the individuals to repay the loan.  If the revenue per worker is (for instance, this is similar to GM) $700 000, the cost of running the business leaves each of them with $350 000, the government then levies a tax based on the investment cost and the length of time it expects the factory to last (say 20 years for a factory), perhaps each person is taxed $250 000 a year.  Then each worker earns $100 000.

If a business fails, they're aren't footed with the full cost of repaying the loan.  Much like a default, they are not required to pay it back.  The concept is that overall the investments will be profitable to make up for the failed investments.  Of course, people associated with failed businesses will have less chance at securing a future investment loan.

Rationale:

It is problematic that most individuals have virtual no chance to ever attempt to start a business in certain key industries.  High-sunk-cost industries have a very large market entry barrier.  This allows highly inefficient companies to continue to exist despite serious flaws in their structure.

(Definition of Market Entry Barrier: An economics term that refers to the cost of starting a business in a particular industry.  For instance, if I wanted to start a car company, I would have to build a car factory, which is likely to cost me a billion dollars.  Most people don't have that kind of money.)

The investment side of the bank lowers the entry cost by allowing middle or lower class individuals to pit themselves against established corporations.  This type of increased competition should promote better wages for workers and better products for consumers and leaner businesses.

Additionally, it would likely be useful for those living in poverty or poor locations to obtain microloans to increase their ability both to find work or produce products for sale.  This may be combined with other government initiatives such as providing a marketplace, creating an area with subsidised rent for shops to open to provide jobs and a point of sale for products produced in the local community.  Micro-loans could be used, for example, to purchase a car and/or perform car repairs so that a person can continue to work if they must commute to their workplace.  These types of micro-loans would serve to displace current cash for pay cheque businesses which usually have interest rates in excess of 50%, causing a severe impediment to social mobility in the overall society.

Tools:

The bank will have to be run by highly qualified banking officials.  For investments a few types of useful data from StatCan (or an equivalent statistics agency in your country) would be helpful in determining a few key measures.

* The usual length of time a particular capital investment lasts.  For instance if a car factory usually lasts 25 years, then you want a repayment schedule that is around 25 years.  That way, when this factory is done, the group can then reapply for a subsequent investment fund to build a new factory.

What I'd like to talk about later:
Automated Tax System
Corporate Tax Revisions and Business/R&D Grants
Healthcare - Preventative Care
Nursing Home Funding
Minimum Income
Carbon and Toxins Tax

-Ultrapunk