In Defense of Universal Resource Inheritance
My last blog post on Universal Resource Inheritance (URI) sparked some controversy among libertarians and anarchists. There is substantial concern about the so-called communist nature of the proposal which I want to address. I also realized that I didn’t explain all of my principles for new readers who may not understand my deep commitment to non-violent, voluntary, solutions for securing life, liberty, and property for all.
I argued for a 5% wealth “tax”, but didn’t to disclose how such a “tax” would be collected without the use of violence or intrusive audits. The challenge with all “taxing” schemes is that markets route-around artificial fees.
There are three broad classes of assets which people hold their wealth:
- Real Estate
Money is trivially inflated in supply by 5% per year. Assuming this was the only supply inflation, a productive economy with advancing technology would likely see price deflation. Major crypto-currencies such as Bitcoin and Ethereum grow their supplies by more than 5% and the supply of US dollars is also growing by more than 5%. The estimated money supply of the US dollar is $14 trillion dollars, meanwhile the federal debt is growing by $1.4 trillion per year. Since it is reasonable to expect that this “debt” will never be repaid, it is economically similar to printing dollars at 10% per year. A 5% increase in supply of real money is FAR below the current effective dollar supply growth. Remember, dollars are lent into existence, if supply doesn’t grow by the average interest rate, then widespread defaults result.
Equities in publicly traded companies are interesting assets because they represent ownership without liability. A shareholder of a publicly traded company is not held liable when said company causes a catastrophic oil spill. This economic privilege is “granted” by the people to the “artificial person” embodied in the company. Every company can issue 5% more shares each year and auction them for the money. The money can be evenly distributed to unique individuals. Since companies own the vast majority of the woulds resources, a 5% equity fee would end up covering the vast majority of productive assets, intellectual property, etc. A country run on a blockchain could trivially bake the share-tax into the terms for registering a company.
If someone wanted to create a company-by-contract (instead of by law) and bypass the 5%, then all the owners of said company would also be personally backing the companies liabilities. This kind of liability model doesn’t scale well when owners are to far removed from operations.
A huge benefit of this approach is that a company cannot cheat the system by cooking the books unless they are willing to suppress their own stock price which is determined by the market.
Real Estate is already subject to a “property tax” based upon assessed value. The existing system is broken because it relies on appraisals given by the government. A very simple solution is to put all real estate inside a company and issue shares which are auctioned off at 5% per year. Owning 51% of the shares gives voting control over use of the land and all improvements on it.
All of my numbers in my prior URI proposal were based only on taxing these three things in this relatively voluntary way.
One of the major challenges with such a proposal is that people will adopt crypto-currency assets which don’t pay the 5% tax. They will use gold, move to countries without a wealth tax, etc. This capital flight is as much theft from the rightful owners as today’s central bank inflation being allocated by crony capitalism and crony socialism. No system is perfect and we shouldn’t let perfect be the enemy of good enough.
No system of laws can make a corrupt people fair and honest. Most people wouldn’t steal from their neighbor even if it wasn’t against the law. The loss to their reputation and social standing would be enough of a deterrent. Likewise, an unjust law will be widely broken and difficult to enforce. Copyright, originally created to censor the printing press, is an example of a property law which many people do not respect.
A URI system is about educating people about a new sense of inter-generational fairness and a self-correcting system for gross violations of property rights by prior generations. For it to be effective, the vast majority will need to understand and support the concept based upon its intrinsic fairness (see my splitting the cookie game theory).
From the lessor of two evils department, a URI system could replace complex, impossible to understand or follow, privacy destroying income tax systems. It would replace our corrupt unemployment, welfare, child support, and social security systems. In effect, half of the population is already receiving cash-payouts. The current system punishes those who increase their income and tells people that they qualify for money based upon their “need”. This need-based distribution is far more harmful to the mental wellbeing of those who accept it than an inheritance-based distribution.
A URI system is not an entitlement system, it is a peace treaty designed to recognize fair negotiation of property rights in a world otherwise governed by might-makes-right. To qualify one must be able to demonstrate they understand the peace treaty, to reject the peace treaty is to have the masses reject your claim to property rights as you have rejected theirs.
Impossible to Implement?
Some people have claimed that URI is impossible to implement because the powers-that-be would never allow such a thing. The same argument could me made against the graduated income tax schemes and resulting welfare / socialized systems throughout the world today. These systems exist because the powers-that-be know that people with “nothing left to lose”, “lose it”. The wealth and power of the “powers-that-be” depend upon the masses continuing to recognize the legitimacy of their claim to property. Allowing the masses to starve will result in a revolt before people accept death by starvation.
Almost 50% of the population already supports UBI proposals, and most of those who reject UBI proposals do so for philosophical reasons. If URI can provide a logically consistent philosophical foundation for initial allocation of the universe’s resources then it is conceivable to get supermajority support for the concept.
Even though I do not advocate violence or coercive governments, I believe that many would tolerate using governments to enforce honest reporting and taxing of wealth upon penalty of deportation. Such a system would be an improvement to the system of taxation and wealth redistribution we have today.
In the mean time, I believe that non-hypocritical supporters of a fair property right system could voluntarily create a private society that operates under these rules. If this private society can grow in market power and influence, then eventually it could take over public opinion. The key to the success of such a private society is that it condition membership and therefore qualification for URI upon tested understanding of the economics and principles behind URI and voluntary payment of dues proportional to wealth.
Won’t prices just rise?
One of the common critiques made is that “landlords would just raise rents and cancel URI”. This is based on the premise that all landlords are colluding as a monopoly to raise prices. The first landlord to defect would get the customer. Furthermore, many people have higher priorities than living in a nicer place, so they might spend their money on other goods and services like organic food. Surely prices will rise due to changing supply / demand dynamics, but they will not uniformly cancel out the benefits. The relative wealth disparity will still be lower.
With respect to landlords, if they were able to raise rents then the value of the property would increase as well. As a property owner they would be paying 5% right back to everyone else. The free market will balance supply and demand in a different location after all people are given a more democratic allocation than today. Since free markets organize to produce the desires “of the people” based upon price signals, a URI system is a much more powerful, efficient, and democratic means of organizing a society than one where people vote on who in government gets to spend their money.
One analogy which I have found helps people understand the concept is a modification of the game of Monopoly. With the simple rule of reallocating 1% of the weath of the players evenly after each role, the game can go on for ever. Players that exersize good trading skill and a bit of luck can still get ahead, but they never bankrupt the other players.
Modern capitalist systems are like a game of monopoly where the owners of the means of production see compounding gains due to effeciencies of economies of scale. The more you win, the faster you win. The rich get richer simply by virtue of being rich. Ask a poor man with a shuvvel to compete in the market for ditch digging against a rich man with a backhoe. It doesn’t matter how “smart” or “hardworking” the poor man is, his labor is worthless unless it can be mixed with the capital represented by the backhoe.
The move toward increasingly automated production of goods and services is like giving the rich capital holder the equivalent of a backhoe in every industry. In many cases, they purchased that backhoe with stolen goods and government favors. The compounding nature of wealth naturally centralizes, URI is needed to keep a sustainable decentralization of power required to secure our life, liberty, and property.
The concept of URI is something that everyone should carefully consider after setting aside preconeived notions about the nature of property rights, socialism, and capitalism.