Systemic
Fiscal Reform
Introduction
Systemic Fiscal Reform is a radical programme for the reform of taxation, subsidies and welfare. It is designed to
stabilise economies, improve quality of life, and facilitates the
transition to full environmental sustainability.
The principles of Systemic Fiscal Reform are
widely applicable. Not only can they be applied to well established
globally-scoped economies, such as those of the United States,
Canada and the members of the European Union, but they can also be used
by more bespoke or evolving economies such as Venezuela and South
Africa.
The reforms mainly comprise the abolition of
cumbersome and wasteful tax, welfare and subsidy systems, together
with abolishing the bureaucracies which implement them.
In their place, a simple integrated
tax and welfare system is introduced. The wasteful burden of personal and corporate tax returns is generally
eliminated.
Systemic Fiscal Reform goals
Systemic Fiscal Reform is a
process of reform moving from the current tax, welfare and monetary system to one based on based on economic, financial and moral integrity. The endpoint of this process is a much more stable and productive society with the following features:
No Income or Corporation Taxes – Replaced by payments pledged by property owners
Income Tax and Corporation Tax are to be phased out
(along with all payroll taxes, National Insurance payments and Gains
taxes). In their place, government will be funded by payments pledged by
landowners through covenants established on a voluntary basis. These pledges are called Location Value Covenants (LVCs), and are inspired by or using the English legal instrument of land covenants.
No Value Added or Sales Taxes – Replaced by a Carbon Tax
VAT and sales taxes are to be abolished. In their
place, a uniform Carbon Tax is levied on all extraction and
importation of fossil fuels. This Carbon Tax is in proportion to the
pollution and climate change potential of the fuel when used in the
normal way.
No Estate (Inheritance), Gift, Transfer or
Stamp Taxes
Estate taxes such as Inheritance Tax and Accession
Taxes are to be abolished. All Stamp Duties are to be abolished,
including those on share and real-estate transfers.
No means-tested welfare benefits – Replaced by a Citizens' Dividend
Welfare benefits based on poverty, joblessness
tests or housing costs are to be abolished. Any welfare payments based on disability
are retained.
Universal Welfare: A Citizens' Dividend
All resident citizens and lawful residents are
entitled to claim a
Universal Welfare payment called the
Citizens' Dividend (sometimes called a Basic Citizens' Income). Such payment is made monthly by the local
government, and may be directly used by home owners and their
families to offset or cancel out their Location Value Covenant obligations under a system of
Unified Billing.
Citizens' Dividends for those in prison and state-funded care are
retained by the state to help pay the costs incurred. Those in
state-funded education will have an amount deducted from their
Citizens' Dividends to help pay for their education costs.
Other taxes
Most other taxes, such as “Sin Taxes” (alcohol, tobacco and gambling),
road and fuel duties can be retained or phased out according to political support. These remain operated on the
principle that they reflect the differing effects on society and public
costs which have to be paid for through health and other spending.
A
Landfill Tax can be retained on the landfill
disposal of refuse, reflecting the scarcity of suitable sites and the
environmental harm.
An increased Insurance Premium Tax is levied on
mandatory vehicle and other liability insurance to help pay for the
police, fire protection, legal and social costs related to the
insured activity. This replaces the fire and police component of Council Tax.
The TV license is phased out, with Public Service Broadcasting paid
for from payments under the Location Value Covenant.
Subsidies abolished
Many tax-based subsidies cease to exist with the abolition of Sales, Value, Income and Corporation taxes. For example, tax exemptions on aviation, fuel, public transport, education and food simply disappear. Business subsidies such as investment relief, tax rebates, pension relief also disappear.
Explicit subsidies including those on energy and carbon emissions trading schemes should be abolished. Banking subsidies are withdrawn by removing banks' rights to create new, government-backed money in the economy (seignorage) in exchange for increases in debt.
Effects of
Systemic Fiscal Reform
General economic effects
Widespread effects are certain, because Systemic Fiscal Reform
addresses core economic issues, such as the costs and benefits of
business activity, land ownership and employment.
-
Enterprise is promoted by removing the tax and administrative barriers to employment and business activity. We get free trade within nations.
- Bureaucratic activity such as tax accounting, planning and advice
are eliminated. Workers in these sectors move to other work,
entrepreneurship, early retirement or reduced hours.
- The 'black' and criminal economies no longer gain an unfair tax advantage.
|
- Labour intensive goods such as restaurant and other services, recycling, and education become less expensive.
- High value-add products such as software, music recordings or consultancy fall in cost as their tax burden falls.
-
Fuel efficiency is promoted by raising the costs of fuel and goods particularly in energy-intensive industries.
- Economic output grows rapidly where real value is delivered.
- Waste is reduced.
|
Effects on housing, homes and land
The Location Value Covenant has far reaching and revolutionary effects:
property speculation ends; new and second hand houses become a
comparable market to second hand cars reflecting their size,
efficiency, condition and quality; urban land prices fall, encouraging
regeneration of poor and derelict land and housing; property price
inflation becomes similar to that of other goods; housing becomes and
remains affordable, contributing to a drastic shift in social mobility.
Effect on poverty
The universal welfare payment
virtually eliminates poverty. All in
society benefit from the “social dividend” created by a
thriving society and effective government. The poverty trap becomes a thing of the past, with financial barriers to employment
removed. Elderly home owners will generally have chosen to live in homes they can afford based on their circumstances, including Citizens' Dividend, pensions and other savings. Where they find living in their home is unaffordable it will usually make sense to move somewhere cheaper, although they may be helped by arrangements similar to home equity release will be supported through a deferred Location Value Covenant or private sector finance.
Universal welfare is as significant a step forward
for society as universal healthcare or universal education
has been in most developed nations.
Effect on oil prices
By imposing a rising Carbon Tax on imports and
production of oil, coal and natural gas, demand will be progressively
reduced, improving the balance of payments (trade deficit)
considerably. Suppliers will be forced to accept lower prices or
reduce output (or both). If this policy is implemented by the major
energy consuming nations, a substantial fall in international
fuel prices will occur.
A Carbon Tax is particularly attractive to nations such as the US or
the UK with rising dependence on fuel imports.
Effect on politics
At present, government spending on local amenities
brings direct windfall benefits to owners of nearby homes and
land. The spending is mainly taken from workers' taxes. This
misalignment of taxpayer and beneficiary is at the heart of
many political conflicts and failures. Systemic Fiscal Reform
ensures the beneficiary of local spending (i.e. landowner) is
the taxpayer, eliminating this fundamental conflict. Any excess
benefit over spending is returned through the Citizen's Income.
Conclusion
Systemic Fiscal Reform answers the challenges of
today and of the future. It resets the creeping state control and
interest in every aspect of household and business life while
ensuring an efficient, equitable, stable and free society.