Repubs party platform: comittee to eval return to gold std and audit fed

[stone]

Looking at a wider scale, globally there are billions of people who presumably were born with immense potential to provide what humanity needs and yet barely get to partake in the global economy. I guess amoungst the three billion poorest people today there are innumerable Steve Jobs equivalents, potential top surgeons, potential engineers etc etc. Aren't they all much like the non-gold bringers in my fable who are going to waste due to a dysfunctional global economy?

That's not the fault of the gold holders.  The gold holders need competent rule of law legal systems that protect private property rights as much as the non-gold holders need it to become successful**.  There is no conspiracy by the gold holders, just government incompetence and the influence of anti-property extremists.

** Well, I guess Detroit or South Chicago, et al brings up a lot of other issues.  But thats a different kind of limitation than poor people face in India, Pakistan, Africa, South America, etc.

I'm not suggesting any malicious ill intent, I'm just saying that it is the inevitable result of a deeply flawed system. In my fable; the "gold bringers" did not need anyone else and held all of the gold and so everyone else was economically excluded and their talents and resources went to waste. All real economic systems lie along a spectrum between that extreme and another extreme where everyone has near equivalent financial power such that what the economy provides reflects a compromise between what everyone wants to provide and aquire. What seems to me to be deeply mistaken is the idea that for some reason a small group with overwhelming financial power (such as the "gold bringers" in the fable) would be able to (and would take it upon themselves) to make loans such as to orchestrate an economy where what the economy provides reflects a compromise between what everyone wants to provide and aquire. That doesn't happen at all in the global economy either now or historical. It is as fanciful as the idea that a soviet style central committee is able or likely to do a decent job of running an economy.

[Gumby]

That's all well and good, Pointedstick. But, can you at least admit that there would be a problem with the island's economy if gold holders didn't regularly spend their gold into non gold holders' hands? I think that's Stone's point.

But Stone's point is a fantasy.  What would happen is the non-gold holders would create their own scrip out of necessity and use it as money.  Then, unless the non-gold holders start accumulating the scrip also or control the issuance of, their gold would rapidly lose any value from lack of demand unless the scrip was over-inflated.

Huh? No. What would happen is the formation of a credit-based society — which is exactly what happened in England, particularly after 1694, with the formation of the Bank of England. That's reality, not fantasy.

Gold holders would just lend their gold out so that non gold holders would be able to make their interest payments (and fund new endeavors) with more and more borrowed gold. That's why private credit (and public debt) and never stops growing in a credit-based society.

[align=center][/align]

[align=center]Total Credit Market Debt Owed = $54.5 Trillion[/align]

In a credit-based monetary system, the interest payments make it virtually impossible to pay down private credit without the creditors actively transferring money back to debtors.

[moda0306]

I think to truly understand the macroeconomic nature of debt/money people have to imagine, first, a barter economy where debts (which are probably not all that prevalent to begin with) are repaid by delivery of goods or services, not pieces of paper or metal.  If malinvestment in a barter economy occurs, contracts are probably much more able to adjust and avoid macroeconomic paradoxes (paradoxi?).  You just work harder and produce more goods/services to pay your debt.  A monetized economy doesn't really work like that.  In a barter economy debt is cleared by working harder and creating more GDP, while in a monetized economy, all work is structurally designed to be paid in dollars.  Very few contracts exist where you could simply realistically "work off" your debt, so malinvestment, instead of resulting in people paying off debts (which are probably minimal to begin with) with work, results in scarcity of money, unemployment, and a recession. 

If you think about it, while much less efficient and severely limited in size, economies built on bartering are probably a lot less fragile (Nassin Taleb, thanks for some visualization on this matter).  Thinking of it that way, one can imagine building every contract in an economy around a single asset (gold or dollars), is extremely fragile. 

Once one sees recessions as a flaw of monetization as much as they are a result of malinvestment, I think everything else starts to become a bit more clear.  The rigidity that a monetized economy offers can be offset, it would seem, by not having the money be a finite resource from the Earth.  The whole goal of a common currency is to promote prosperity, not a mirage of prosperity that eventually turns into bitter recession.  Maybe, with a combination of proper monetary/fiscal policy combined with a monetary (not barter) economy is the perfect mix of the flexibility of barter with the efficiency of monetized economies. 

One thing both Austrian Capitalists and Keynesian quasi-socialists can probably agree on is that an economy should be about creating wealth, not accounting identities or "sound money."  Creating wealth and prosperity (not the gov't creating it itself, so much as facilitating it as much as possible), should be the main goal.  In this light, I'd like throw Austrians' a bone by saying maybe we need to rethink a proper measure of GDP.  Any gov't make-work should probably be removed from that figure, and if the government is making war machines, perhaps assign a negative amount to that figure !

Great discussion.

[stone]

Gumby, I think the origin of the Bank of England is especially curious because it occurred when there already was a firmly established debt free fiat currency system that had been running since the 1100s (the tally stick system). I really don't understand how the UK government was bamboozled into "borrowing" from the Bank of England. If the government wanted more money to be in circulation, why didn't they just issue more tally sticks? The bizarrest thing about the origin of the Bank of England was that its equity capital was in the form of tally sticks. They weren't lending lots of money into existence from a little gold, they were lending lots of money into existence from a few tally sticks!

[MachineGhost]

Huh? No. What would happen is the formation of a credit-based society — which is exactly what happened in England, particularly after 1694, with the formation of the Bank of England. That's reality, not fantasy.

I don't view the top down imposition of a "credit-based society" as bottoms-up democratic in the very least.  Nor do I think the current Time Hours in Spain have -- or the Scrips during the Great Depression had -- one whit to do with a "credit-based society".  There's nothing stopping anyone from creating their own money to avoid the existing system other than for paying Federal taxes.

[stone]

machine ghost, I agree that credit money gets created by ingenious people time and again throughout history. TBV though was arguing that gold as money was a sustainable monetary system that would serve the economy well with no need for any imposed redistribution etc. To me it would be quite a cop out to say that the way gold money would work would be by most of the population not using gold and instead inventing a credit money alternative with no conection to gold!

[Pointedstick]

machine ghost, I agree that credit money gets created by ingenious people time and again throughout history. TBV though was arguing that gold as money was a sustainable monetary system that would serve the economy well with no need for any imposed redistribution etc. To me it would be quite a cop out to say that the way gold money would work would be by most of the population not using gold and instead inventing a credit money alternative with no conection to gold!

Why would they have to invent a credit money system? Couldn't they invent a debt-free currency, like greenbacks or tally sticks?

[Gumby]

machine ghost, I agree that credit money gets created by ingenious people time and again throughout history. TBV though was arguing that gold as money was a sustainable monetary system that would serve the economy well with no need for any imposed redistribution etc. To me it would be quite a cop out to say that the way gold money would work would be by most of the population not using gold and instead inventing a credit money alternative with no conection to gold!

Why would they have to invent a credit money system? Couldn't they invent a debt-free currency, like greenbacks or tally sticks?

You're right. They could use debt-free money. And then the non gold holders wouldn't have the snowballing interest leak. It just depends which side wins the hearts and minds of the non gold holders. Terms like "sound money" were used as propaganda in that debate. It all comes down to the message and what constituents want to believe in the end. Gold owners certainly have the funds to back gold-friendly politicians and bankroll newspapers (and their editorial boards) to push a "sound money" agenda. It would be one thing if everyone had fair access to "sound money." But, it's quite another thing when non gold holders have to borrow it and pay interest to gold holders.

[Pointedstick]

You're right. They could use debt-free money. And then the non gold holders wouldn't have the snowballing interest leak. It just depends which side wins the hearts and minds of the non gold holders. Terms like "sound money" were used as propaganda in that debate. It all comes down to the message and what constituents want to believe in the end. Gold owners certainly have the funds to back gold-friendly politicians and bankroll newspapers (and their editorial boards) to push a "sound money" agenda. It would be one thing if everyone had fair access to "sound money." But, it's quite another thing when non gold holders have to borrow it and pay interest to gold holders.

This may seem like a bit of a tangent, but when you said 'It would be one thing if everyone had fair access to "sound money." ' I was reminded of the imaginary monetary system used by one of the races of a tabletop wargame I play. No really, stay with me here!

In the Warhammer 40,000 game, the Orks are a bunch of space-fairing, barbaric brutes whose societies center around violence. But the background lore of this race involves a highly sophisticated social and monetary system, in which the currency is the Orks' own teeth, which periodically fall out and regrow. The teeth also rot after some time, losing all their exchange value.

So what you have is that every individual Ork has a ready supply of some basic quantity of physical hard-asset money, irrespective of his ability to produce value (which in Ork society is violence, or the construction or maintenance of weaponry). In addition, he can't hoard his teeth because the stash eventually goes bad. He can accumulate more teeth through violence and conquest, but must spend it quickly on real assets or else he will be poor again. But only poor; not a destitute zero marginal product worker.

In this manner, the entire Ork economy prohibits the accumulation of financial assets and systematically encourages the creation and accumulation of real assets such as guns, ammunition, vehicles, medical supplies, fortifications, and of course more guns! The Orks being who they are, these real assets all improve the Orks' ability to gain more financial wealth (by conquering other Orks and taking their teeth) or real wealth (by conquering other races and capturing their property, or the property of the conquered other Orks).

This monetary arrangement has always been fascinating to me, and it was one of the draws of that particular army. FYI, this is what they look like:

http://imgur.com/78nhx,AGFpu
http://imgur.com/78nhx,AGFpu#1


But anyway, to get back to the thread, what you said is one of the reasons why Bitcoin is interesting to me. It's inherently deflationary, yes, but it's not debt-backed. It may not be the ideal fiat currency, but its mere existence opens the door to more currency experimentation which is in my opinion sorely needed in a world dominated by state-monopolized debt-backed currencies.

[stone]

Pointed Stick, your description of the Ork teeth got me hopping up and down because the attributes, you describe as making Ork teeth work so well, get confered to ALL possible stores of value/mediums of exchange if the tax system entirely shifts to being a universal asset tax.

The islanders could instigate some system where they taxed 5% of the value per year from each of their asset holdings and dished out that pooled revenue as a flat citizens' dividend. That would make everything they owned act like Ork teeth from a monetary point of view.

I was including tally sticks and green backs when I said "credit money". Greenbacks need taxation to confer value to them. Tally sticks also need to be called in in order to give them value. Tally sticks were used in England as currency from the 1100's  where they were called in regularly as a tax but that was a redeployment of tally sticks as a much older system where say at harvest the tally sticks would get called in to determine who got how much grain. They did represent a future obligation and so tally sticks and green backs IMO are zero interest credit money. Hut tax tokens are another form of zero interest credit money. Nowadays Japanese Yen is also pretty much zero interest credit money.

[Pointedstick]

stone, I actually happen to agree with you that an asset tax might help ameliorate the problem we're talking about in a debt-based monetary system, and I on a personal level would certainly prefer a flat 5% asset tax to the current mass of federal, state, local, income, gift, inheritance, property, sales, business, capital gains, electricity, gas, cell phone, tanning salon, and medical device taxes.

However I do worry a poorly-chosen definition of "asset" used by the program would have a deleterious effect on those rich in real assets but poor in cash. For example, in many areas of the USA there are poor people who own land and a paid-off house built by their grandfather that's been passed down through the generations; if these assets were taxed at 5% per year, the might well find themselves lacking the cash to pay the tax. I would want to see some kind of exemption for one's first home and first X acres of land, or something like that.

One other worry is that it might not work for humans. The system works for the Orks because they have a unifying cultural feature: a love for violence. Everything they do reflects this, whether it's the building of weapons, the construction of vehicles, the creation of medical supplies, or the plundering of others' wealth. Even the poorest Ork possesses a high innate capacity for violence relative to most of the other species of the universe and so can engage in these things fairly well.

But what's a ZMP human who's given a citizens' dividend supposed to do? If technology and economic development kick you out of the labor pool, what are you supposed to do if you don't want to simply drop out of the modern economy? Sit around and consume without producing anything? I worry that it might result in an ever-widening pool of permanently unemployed people. Then again, I guess it all depends on what you think people with low productivity do when given the means to support themselves without working.

And of course, on the practical level we all know that if such a program were to be actually initiated, it would be in addition to rather than replacing all the current taxes, and that the 5% would go to the government's weapons-buying mania rather than actually being returned to the people. 

[stone]

Pointed Stick, I think house prices today are basically a function of what mortgage interest burden people can bear. I suspect that if we had to pay a 5% annual tax on the value of our homes, then house prices would go down to the point where they were affordable even with the tax. Also I think banks  currently like to make ever bigger mortgage loans so as to create more "asset" of mortgage debt on bank balance sheets. I suspect that with a tax on gross assets, outright ownership of (now lower priced) houses would be more standard so as to avoid both the home and the "asset" of the loan being taxed (the loan "asset" would be taxable for the bank owners). Even today a lot of elderly people in the UK get "equity release" schemes that convert house ownership into a cash payment but allow them to continue living in the house for the rest of their lives. Basically the bottom line as I see it is that houses would still be owned and occupied. My guess is that the only thing that would be lost would be the size of bank balance sheets. What is currently taken as mortgage interest by banks would instead go to providing tax revenue.

I'm also not sure I follow why a family tradition of living in a very expensive house is more important to support than say a family tradition of taking a holiday at an expensive holiday resort?

I actually thought that a citizens dividend would facilitate economic inclusion. Anyone would be able to keep any money they earned on top of it (it would be instead of means tested welfare). Also it would provide the financial freedom for anyone to start up an enterprise on their own or with people they know. Presumably there are lots of people now who a thwarted from starting up new enterprises because they don't have the funding to allow them to take the risk.

I'm definitely suggesting an asset tax as an alternative to the current taxes not as an addition. I think transaction taxes tend to shut down the real economy. Shifting to an asset tax and away from transaction taxes might be what we need to get the economy up and running again IMO.

[Gumby]

Pointed Stick, you might enjoy reading this...

http://en.wikipedia.org/wiki/Economic_democracy

I think there are a lot of good ideas in that link — many of which Stone has suggested in the past: asset tax, citizens dividend, etc. It took me awhile to grasp the importance of Economic democracy, but now I can see why it would make sense in an economically fair society.

[Xan]

Stone, the more you describe your asset tax, the more sense it makes to me.

How different would it be in practice from the FairTax?  FairTax even has a citizens' dividend like you describe.  I suppose they would be practically identical if everybody consumed in proportion to their wealth.  To what extent is and isn't that the case, and what effects would there be of that being off?

Also, the big weakness of the FairTax as I see it is the paperwork involved in figuring out whether the tax has been paid on any particular item or not.  I suppose a hypothetical asset tax wouldn't suffer from that.  Although you'd still have to figure out what's an asset and what isn't, what's personally owned and what's corporately owned, etc.  (Or would corporations also pay the asset tax?)

[Pointedstick]

I'm also not sure I follow why a family tradition of living in a very expensive house is more important to support than say a family tradition of taking a holiday at an expensive holiday resort?

There's actually a fairly specific case I have in mind. In New Mexico, there are a lot of old Spanish or Indian families that have passed down their land for generations. We're talking hundreds of years here, and a lot of this land was purchased at a time when it was very cheap. In addition, many of them built adobe houses on their land with their own two hands at a very low cost. Now, today land is expensive and we Americans build shoddy houses out of chemical-treated dimensional lumber, lung-irritating insulation, and all manner of other sub-standard materials, so the old-style adobe houses are now worth a lot more than the doublewides that many poor people live in today. So you have a situation where a very poor family--maybe even a ZMP family, sadly--lives on land and in a house that through a historical accident may be valued at more than $400,000 by the county tax assessor. How are they going to raise the $20,000 per year to pay the tax on their "assets" while still managing to eat? This is a family that today might be on food stamps and drive an old beater 30 miles to a minimum wage job.

When we loftily discuss what the macroeconomy should be doing, it seems like one thing we can all agree on is that the production and accumulation of real wealth is far superior to the production and accumulation of financial wealth. That's why this asset tax seems to have the oddly destructive, regressive trait of incentivizing the liquidation of valuable real assets owned by poor people without the means to pay the hefty tax. It's easy to imagine other situations where people of limited financial means may--even accidentally-- acquire valuable real assets. Say you go on Antiques Roadshow  and have your great grandmother's solid hardwood end table appraised only to find out that due to a confluence of factors, it's estimated to be worth $300,000 at auction to rabid furniture collectors. Well that's great if you intend to sell it, but if it holds great sentimental value to you and you intend to keep it then surprise! You now owe the government $15,000 a year, forever, on top of what you were already paying on your house and car.

These sorts of things don't seem fair to me, and the incentivization to minimize the value of your real assets (the things that truly mark a productive economy, after all) or even liquidate them to avoid the tax you can't afford appears highly undesirable. Perhaps the asset tax should fall only on financial wealth and exempt real wealth.

[Xan]

Great points, PointedStick.  Another horror of an asset tax in your Antiques Roadshow scenario is if the government tries to go after you for BACK asset taxes for all the years that end table sat in your attic!

These seem to be reasons why the FairTax is better than an asset tax, while still retaining the benefits.

[Pointedstick]

Although you'd still have to figure out what's an asset and what isn't, what's personally owned and what's corporately owned, etc.  (Or would corporations also pay the asset tax?)

I would certainly assume so! To me the biggest sticking point is what to do about valuable real assets owned by poor people. If it fell on real assets as well as financial assets, this asset tax seems like it would push them to have to liquidate them to avoid paying such a high sum.

It might make sense for it to only hit real assets that are actually being used as an economic wealth producer, like a rental home or a factory. That way, poor homeowners wouldn't pay a punitive tax on their homes, but landlords would pay it on the value of their rental properties and factory owners would pay it on their factories. Then again, the landlords and factory owners would just increase their rents and prices 5% or more to compensate for the tax...

[TBV]

To add some background info to the discussion....
In the case of California, home prices grew in both nominal and real terms for many decades after WWII.  So did real property taxes.  By the 1970's, the adverse impact on older residents (and not just older residents) was substantial.  They sometimes didn't have the cash income to pay the tax on their homes, increasing the likelihood of seizure for unpaid back taxes.  In response, voters overwhelmingly passed Proposition 13, which limited home taxes to no more than 1% of the market valuation, with 2% per year increases allowed if the market price rose, and revaluation to the actual sales price if/when the home was sold.

I understand that Stone is suggesting asset taxes as an alternative, not an additional tax.  However, in locales like California where the income tax system is highly progressive, persons with lower taxable incomes would incur substantially higher taxes overall if the system transitioned to a 5% asset tax.  Several US states have no state income tax, but do have relatively higher property and/or "wealth" taxes (on cars, dividends, etc.)  Many states also offer "homestead exemptions" which range from minuscule to very substantial.  These exempt a portion of the property's value from taxation if the owner lives in them as his/her primary home.  Further enhancements exist for persons over the age of 65.  So an asset tax need not be inflexible.

Stone, It seems your interest in an asset tax is influenced by a desire to levy taxes on those best able to pay them, and in a way that does not inhibit wealth creation.  There are situations, however, in which asset ownership (at least property ownership) does not correlate highly with actual wealth.  For example, in several large cities, upper middle income families reside in rental apartments for which property tax has been abated for up to 20 years.  Due to the political influence of renters (and property developers), tax liability often falls more heavily on specific sets of property owners, many of whom are (oddly enough) persons with lower incomes who happen to own modest homes.  So an asset tax is not immune to political distortions and unintended consequences.

[Gumby]

For what it's worth, supporters of "Economic democracy" (including David Schweickart in his book, After Capitalism) prefer an asset tax that only applies to capital, not "things". And if I'm reading this correctly (someone help me here), it might only apply to businesses.

According to Schweickart, economic democracy, like capitalism, can be defined in terms of three basic features:

• Worker Self-Management: Each productive enterprise is controlled democratically by its workers.
• Social Control of Investment: Funds for new investment are generated by a capital assets tax and are returned to the economy through a network of public investment banks."
• The Market: These enterprises interact with one another and with consumers in an environment largely free of governmental price controls. Raw materials, instruments of production and consumer goods are all bought and sold at prices largely determined by the forces of supply and demand.

...

In Schweickart’s model, workers control the workplace, but they do not "own" the means of production. Productive resources are regarded as the collective property of the society. Workers run the enterprise, use its capital assets as they see fit, and distribute the profits among themselves. Here, societal "ownership" of the enterprise manifests itself in two ways:

 All firms pay tax on their capital assets, which goes into society's investment fund. In effect, workers rent capital assets from society. Firms are required to preserve the value of the capital stock entrusted to them. This means that a depreciation fund must be maintained to repair or replace existing capital stock. This money may be spent on capital replacements or improvements, but not to supplement workers' incomes.

Firms that are unable to generate at least the nationally specified minimum per-capita income declare bankruptcy. Capital is sold off to pay creditors. The workers seek other employment. Workers are free to reorganize the facility, or to leave. They cannot use the proceeds of capital sales as income. A firm can sell some capital goods and use the proceeds to buy alternative capital goods. Should a firm wish to contract its capital base to reduce its tax and depreciation obligations, it can sell assets, but in this case proceeds from the sale go into the national investment fund, not to the workers, since these assets belong to society as a whole

...

Economic Democracy does not depend on private savings or private investment for economic development. Under Schweickart a flat-rate tax on capital assets replaces all other business taxes. This "capital assets tax" is collected and invested by the central government. Funds are dispersed throughout society, first to regions and communities on a per capita basis, then to public banks in accordance with past performance, then to those firms with profitable project proposals. Profitable projects that promise increased employment are favored over those that do not. At each level, national, regional and local, legislatures decide what portion of their funds is to be used for public capital expenditures, then send the remainder to the next lower level. Associated with most banks are entrepreneurial divisions, which promote firm expansion and new firm creation. For large (regional or national) enterprises, local investment banks are complemented by regional and national investment banks. These too would be public institutions that receive their funds from the national investment fund.

Banks are public, not private, institutions that make grants, not loans, to business enterprises. According to Schweickart, these grants do not represent "free money", since an investment grant counts as an addition to the capital assets of the enterprise, upon which the capital-asset tax must be paid. Thus the capital assets tax functions as an interest rate. A bank grant is essentially a loan requiring interest payments but no repayment of principal.
Source: http://en.wikipedia.org/wiki/Economic_democracy

See: http://en.wikipedia.org/wiki/Economic_democracy

The Wikipedia article also mentions that "Schweickart and other analysts consider interest payments to private savers both undeserved and unnecessary for economic growth."

[stone]

In the UK too many many people are also fixed asset rich but cash poor and yet tap into that wealth by using an "equity release" scheme where you get cash whilst you are alive but then hand over your house (or I guess your rare antique) when you die. Such a set up would allow people to enjoy their ancestral homes and valuable art collections for their entire lives and comfortably pay the asset tax. My mother in law actually has done such an equity release thing with her (fairly modest) home and so lives an afluent retirement as a result.

I think the big beneficiaries of inflated asset prices are the banks. People buying homes now have to pay a huge amount because banks have made ever bigger loans to inflate house prices higher and higher.

I think for an asset tax to work it needs to show no favor to any particular asset type. It needs to be purely on what something is valued at. I don't think exempting "things" could work. The classic "old money" way to allocate wealth is as one third farm land, one third art and one third gold. That could be seen as 100% "things". Value gets confered to "things" purely down to them adopting a "store of value" role. Much of the point of an asset tax would be so that asset values reflected the earning potential of the asset. To my mind a key current distortion is that asset values don't reflect earning potential and instead reflect bubblishishness.

[Xan]

That ensures that the ancestral home becomes no longer an ancestral home after you die.  Maybe that's what you're aiming for, but if so, why would you care whether a family who's lived someplace for generations has to move out now or later?

I do see a consumption tax as the better answer.

[Pointedstick]

Perhaps this is a European vs American perspective thing, but here in the USA, families that pass their homes down through the generations tend to be indigenous, poor, or middle class and not the rich elites, who are generally buying and selling multiple houses all over the place. In America, we don't really have the phenomenon of an aristocratic elite tending their 40,000 sqft ancestral mansions with adjoining 5,000 acre hunting grounds and farmlands. It just doesn't happen here.

That may be, stone, why you're seeing pushback from us Americans against your proposed asset tax that doesn't exempt homes and land. You see it as a feature in that the rich can't hoard too many real assets without the tax forcing them to "repatriate" 5% of the value of the wealth every year. But we don't really have that problem in the USA, and so we see the creation of a new problem in that under this tax system, the poor won't generally be able to pay the taxes on top of their other income (which right now is often effectively tax-free) and so will wind up without real assets, or will have entered into equity withdrawal agreement with banks. That part is actually sort of ironic to me, since you seem generally distrustful of banks, but your solution to what poor people with assets should do basically involves a complicated financial transaction with a bank that involves the (rich) bank eventually possessing the asset.

[WildAboutHarry]

To me the biggest sticking point is what to do about valuable real assets owned by poor people. If it fell on real assets as well as financial assets, this asset tax seems like it would push them to have to liquidate them to avoid paying such a high sum.

This was one of the motivations behind California's Proposition 13.

[Gumby]

I think for an asset tax to work it needs to show no favor to any particular asset type. It needs to be purely on what something is valued at. I don't think exempting "things" could work.

Looks like I was mistaken on the definition of "capital" in Economic Democracy. Here we go... Schweickart's book is on Google Books.

In Economic Democracy, investment funds are generated in a more direct and transparent fashion. We simply tax the capital assets of enterprises — land, buildings, and equipment. This tax, a flat-rate rax (essentially a property tax) maybe regarded as a leasing fee paid by the workers of the enterprise for use of a social property that belongs to all.

Revenues from the asset capital asset tax constitute the national investment fund, all of which is earmarked for new investment. ("New investment" is simply investment over and above that financed by enterprises directly from their own depreciation funds.)
Source: http://books.google.com/books?id=FPSFoG ... &q&f=false

...A flat-rate tax will be levied on each firm's capital assets, all the revenue from which will go into the national investment fund. Firms may object to this new tax, but it will be pointed out that they are no longer paying dividends to their stockholders or interest on loans they have accumulated. This tax is the rent they pay for the use of assets now regarded not as the private property of owners but the social property of the nation. (If a capital assets tax has already been implemented under capitalism, as part of the reform process, the mechanisms for calculating and collecting the tax will already be in place. The rate need merely be raised.)

Source: http://books.google.com/books?id=FPSFoG ... &q&f=false

The classic "old money" way to allocate wealth is as one third farm land, one third art and one third gold. That could be seen as 100% "things". Value gets confered to "things" purely down to them adopting a "store of value" role. Much of the point of an asset tax would be so that asset values reflected the earning potential of the asset. To my mind a key current distortion is that asset values don't reflect earning potential and instead reflect bubblishishness.

I believe Schweickart also argues that "private property" should be abolished since it is not productive for society. This would be different from "personal property" which are the "things" you own. As extreme as that all sounds, this would eliminate one's ability to concentrate too much non-productive wealth into land, while simultaneously allowing people to preserve their wealth as "personal property." So, it sounds like the poor person and the elderly wouldn't have to carry a tax burden if they weren't working.

There may be more to his theory than that, but the chapter on "personal/private property" is not included in the Google Books preview. But, he is definitely mindful that the top 1% tend to have too much wealth and the crux of "economic democracy" is about trying to fix that imbalance.

[Pointedstick]

Gumby, after reading over that page and the quotations you've pasted here, this all sounds like it will require massive government intervention in the economy in the form of a central planing apparatus to direct the socialized funds that would, like all such institutions, be vulnerable to corruption and capture by the moneyed class whose wealth it's meant to redistribute. In addition, it would obviously suffer from all the other standard problems of economic central planning.

I haven't read any of Schweickart's works, but do you know if he acknowledges this danger and has a plan to avoid it? Without one, "Economic Democracy" looks like communism-lite to me. I mean heck:

http://en.wikipedia.org/wiki/Economic_d ... investment

Under Schweickart a flat-rate tax on capital assets replaces all other business taxes. This "capital assets tax" is collected and invested by the central government. Funds are dispersed throughout society, first to regions and communities on a per capita basis, then to public banks in accordance with past performance, then to those firms with profitable project proposals. Profitable projects that promise increased employment are favored over those that do not. At each level, national, regional and local, legislatures decide what portion of their funds is to be used for public capital expenditures, then send the remainder to the next lower level.

Boy, I can't see any of that ever going wrong