One of the biggest objections we got to our 1st diary on Basic Income was the risk that corporations might leave the country because of our higher tax rates. However, the problem with this argument is that life would go on and we would not replace it with nothing. Instead, it would create a power vacuum in which other enterprises would arise and replace the multinational conglomerates who are only answerable to the bottom line.
One such enterprise is cooperatives. Community Wealth, which has an entire website devoted to alternative business structures, has this to say about cooperatives:
They often provide quality goods and services to areas that have been shunned by traditional businesses because they are deemed less profitable markets.
They typically invest in local communities. For example, many rural cooperative utilities finance community infrastructure projects, make equity investments in local businesses, make grants to neighborhood nonprofits, and sponsor a range of community-focused events.
Since most cooperative members are local residents, business profits remain and circulate within the community.
Cooperative membership builds social networks and strengthens social cohesion, which are essential elements of strong, healthy communities, by connecting diverse community residents.
Purchasing cooperatives, in particular, help small, local businesses remain competitive within markets dominated by large, national retailers.
Worker cooperatives, in particular, create quality, empowering jobs for community members (for more details, please see our page on worker cooperatives).
Basic Income would fuel the growth and development of cooperative businesses and other alternative enterprises. This is because while certain multinational corporations might leave the country, the need for the goods/services they provide is still there. Assuming Basic Income levels are around $30,000/year, one could bring together 9 other people who put in $30,000 a year for the purposes of running a business. Or, they could put in $15,000 and keep $15,000 for themselves.
One of the big problems of the Great Depression and Great Recession was banks tightening up their credit markets. But with Basic Income, everyone would have income, so we would all have access to credit. Furthermore, if banks were stingy with credit, thanks to Basic Income, we could simply bypass them.
With cooperatives, we would have a lot fewer jobs outsourced even with robots, TPP, and TTIP. That is because people who invest in these enterprises are connected with the local community and do so because they want a valuable community service to survive, not because they are necessarily in it for the money.
Cooperatives can either be owned by workers, or by members who buy into the business. Some are owned by the consumers who buy their products, and some are purchasing cooperatives, which combine their resources in order to increase their purchasing power. A few examples follow:
Weaver Street Market (NC)
Weaver Street Market is part of a worldwide movement of businesses that use the cooperative model to meet individual and community needs. Unlike stores that are owned by out-of-town corporations, Weaver Street is owned locally by our customers and employees. We have 18,000 consumer households and 200 employee owners, each with their individual tastes and interests but all sharing the purpose of helping our co-op and our community thrive.
The key to Weaver Street’s cooperative model is the relationship with our owners, made up of shared economics, shared community, and shared knowledge.
WSM exists to provide an economic benefit for our owners that they couldn’t get otherwise. For consumers, this means hand-selected foods that taste the best, are the most healthful, come from trusted producers, and are a good value. Because Weaver Street is a co-op, the priority is to be the buying agent for our owners, not a selling agent for national brands.
For employees, shared economics means that Weaver Street provides not just a job but a career with good pay, good benefits, and an opportunity to make a difference.
Mandela Foods (Oakland, CA)
This cooperative is a consumer-owned cooperative; it was formed by a group of women who wanted more access to healthy foods.
Sevananda (Atlanta)
Welcome to Sevananda Natural Foods Market. Since 1974, our consumer-owned natural foods market, has provided quality whole foods to shoppers and members in Atlanta and surrounding cities throughout Georgia. Our fresh market is owned and operated by our members and provides a natural source of healthy, local, and organic foods to the local community.
Sevananda is proud to support local farmers and businesses by selling local organic food, including seasonal produce, natural groceries, bulk herbs and spices, and other specialty health and wellness products in high demand. Offering locally grown foods allows us to live up to the commitment of our triple bottom line philosophy of economic, environmental, and social responsibility. By supporting our local community, we help to reduce the environmental impact of product transportation and provides our members and shoppers with the option of fresh, organic produce that is grown within 150 miles of our store, as well as many other natural foods, supplements, and health products.
With Basic Income, these enterprises would thrive. People would have more money to grow their own food and purchase memberships in their favorite cooperatives. One could easily develop a situation with multiple different sources of income -- work a full-time job, garden organically on the side and sell to a cooperative market, get their basic income from the government, and get patronage rebates from the cooperatives they are part-owners of. One large farm cooperative,
Land O'Lakes, for instance, gave out $184 million in rebates back to its members last year.
With 300,000 direct and indirect members, that comes out to slightly over $600 per member.
Cooperatives are not limited to food. There have been electric cooperatives and farm cooperatives for a long time. There is a housing cooperative in Maryland, a cooperative school in Las Vegas (I'm usually skeptical of alternative schools, but I could get behind this one), recreational gear cooperative, and even a renewable energy cooperative.
One possible side benefit of a cooperative economic structure is that there would be less gun violence and fewer mass shootings. The studies I've seen show that most mass shooters are loners who do not fit into the outside world. But a cooperative enterprise helps people to fit in that might not otherwise. And since there is stronger social cohesion, it can be used as a preventative tool against gun violence. In other words, don't take peoples' guns; build social cohesion. I've evolved on gun control from being knee-jerk gun control, to pro-gun, to agnostic, to being for gun control again given the wave of mass shootings in this country. There is a compelling public interest in protecting public safety. But our first line of defense against gun violence should be building stronger social cohesion in our communities. The other should be to move away from the high-stakes standardized testing in our schools that robs kids of their humanity. Instead, we should promote an ethic within our schools which renounces violence as a means of solving problems and developing critical thinking skills in our young people, along with developing social skills and the ability to work with others. As long as we don't focus on root causes, the gun debate will never be settled. But if we focus on building community in which everyone is important, it helps prevent the kind of loner mentality which leads to gun violence and mass shootings and it bypasses the sometimes toxic debate on this issue.
Even with Basic Income, there will be social upheaval due to outsourcing, TPP, technological unemployment, TTIP, and climate change. But with Basic Income and cooperatives, it will create a strong social safety net that helps us to meet these problems. These problems will simply become opportunities for us to build a stronger union than we had before. I am always open to better ideas, but without something, the upheaval will be such that the US will be plunged into another depression as the only thriving enterprises would be multinational corporations, the Military Industrial Complex, and the Koch Brothers.
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APPENDIX -- REVISIONS TO OUR FIRST DIARY ON BASIC INCOME
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This is the second draft of our discussion on Basic Income as a way to adapt to a very serious problem on the horizon. With the passage of TPP and the rise of robotic technology, more and more people on top of the 101 million already considered disposable by corporate America will be considered disposable. If we do not act, at some point, we will have a depression that will dwarf the Great Depression. If we do act, we will create a world in which we create economic freedom as well as the personal freedoms that are already granted by the Constitution.
Last week, I suggested a $30,000 Basic Income and ways that we could pay for it. However, many of you were not convinced that we could get to $30,000. Fair enough. I suggest that $30,000 should not be written in stone. Instead, it should be a dividend -- if our ideas generate enough for $15,000 for every person in the US over 18, so be it. If they generate $40,000, then we'll take it. That means that we never blow a hole in the budget deficit, since now, our plan would be deficit-neutral. But in reality, it would help the deficit since people would be able to put that money back into our economy, since there would be a lot more disposable income. Banks would be much more likely to lend out money, since we would all have an income; in fact, they would have to compete for loans since if I could convince 9 other people to put in $15,000 of our $30,000 a year in a business venture, we could tell the banks to go to hell if they were not reasonable in their terms.
The other criticism that people had was that we would still be dependent on corporations, since corporate taxation of enterprises making a lot of money constitutes a big part of our plan. The risk, especially with passage of the TPP, is that they could move somewhere else. That means that the numbers I gave could be considerably lower than expected. This is why I suggest that basic income should be a variable dividend.
So, without further ado, here is our new draft. Changes are highlighted:
Cut Defense Spending to 1/3 of Current Level:
Cutting defense spending to this level would still leave us with the strongest army in the world. Current discretionary defense spending is now around $600 billion. Cutting two thirds of that would save $400 billion of taxpayer dollars.
Double Individual Tax Rate of Top 10%:
The top 10% of taxpayers (over $125,000/year) account for 70.17% of federal revenue as of 2012. Total income tax revenue for 2012 was $1.4 trillion. Of that, the top 10% of taxpayers paid around 980 billion. Their tax rate would still be lower than historic tax rates, which were in effect before Ronald Reagan took office. So far, we have raised $1.38 trillion.
Make it Taxable:
Making Basic Income taxable at a 10% rate would bring a return of $700 billion given the $7 trillion we need to raise. Raised so far: $2.08 trillion.
There was disagreement on whether Basic Income should be taxable or not. My feeling is that if we're going to do it, it shouldn't be too high, since there are circumstances (court judgments, divorce, bankruptcy, child support, foreclosure, medical bills) in which we would still have financial hardships.
Robin Hood Tax:
This tax on Wall Street speculation, sponsored by Bernie Sanders, would curb the kind of rampant speculation that led to the Great Recession of 2008. It would raise, according to their figures, an estimated $300 billion annually. Raised so far: $2.38 trillion.
The Heritage Foundation:
People may wonder why the inclusion of the Heritage Foundation on a Democratic Website, but this chart lists 50 examples of wasteful government spending totaling around $750 billion. A few of the most blatant examples:
A GAO audit classified nearly half of all purchases on government credit cards as improper, fraudulent, or embezzled. Examples of taxpayer-funded purchases include gambling, mortgage payments, liquor, lingerie, iPods, Xboxes, jewelry, Internet dating services, and Hawaiian vacations. In one extraordinary example, the Postal Service spent $13,500 on one dinner at a Ruth's Chris Steakhouse, including "over 200 appetizers and over $3,000 of alcohol, including more than 40 bottles of wine costing more than $50 each and brand-name liquor such as Courvoisier, Belvedere and Johnny Walker Gold." The 81 guests consumed an average of $167 worth of food and drink apiece.
The Pentagon recently spent $998,798 shipping two 19-cent washers from South Carolina to Texas and $293,451 sending an 89-cent washer from South Carolina to Florida.
The Transportation Department will subsidize up to $2,000 per flight for direct flights between Washington, D.C., and the small hometown of Congressman Hal Rogers (R-KY) -- but only on Monday mornings and Friday evenings, when lawmakers, staff, and lobbyists usually fly. Rogers is a member of the Appropriations Committee, which writes the Transportation Department's budget.
Washington has spent $3 billion re-sanding beaches -- even as this new sand washes back into the ocean.
Total raised: $3.13 trillion.
Universal Employment:
Creating universal employment and putting everyone to work is the most difficult portion of this plan. We can start by putting wind or solar in every US city that wants it, allowing more generous immigration laws since immigrants create jobs, and facilitating the creation of mom and pop enterprises (as opposed to the corporate welfare state we have today). It is a topic for another diary, but if we were to put everyone to work who wanted it, we can raise around $1.1 trillion. There are currently 8 million people looking for work who are on the unemployment rolls, and there are another 93 million who are considered "unemployable" by corporate America and dropped from consideration in unemployment stats. This masks the true extent of the disaster that our corporate welfare state has created. Multiply that by the present per capita personal income ($42,693) and divide by the resultant income tax rate (25%), and we get $1.1 trillion.
Total raised: $4.23 trillion.
Hampton Roads:
Hampton Roads has the following calculator that we can use to raise/save even more money. We played around with it, and here is what we came up with; the figures are from Hampton Roads:
Alcohol tax; 50 cents on six pack of beer; 40 cents on fifth of liquor -- $63.6 billion.
Regulatory fees and fees for private sector use of federal services, land, and waterways -- $1.5 Trillion (considered separately)
The previous figure of $21 billion was too low. The user hooper directed me to Peter Barnes' book With Liberty and Dividends for All. In it, he proposes a whole system of regulatory fees. For instance, renting out our commons such as the atmosphere, the broadcast spectrum, and the financial system, which is public property, would yield a $5,000 dividend for every man, woman, and child in this country. My feeling would be to pay out monthly dividends for the rest of these plans and then pay a $5,000 lump sum from rental of public property for Christmas, Hanukkah, Eid, or any other time frame of the taxpayer's choice. It should be variable since we can't predict with certainty how much revenue we will receive.
Restore the 1950 Corporate Tax except for corporations under $500,000 -- $1,695,000,000,000. Back in 1950, the Effective Corporate Tax Rate was around 50%; Bernie Sanders noted in a popular meme last year that the corporate share of government revenues was 33% back in 1952 and 9% today. The IRS reports that nearly all corporate tax revenue comes from corporations making $500,000 or more, which means that we could even reduce or eliminate the rate for mom and pop stores.
This number may be high because of the chance that some corporations may leave the country. Some people found it hard to believe there was a time when corporations paid 50% of their income in taxes, but the Effective Tax Rate is what corporations actually pay. One person pointed out that there were a lot more tax shelters in place before the 1986 Tax Reform Act. But that did not stop the Effective Corporate Tax Rate from being much higher. We could raise the Corporate Tax Rate back to its 1950 level and bring back a variant of this -- corporations could write off taxes by hiring workers at a living wage, locating offices and facilities in communities with declining populations and/or have a collective income low enough to qualify for a Community Development Black Grant, giving to certain charities, investing in wind and solar and electric cars, or other such activities which contribute to the common good.
In other words, our Basic Income would not be as high. But our economy would be developed in other ways that would benefit us.
Repeal tax breaks for oil, gas, and mining -- $33.8 billion.
Extend period for depreciating cost of certain investments -- $272 billion.
Impose annual fee on large financial institutions -- $64.4 billion.
Increase cigarette tax by 50 cents -- $37.4 billion.
Raise individual income tax rates by 2% in addition to doubling upper income tax rates -- $1.388 trillion.
Impose tax of $25/metric ton on greenhouse gas emissions -- $1.06 trillion.
Raise maximum yearly income taxed for Social Security -- $460 billion.
Increase motor vehicle fuel excise taxes by 35 cents & adjust for inflation -- $452 billion.
The total estimated money raised from the Hampton Road site comes to $5.547 trillion. The total estimated amount raised is $9.774 trillion. But these numbers are only estimates, which is why I now advocate a dividend as opposed to a flat rate. The actual number will be higher or lower depending on the actions of people and corporations.
Many of you talked about the drastic amount of money raised, which is close to 40% of our GDP. But drastic problems such as inequality, the prospect of millions more people out of work through no fault of their own thanks to technology, TPP, and TTIP, climate change, rising ocean levels threatening to inundate our cities, and the release of methane gasses into our atmosphere require drastic action in a way that used to be considered unthinkable. The money we are talking about may seem drastic. But given these massive problems that we face, we can't afford not to. In other words, this is cost-effective because it harnesses the collective creative energy of the people to leave a better planet for our children and grandchildren.
Many of you were concerned about the decoupling of work and income and that it would encourage laziness. But in reality, we work more than any other nation in the industrialized world. The problem is not that we are lazy or don't work hard enough; the problem is that we, as a society, lack meaningful work. Some of us know exactly what we want to do with our lives when we turn 18; others of us need until we're 30 or 40 before we discover our true passions. In the meantime, building a cooperative economy and basic income would give us money to live on.