Integrating Tax Justice with FALC: Funding Truly Universal Basic Income Schemes
by David Quentin
Table of Contents:
- Tax and utopia?
- The need for, and impossibility of, UBI in a world of global financial capital and global inequality
- Three ways in which tax justice is already bringing about the conditions for global UBI:
(1) Tax sovereignty
(2) Fiscal transfers between states
(3) Fiscal transparency
- The politics of fully automated luxury tax justice
Tax and utopia?
My purpose in this essay to discuss the role tax could and should be playing in current utopian thinking on the left. More specifically, I want to discuss the role tax might play in bridging the gap between actually existing progressive political projects that liberal centrists can and do support, and truly transformative utopian thinking on the far left. Clearly tax is not something that is going to form a major part of anyone’s utopia once established, but it may have to play a significant role in getting there, and if that is so then it is something that should be embraced. The utopia I have in mind in particular is Fully Automated Luxury Communism.
Fully Automated Luxury Communism is a response to the tendency for capital to accumulate in the form of means of production. The means of production that advocates of Fully Automated Luxury Communism most often talk about is robots but really the tendency is as old as capitalism. As means of production accumulate, so profits and wages get squeezed. Capitalism, structurally incapable of accepting its own demise, recoils from this tendency in the form of the horror and chaos we see around us: wars, inequality, waste, (to name but three of its horsemen) and also the “creative destruction” of competing technologies that can deprive communities of their livelihoods almost without warning, and the ever-encroaching financialised pretend-production that serves to enrich elites and protect capitalism from the self-destruction of its own uncontrollably productive internal dynamic.
Fully Automated Luxury Communism offers an alternative, in the form of a post-work world where human labour is kept to a minimum and accumulated means of production (i.e. robots) serve to produce the things we need and want while we get on with leading our best and most fulfilling possible lives. This vision is certainly subject to critique, particularly from feminist perspectives and from green perspectives (as to which see below), but it is the utopian thinking which to a certain extent forms the theoretical undercurrent of today’s surge in popular leftist politics. As regards getting us there, the key policy ask is universal basic income, or “UBI”.
The need for, and impossibility of, UBI in a world of global financial capital and global inequality
UBI comes in a right-wing form, which is essentially a regressive welfare simplification where existing welfare budgets are distributed equally rather than being distributed according to need, and it comes in a left-wing form, where a flat additional income is paid to everyone in addition to such welfare receipts they may be entitled to. The idea behind the left-wing version with which we are concerned here is that, as capital accumulates, the amount of surplus that accrues to individuals can be incrementally removed from the unjust domain of the market for human labour, and incrementally distributed more equally instead. It is a pretty good idea. It does, however, suffer from two huge and interrelated problems which require to be addressed.
First, the money needs to come from somewhere; UBI is one half of a fiscal technology and we rarely hear about the other half. We know that (right-wing kindergarten macroeconomics notwithstanding) there most definitely is a magic money tree; we saw it bear staggeringly large fruit during the era of quantitative easing. But its use for progressive purposes is severely constrained by global financial capital. Increased public spending either constitutes a fiscal intervention (i.e. an increase in taxation) or a monetary intervention (i.e. an increase in money-creation) and global financial capital has tools which threaten to prevent either of these things from happening on a large scale in any particular state. It suppresses fiscal interventions by threatening to withdraw investment and invest elsewhere, and it suppresses monetary interventions by means of the threat of currency speculation, which could punish progressive spending by forcing currency to lose value. The fundamental problem here is that UBI is conceived of as a solution to inequality on a national level but the forces that stand to prevent money being spent for the benefit of people exert their power on a global level.
Secondly, UBI in a rich country – even UBI of the progressive variety – is simply not a progressive intervention when the adverse impact of capitalism is viewed (as it absolutely must be) as a global phenomenon. We can redistribute purchasing power in a rich country till total equality is achieved, but the goods and services we buy will continue to reflect savage poverty and unconstrained environmental destruction at the other ends of the global commodity chains that form the global production network. It is all very well (and indeed right) to work hard to redistribute wealth here in the UK, where four million people live in “persistent income poverty” (which is defined by reference to a series of household income thresholds for different kinds of households, e.g. £20k p.a. for a family with two kids). But the fact is that over two billion people worldwide do not even have access to a toilet. Fully Automated Luxury Communism in the UK would be like turning the Hunger Games’s “Capitol” communist but leaving its regime over the twelve districts in place. And it is an enormous shame that UBI cannot be conceived of as a global project because it is starting to look very much like improvements it could make to lives in rich countries are as nothing compared to improvements even a very modest UBI could make in the Global South.
Three ways in which tax justice is already bringing about the conditions for global UBI
As a tax justice activist looking at those two problems – the power of global finance capital, and the problem of income inequality between states – I have good news. That good news is that we have been working on precisely those problems for some time now, and I am delighted to inform the Fully Automated Luxury Communists out there that a certain amount of progress is being made. Not, as yet, world-changing paradigm-busting transformational progress, but incremental progress broadly in the right direction. This progress can be organised into three broad categories.
(1) Tax sovereignty
First, there is progress in shoring up the power of states to tax capitalist accumulation. Global financial capital abuses its mobility to force states to compete for inward investment by offering tax incentives out of public coffers, in the form of (for example) tax holidays or favourable tax rulings for specific companies, low tax rates on corporate profits generally, and tax give-aways for specific kinds of corporate behaviours hidden in a tax code applying nominally respectable rates. (This latter example, carefully tailoring what is called the tax “base”, is how sophisticated players of the tax haven game like the UK and the Netherlands avoid the opprobrium that Ireland has attracted by simply having a low headline rate of corporate tax.)
Neoliberal technocrats working within state administrations often cling to the fantasy that these policies will pay for themselves, as if capital’s appetite for untaxed profits can be sated, with increased tax yields ultimately following as a consequence. But we in tax justice know that capital’s appetite for public money extends through the floor of nil tax and into a boundless realm of subsidy. We talk of a “race to the bottom” but really it is a race through the bottom to a kind of fiscal “upside down” world where states pay companies to make profits.
The answer here, of course, is for states not to compete but to co-ordinate, effectively forming a corporate tax cartel so that capital has to pay a price for accumulation wherever it goes. We are a long way off the formation of such a cartel, but corporate tax policy is increasingly being made multilaterally, in the form of G20-mandated OECD recommendations to states to limit competitive tax practices of various kinds and (at EU level at least) actual legislation along similar lines. The EU is even making moves towards a shared definition of the corporate tax base among member states. These are baby steps, and sometimes it is easier to imagine states giving up the sovereign power to make war than giving up the sovereign power to hand public money to companies, but the steps are nonetheless being taken.
(2) Fiscal transfers between states
Secondly, there is the question of fiscal transfers between states; something which is absolutely necessary if wealth in rich countries is going to fund UBI globally. As things stand the conceptual basis for such transfers is barely even embryonic but in practice it is already taking place, albeit indirectly. This is because the way companies are taxed on their international activities is slowly (and I am referring again both to those OECD recommendations and to those proposals at EU level) moving towards a system whereby the corporate tax base is distributed between jurisdictions for tax purposes by reference to what is actually being done in those jurisdictions rather than by reference to where profits nominally arise.
Currently the possibilities are largely limited to ensuring that rich countries collect tax that would otherwise be lost to tax havens; what we really want to see is poor countries collecting tax which would otherwise be lost to rich countries. What this means is taking the existing policy goal of “unitary taxation by formulary apportionment” and extending it to cover the entire value chain rather than merely the large corporate groups that dominate the chain. To take the garment business as an illustration, what this would mean is taking the profitability currently sitting offshore with a vendor’s intellectual property, and treating it as arising for tax purposes not just in the rich country where the garments are sold but also (and ideally predominantly) in the poor country where they are made.
(3) Fiscal transparency
Thirdly, there is the question of fiscal transparency. There exists a concern that money passing into poor countries flows straight back out of it because of corruption, and that concern is often encountered alongside disgraceful racist assumptions about the inherent dishonesty of brown and black people. In fact corruption is a risk, but the risk lies in the corruption of the (predominantly white) people who staff the offshore finance industry and the onshore financial centres to which the offshore side serves as a conduit. Under-resourced jurisdictions find it hard to stop illicit financial flows but the real problem is the existence of a global industry dedicated to looking after vast amounts of wealth without questioning too deeply where it has come from and certainly without telling any tax authorities anywhere about it. Again this is an area where tax justice activism has yielded progress, from international treaties regarding information exchange to moves to force companies to publish details of their profitability in all jurisdictions, including the tax havens where so much of their nominal profitability arises.
The politics of fully automated luxury tax justice
What is particularly interesting, from the point of view of future possibilities, is the politics of these sorts of developments. The tax justice movement is largely peopled by committed leftists of one kind or another, but we are also often from technocratic professional milieus, and the success of these policy asks has been partly to do with framing them as neutral, centrist, technocratic improvements to the existing global order. So, for example, combating tax avoidance by large multinationals can be presented as thwarting anti-competitive practices in respect of that policy-maker’s darling the small-to-medium-sized enterprise.
Equally significantly, these asks have gained significant traction at the level of supranational neoliberal institutions such as the OECD and the EU, and even among those guardians of the neoliberal world order the IMF and the World Bank. The reason for this is to my mind fairly clear: these institutions know that the world they have ushered into being, where global financial capital has achieved domination over the national sovereignty of even the most powerful states, is one where the productivity that capitalism is capable of is suppressed into stagnation, potentially harming elites through consequent political upheavals as much as it harms people generally. These institutions are increasingly espousing tax justice (and even tax justice of the international kind that favours developing countries) because they realise that freeing the world of the straitjacket of global financial capital will unleash another era of capitalist growth, and the more geographically dispersed that growth spurt is, the longer and deeper it will be.
There are of course two problems with this. First, another growth spurt will inevitably lead to another crisis; that is just how capitalism works. And secondly (and vastly more importantly) the planet simply cannot cope with another capitalist growth spike. The last one has been a catastrophic extinction event on a scale similar to that of a geological-epoch-terminating meteorite impact, and it has transformed the global climate to an extent an order of magnitude greater than any natural fluctuation since the dawn of civilization. And capitalist growth is of course exponential: given that the outcome of the last growth spurt is the starting point for the next one, who knows to what hell it will take us? It must not be allowed to happen.
And yet, of course, there are still those countless millions who need that growth so as not to have to go and take a shit in a field. It is in squaring this circle that I believe tremendous progress can be made in uniting the incrementalist, reformist, technocratic (and, if I am honest, liberal) tax justice movement with the utopian demands of the fully automated luxury communists. Fully automated luxury communism is a goal without a viable global route for getting to it, and tax justice is a viable route for progressive change without a sustainable global goal. So let us combine these conversations. Let us talk about unleashing the productive power of capitalism by winning the fight against global finance capital, and at the same time let us talk about progressively constraining that productive power to humane and sustainable ends by forcibly re-routing as much as possible of the resulting surplus to the world’s poorest in the form of a “universal” basic income that is truly universal.
These are conversations that need to start as soon as possible. The internationalist neoliberal institutions that have proved themselves to be an unexpectedly effective tool for achieving tax justice objectives are currently under attack from the political right in the form of such movements as Trumpism and Brexit, and if the left were to throw them a lifeline they might grab it as an alternative to mere marginalisation and increasing irrelevance. So, utopians, you talk a lot about how technology can be revolutionary; it is time to start talking specifically and comprehensively about fiscal technologies and how they can take us to where you want to go. And, tax justice advocates, you need to start talking about where, ultimately, all your efforts are intended to take us.
This essay was first published as ‘The Fully Automated Luxury Communist’s Guide to Tax Justice’ in issue 151 of Island Magazine.