Stallman-Lietaer “Tax”

This proposal combines Richard Stallman’s suggestion for a progressive business tax with Bernard Lietaer’s ECO-plan. We will first discuss both proposal separately and subsequently we will discuss a (possible) combination of both.

A progressive business tax

Richard Stallman has proposed to introduce a progressive tax on business to curb the size of corporations. His reasoning is that by levying higher rates on greater business sizes, big enterprises will have a strong financial incentive to split up themselves into smaller businesses. Stallman believes that is a more efficient method to curb corporate power than relying on anti-trust laws.

A crucial part of Stallman’s business tax, is that it will be levied on gross revenue rather than on profits. He argues that it is more difficult to obfuscate gross revenue than profits with clever accounting tricks.

The ECO plan

Where Stallman is primarily concerned with [the abuse of] corporate power, the late Bernard Lietaer seeks to stimulate larger enterprises to become more sustainable. As explained in his book Money and Sustainability, this scheme works as follows:

  • Each corporation with a gross revenue of $1,000,000 will have to pay 1 ECO for every $1,000,000 in (global) gross revenue;
  • Corporations can earn ECOs by implementing verifiable measures to reduce its carbon foot print;
  • Enterprises with a surplus of ECOs can sell these to enterprises with a deficit.

The rationale behind Lietaer’s plan is to reward good behaviour rather than to punish bad behaviour – though there is an indirect penalty. A reward system seems to be more efficient as corporations will have a strong motive to comply.

Comparison

These two proposals have a few similarities:

  • both target corporations
  • both are based on gross revenue
  • both seek to modify corporate behaviour

However, there a few important differences:

  • Stallman’s plan is progressive, whereas Lietaer’s is proportional
  • Stallman’s plan uses conventional money, Lietaer’s introduces a complementary currency
  • Lietaer’s plan uses rewards, Stallman’s does not

Synthesis

As stated above we believe that both proposals can be combined into a single system. Like the ECO plan we are in favor of creating a special currency but with a progressive element, as proposed by Stallman.

In order to determine a corporation’s “tax liability”, we propose the following method:

N = floor( ( gross revenue – threshold) / step size))

The threshold is the level of gross revenue below there will be no “tax obligation” (say $10,000,000) and the step size determines how quickly the “tax rate” increases (say $5,000,000). The final step in this calculation is:

T = F(N)

T is the “tax obligation” and F(N) is the Nth Fibonacci number – provided that N > 0, otherwise T = 0.

We will illustrate this with an example. Let’s that the Alice & Bob Corporation has an annual gross revenue of $55,000,000, then N will be:

N = floor(( 55,000,000 – 10,000,00) / 5,000,000 )) =

= floor( 45,000,000 / 5,000,000 )) = 9

So we have now to check what the 9th Fibonacci number is, which is 34. Hence the Alice & Bob Corporation has a tax obligation of 34 ECOs.

The threshold and step size are parameters that could be used by the government to fine tune the system. Also we could use a different progressive sequence instead of Fibonacci numbers.

However, the benefit of the Fibonacci sequence is that it rapidly grows, hence creating a strong incentive to split up the business, as a way to reduce total “tax liability”.

Earning ECOs

Now we have established a method to determine the amount of ECOs a corporation has to pay, we need to consider how businesses could earn them.

In Lietaer’s original proposal earning ECOs is linked with the reduction of carbon dioxide emissions. However, as most space settlement will be dependent on Solar power, the emission of carbon dioxide into Earth’s atmosphere will be of little relevance.

Nevertheless, curtailing the power of Big Business – a.k.a. Corporatocracy – is important for any republican space settlement. Also besides climate change there are a several things businesses can do that are socially desirable. We will suggest a few:

All enterprises regardless of size will be able to earn ECOs. A possibility could be to extend this reward system to non-charities as well, though these organizations would never be required to pay any tax in ECOs.

The ECO market

As stated above some corporations will have a surplus of ECOs, while others will have a deficit. We agree with Lietaer’s proposal to allow businesses to trade ECOs on the market. The price of the ECO will be determined by demand and supply.

In our proposal, however, smaller enterprises are more likely to have a surplus and larger ones more likely to have a deficit. Consequently larger corporations will purchase ECOs from smaller businesses and so small and efficient enterprises will be strengthened financially.

For the sake of clarity, we propose that any additional revenue resulting from surplus ECOs, will be exempted from the calculation of the “tax obligation”.

ECOs might also be bought and sold by speculators as a way to make money. However, the government should not trade in ECOs, in order to prevent circumvention of the whole system.

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