Systemic Fiscal Reform
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
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.
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.
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
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.
Welfare benefits based on poverty, joblessness tests or housing costs are to be abolished. Any welfare payments based on disability are retained.
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.
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.
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.
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.
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.
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.
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.
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.