Common Resource Taxes

As we explored questions about rights we encountered the reality that in order for all people to have equal rights, they must have equal claim to the universe.

It should be obvious that our simplistic rules of ownership of some types of resources don't meet this criterion. Ownership of land, the most critical of all resources, is permanent and irrevocable without the owner's consent, and only relatively recently have property taxes been used to prevent land from permanently accruing to small groups. Even in modernity, land is often zoned and allocated very inefficiently. It is obvious given our definition of rights that permanent irrevocable land ownership is a form of monopolistic regulatory capture, and interferes with all Beings' rights to own that same land or gain benefit from it indirectly.

However if we propose forcibly seizing and arbitrarily dividing land, we quickly run afoul of the Welfare imcomparability problem, since we can't know how different individuals value land and therefore can't possibly divide it truly equally. What we need is some democratic system that allows every being to equally signal need for common resources in a way that maximizes Welfare for all.

COST almost does the job.

In Radical Markets, the authors describe the inherent monopolistic problem of land ownership in detail, and offer a form of taxation that very neatly counteracts it called the COST, an acronym for "Common Ownership Self-Assessed Tax". This mechanism provably maximizes allocative efficiency of any good.

However, as will become clear when we describe the tax, it would obviously skew many social decisions to only consider financial merit, ignoring other non-monetary forms of value. Radical Markets also proposes the use of the tax for all forms of property, which is difficult to make consistent with our system of rights.

This chapter describes a modified version of the tax that patches these potential problems using principles of Persistent Democracy.

Description

First a description of the original version of the mechanism. No specific type of asset is assumed, since all will behave the same in practice.

  • The owner of an asset would at any time state their self-assessed value of the asset. This price represents the value they believe they gain from the asset.
  • They pay a flat tax rate on this self-assessed value per time period, such as 1% per year.
  • At any time, anyone else can make a credible offer to buy the asset at a price higher than the owner's self-assessed price by placing funds in escrow. The owner can then choose to either:
    • Accept the offer and sell the asset.
    • Decline the offer. If they do this, they must raise their self-assessed price to match the credible offer, and subsequently pay the tax on that higher price.

This system is very elegant and simple, and optimizes allocative efficiency. It is a market-like way of ensuring that all property taxes are perfectly accurate. To learn more about why this system is so efficient, feel free to read the original chapter in Radical Markets.

There's a very critical problem with this mechanism however, that it only values an asset in monetary terms. It will ensure assets are allocated to whoever monetarily values them most, but any other form of value that doesn't structurally create monetary income will eventually be outbid.

However if we extend this mechanism in a way that allows Persistent Democratic Weights to somehow offset the mechanism, we can allow all other forms of social welfare to compete democratically with monetary value. The simple name I give this tax is the Common Resource tax, since it can apply to any resource that is inherently held in common between all people as defined by our system of rights.

At this point I have two potential ideas for how democratic weights can be used as offsets: either by making their placement decrease the tax obligation quadratically in a form of tax deduction, allowing the owner to state a higher price and strengthen their continued claim; or by requiring their placement to be matched by any potential buyer, changing the kinds of buyers who could conceivably actually use the mechanism, allowing the owner to state a lower price but not face the same risk.

Before we discuss these alternatives let's restate the whole mechanism with some unknown offset present.

  • The owner of any asset would at any time have a self-assessed value as before, which is used to calculate their tax obligation. Also as before, anyone can make a credible offer that must be accepted if the owner doesn't wish to pay a higher tax.
  • However the owner can place their Democratic Weights on the asset to strengthen their claim somehow. Since this offset uses democratic weights it would tend to favor larger groups or those with a stronger relative preference intensity.
  • The previously discussed Persistent Funding mechanism allows any project to gain priority for funding from a Quadratic pool or inflation funding, meaning it can also be done to collect money for credible offers on assets. This means groups can democratically fund public asset acquisitions.

Now let's look at the strengths and weaknesses of the two potential offset systems.

  • Deduction Strengths: this system is very simple, and it's also very uniform. This likely retains the market-like aspects of the mechanism best, since it simply allows conversion of democratic weights into a currency deduction.
  • Deduction Weaknesses: since we must have some known ratio of weights to currency to make the deduction uniform (the deduction can't be in percentage terms since that would unfairly favor those holding more expensive assets), we have to devise a way to determine that number. Although this could be done by somehow relating the value to average purchasing power, this is a pretty fraught project where we can very easily make arbitrary and therefore unfair decisions. It's also possible that deductions are more unstable and don't allow sufficiently strong democratic protection of common resources, and that they would not do enough to allay people's frustrations.
  • Matching Strengths: this system is also simple, and allows very strong protection of common resources for socially legitimate causes, likely being much more stable and socially healthy. It also sidesteps any need to relate weights to currency, since the weights must be matched in addition to a monetary bid.
  • Matching Weaknesses: there's a degree of arbitrariness to this system, since currency and weights are no longer on a uniform scale. It's possible this version would allow too much arbitrary capture and protection in a way that would harm society.

As a sidenote, it is natural to also include some kind of "conservation" mechanism alongside this tax. Since things like national parks or wildlife refuges have some socially intrinsic value which can't be restored once destroyed, it should be possible for some sufficiently strong democratic weights action to permanently place them under public ownership. A future chapter discusses this question further.

Benefits

  • Common Resource taxes ensure all beings have equal claim to common resources without having to forcibly seize and arbitrarily divide them.
  • A democratic offset ensures all forms of social welfare, not just monetary value, are used to determine ownership of common resources, while still allowing private market uses when they are welfare positive. In very high-demand areas such as dense cities it is common for any kind of public space to be gradually starved away, and can only be ensured through acts of fiat by potentially corruptible public administrators. A Common Resource tax allows public parks, gardens, recreation centers, libraries, or even sources for essential utilities such as water to be acquired and controlled democratically.
  • A COST-style tax has provably optimal allocative efficiency, ensuring all owners prices are accurately stated and assets given to those who value them most.
  • A COST-style tax is very difficult to cheat or manipulate, and our democratic offset only allows them to be reduced through legitimate democratic will.

Potential Objections

  • Many in our society have grown accustomed to owning land forever, despite how intrinsically unfair such ownership is. It might be difficult to implement a system that could require you to sell something you value highly, and could be somewhat stressful for many once implemented. The democratic offset reduces this problem, but doesn't remove it.
  • Using the same supply of democratic weights for voting and tax reduction might disadvantage the poor, since they could be caught in a constant struggle between voting and protecting themselves financially. A simple solution to this problem could be to split democratic weights into two categories, legislative used for decisions about rules and rights and justice officials, and administrative used for decisions about zoning and prioritization and taxes and democratic funding.
  • A Common Resource Tax easily allows property allocation to scale to new areas, such as we will certainly encounter when traveling beyond our planet (!!!).

Open Questions

Despite how obviously the democratic offset in principle improves the original COST tax, it brings with it a devil in the details we must tame. We've already mentioned two potential ways to democratically offset the tax, but there could be others. Further, even the exact details of the two alternatives aren't all known, such as:

  • For deductions, how to relate weights and currency.
  • For deductions, should we allow citizens to use Democratic Weights to make some tax burden negative, producing a tax credit? I don't feel so, and would prefer to instead democratically invest all levied taxes in public goods. However some argument asserting the opposite could certainly be made.
  • For deductions, if the owner can place Democratic Weights to strengthen their claim, then shouldn't others be able to place Democratic Weights to counteract that claim? Further, should it be possible for groups to counteract a price beyond the original unadjusted price, thereby increasing the tax obligation of the owner? Should they be able to reduce the price at which they could buy the asset?
  • For matching, should we allow some kind of "fastening" system owners can use to make their weights hold for a longer period of time and therefore require any matching buyer to do the same?
  • For both, should we allow owners to "respond" to credible offers, or simply assume the owner would have set a higher price if they valued the asset more? Would it make sense to use this more "pure auction" form for any assets without any democratic weights? If we did that, how would we allow owners to lower their prices without simply lowering them arbitrarily and then responding briefly to credible offers? Might we have some "price decay" function that only gradually allows owners to lower their price after credible offers have been made?

At this point I'm leaning toward the matching system, since I'd rather err on the side of too much democratic protection than too little. But this is a question I have to investigate.

And one more potential change:

  • Perhaps zoning should allow some districts to not use Common Resource taxes? Especially purely residential ones? I personally don't feel this is a good idea, but it might address the fear and stress of the mechanism, and should be considered. A simpler way to allay the fear is to simply lower the tax rates.

Table of Contents

Introduction
In Defense of Pure Logic
Persistent Voting
Quadratic Range Voting
Persistent Documents
Persistent Prioritization
Persistent Endorsement
Persistent Commitments
Persistent Funding
A Theory of Minimum Necessary Rights
Markets and Rights
Common Resource Taxes
The Crowdsell Mechanism and Intellectual Property
Democratic Districts
Free Borders
Persistent Logistics
Democratic Adjudication
Misinformation Trials
Member Cooperatives and Economic Activism
Coda
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