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ANDE - A National Dividend Economy
A proposal by David C. Coles

2002 by David C. Coles, All rights reserved
Permission to distribute and access this URL is granted.

DISCLAIMER: The figures; "50%" (the tax rate) and "$20,000" (The annual dividend) are only 'Straw Man' numbers used to illustrate the principles and interactions of this proposal. I expect further research and analysis to result in changes from the figures cited here to much more optimum numbers.

(1) What citizens don't spend, they save or invest.

(2) Saved or invested money creates growth, jobs, expanded investment opportunity and it increases the quantity, quality and variety of goods and services offered by business.

(3) Because the dividend (#9) is modest, citizens seek extra income through paid employment, investment and business endeavors. However, since the dividend will reduce the demand for employment somewhat, wages are likely to increase to attract employees. To avoid inflation, additional anti-inflationary pressures will be needed. These can include high Federal Reserve rates, tax benefits for anti-inflationary wage and price practices by business, Government policies that reward and facilitate price competition, and other similar approaches. Also a look needs to be taken at the hourly wage concept itself. What would the inflation impact be if hourly wages were largely replaced by profit sharing? Or if the post-national-dividend "wage increase" to bring in employees were provided in the form of profit sharing above pay as opposed to big pay raises themselves?

(4A&B) NOTE TWO-WAY CONNECTOR - Citizens spend money to buy products and services, including advanced health care services above the basics offered in (#8). Every purchase generates Government income via national sales and luxury taxes (#6, #7).

(5) A 50% sales tax on all products, goods and services (including employee wages?) bought by business entities. Note that all tax breaks, including depreciation, are eliminated, except the anti-inflationary rewards discussed in (#3) so that tax policy guarantees that business cannot avoid paying significant taxes.

(6) A 50% national sales tax on all products, goods and services citizens (and all other non-business entities except charitable organizations) buy. This completely eliminates and replaces the income tax, which is far too complex to be fair and far too easy for the Government to raise unnoticed by the electorate in general.

(7) Tax progressivity is provided, and guaranteed unavoidable, by a substantial surtax on all luxury goods and services.

(8) The Government provides it's services (including basic health care and public education through High School) to all citizens, paid for by taxes (#5, #6 & #7).

(9) These taxes also pay for the replacement of all current Welfare, Social Security and similar expenditures by a lifetime $20,000/year dividend paid to every citizen regardless of work status or personal wealth. The parents of minors receive $10,000 yearly per child, with the child's other $10,000/year going into an inaccessible interest-bearing account to be used by the child for and after college or vocational training.

A couple with two children would therefore receive $60,000 yearly (20+20+10+10) but since 1/3 of every dollar spent goes back to the Government in the (#6) sales tax (this encourages saving over spending) the families after-tax income would be $40,000 if they put no money in savings. This income level appears to be sufficiently large to eliminate poverty (and much poverty-motivated crime) while still being modest enough to encourage employment, investment and business endeavors. It is also not hard to imagine the quick establishment of a social ethic against relying wholly upon the dividend for one's support. But those who can't find work will be able to survive at a reasonable but not extravagant level, and be able to afford some vocational retraining.

Note that by making the dividend universal:
1. We eliminate the need to enforce work or income testing rules - and the privacy invasion and social polarization that would come from chasing and punishing abusers of the dividend system. This is a substantial, stabilizing social benefit which is easy to underestimate at first glance.
2. We also silence the charge that we're paying people for not working. The dividend is simply every citizen's right, like voting.

Important Note: The size of the dividend should grow annually as the GNP grows. Increased spending money means increased tax revenues, permitting increased levels of Government services (hopefully including the level of basic health care) without having to raise the tax rate.

Email me with your questions and comments.

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2002 by David C. Coles, All rights reserved - Permission to distribute and access this URL is granted.