POTENTIAL REVENUE SOURCES

THE QUESTIONS I address here are: (1) Is there enough co-owned wealth that we can plausibly charge for to pay meaningful dividends to everyone? (2) If so, what might some major revenue sources be?

To answer these questions, we must first establish criteria for choosing co-owned assets to charge for.  The criteria I use are the following:

• The income generated by charging for use of the asset should be substantial enough to justify doing so.  In other words, the asset should be used often and be highly valuable.

• Charging for use of the asset should create ancillary benefits beyond dividends.  Such side benefits could include the internalization of currently externalized costs and the redirection of extracted rent.

I  also assume that one hundred percent of the revenue is distributed in equal dividends to all legal US residents with a valid Social Security number — that is, the rightful co-owners of the asset.

The answers to the posed questions are based on the table below.  (The source of the table is With Liberty and Dividends for All, p. 94 and Appendix.)  Following the table, I discuss the questions first at the economy-wide level, and then by looking at specific potential revenue sources.

POTENTIAL REVENUE SOURCES
(in billions of 2013 dollars)

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ECONOMY-WIDE SCALE

TAKEN AS a whole, co-owned wealth that’s charged for would constitute a new sector of our economy.  How big would this sector need to be to sustain a large middle class, and is that a plausible size?

As of 2013, approximately three hundred million Americans had Social Security numbers. If each received a dividend of $5,000 yearly, the total revenue needed would be $1.5 trillion, or 9 percent of GDP.  This is roughly equivalent to the federal social insurance sector — Social Security, Medicare, disability, and unemployment compensation.

Another comparison is with value added taxes (VATs) in Europe.  All countries in the European Union are required to collect VATs; rates range from 20 percent in Britain and France to 25 percent in Sweden.  EU-wide, about 13 percent of economic activity consists of public services funded by VATs.

These numbers tell us that in terms of scale, a revenue-generating co-owned wealth sector would be about the size of our present social insurance sector and about 30 percent smaller than the public service sector supported by value added taxes in Europe.  Its scale is therefore plausible.

MAJOR POTENTIAL REVENUE SOURCES

IT’S IMPORTANT to note that, in considering the revenue potential of specific co-owned assets, numerical precision isn’t possible; we’re dealing with future projections and many unpredictable variables.  What follow are therefore “back of the envelope” calculations made with the best available data.

That said, it’s also important to note that, for purposes of this discussion, numerical precision isn’t necessary.  My goal is to determine whether annual co-owned wealth dividends in the range of $5,000 per recipient are economically possible if the political will is there; and if so, what some major potential revenue sources could be.  This can be done with rough numbers.

• Air.  Our atmosphere enriches us in many ways, for which we currently pay nothing.  It delivers oxygen for breathing and burning fossil fuels, nitrogen for making fertilizers, fresh water for farming and drinking, waste absorption, ultra-violet protection, and more.  Of these services, the most important to charge for — because not charging for it causes the most harm — is our use of the atmosphere for carbon dioxide storage.

How much revenue might we collect by charging for atmospheric carbon storage?  One way to answer this is to use the formulas in the Carbon Limits and Energy for America’s Renewal (CLEAR) Act (Cantwell-Collins, 2009).  The bill would require permits for bringing burnable carbon into our economy, gradually reduce the number of permits, and require all permits to be purchased at auctions bounded by floor and ceiling prices that would rise over time.

Using the floor and ceiling price formulas contained in the bill, carbon permit revenue in 2033 (twenty years from 2013) would be between $87 billion and $309 billion in 2013 dollars, with a midpoint of $198 billion.

• Money.   There’s no doubt that everyone benefits from our financial infrastructure, and also no doubt that financial firms and their shareholders benefit far more than anyone else.  Yet these firms pay virtually nothing to use that infrastructure.  In fact, many of them are subsidized to perform such public functions as creating money.

We might share the benefits of our financial infrastructure more evenly in at least two ways: charge small fees for trading in it, and create new money through dividends rather than bank loans.

Estimates have been made of the revenue that could be generated by a financial transaction tax, which is effectively the same as a financial infrastructure user fee.  I use a 2012 estimate by Robert Pollin and James Heintz of the University of Massachusetts / Amherst that revenue of $352 billion could flow from a set of financial transaction fees (assuming a 50 percent drop from 2011 trading volume as a result of the fees).

With regard to new money creation: from 2001 to 2008 (before the financial crisis), the average yearly increase in what the Federal Reserve calls M2 was $244 billion.  I use this figure (which is adjusted to 2013 dollars) to calculate the low end of the range of new money created annually.  For the high end I use the average annual change in M2 from 2001 to 2013, which includes several years of “quantitative easing.”  That figure is $323 billion.  The middle figure is halfway between.

• Intellectual Property Protection.  Intellectual property (IP) rights owned by private corporations include patents, copyrights, and trademarks granted and enforced by the federal government.  Such property rights are enormously valuable.  A recent study by the Department of Commerce found that IP-intensive industries account for about a third of US GDP.

That said, it’s not simple to estimate how much revenue could be generated by charging for IP protection.  According to the Department of Commerce study, the 15 most patent- and copyright-intensive industries (software, entertainment, pharmaceuticals, et al.) ac- counted for $1.6 trillion of value added in 2010.  A 20 percent value added fee on those industries, comparable to Britain’s value added tax, would yield $320 billion.

• Electromagnetic Spectrum.  The economic value of the electromagnetic spectrum — long used for radio and television and increasingly used for cell phones and data trans- mission — is enormous and rapidly growing.  By law, the spectrum is publicly owned, but in practice, much of it has been given or sold to private broadcasting and telecommuni- cations companies.  Putting a value on using it is complicated by many factors, including the different properties of different frequencies.

For purposes of preceding table, I adopted a simplified valuation methodology similar to that used for IP protection.  According to the US Bureau of Economic Analysis, the value added by the broadcasting and telecommunications industries, averaged over 1998 to 2011, was 2.5 percent of GDP.  Applying that to 2013 GDP yields a value added of $418 billion.  A 20 percent value added fee on those spectrum-intensive industries would generate $84 billion for dividends.

• Other Assets.  The list of other co-owned assets that could generate revenue for dividends includes minerals and timber on public lands (including offshore continental shelves); the Internet (commercial use only); and air, soil, and water as waste sinks for pollutants in addition to carbon.  Complexities abound in estimating the revenue such assets might generate; I have therefore omitted them from previous table.  However, there is much opportunity for research and revenue in this area.

There is sufficient co-owned wealth that could — and arguably should — be charged for in America to pay meaningful dividends to everyone.