“[B]y the year 2012, projected outlays for entitlements and interest on the national debt will consume all tax revenues collected by the federal government… There will not be one cent left over for education, children’s programs, highways, national defense, or any other discretionary program.”
— Bipartisan U.S. Commission on Entitlement and Tax Reform (1994)
While governments struggle to develop budgets that they imagine will serve the interests of most of their constituents, the rest of the world races ahead, with unrelenting and quickening progress, developing new tools to transform society.
The U.S. government, like other governments, seeks out and punishes those who publish information it does not like, and engages in attempts to regulate the internet. Yet despite such efforts, technological progress ultimately surpasses the capacity of government to regulate it. We live in a world in which kindergartners are learning to develop computer applications before they can read and where children are capable of printing objects using their minds.
Considering the technological developments in society, issues related to capital flight are important, but traditional methods of movement of capital will become less relevant as technology enhancements and the development of the information society result in information itself being adopted as new currency. This was alluded to in July of 2001 by D K Matai of mi2g at a Lloyd’s of London keynote speech and more recently has been discussed in numerous articles (examples: CNN, 2009; Estreitinho, 2013) discussing the concept of information as currency and the notion of the relationship as the ultimate technology (Gallagher, 2009).
The following paragraphs are excerpts from “The Sovereign Individual: Mastering the transition to the Information Age” by James Dale Davidson & Lord William Rees-Mogg (published by Touchstone, 1999).
“As ever more economic activity is drawn into cyberspace, the value of the state’s monopoly power within borders will shrink, giving states a growing incentive to franchise and fragment their sovereignty.” (p. 179)
“If a 747 jetliner filled with one investor from each jurisdiction on earth touched down in a newly independent country, and each investor risked $1,000 in a start-up venture in the new economy, the American would face a far higher tax than anyone else on any gains. Special, penal taxation of foreign investment, exemplified by the so-called PFIC taxation, plus the US nationality tax, can result in tax liabilities of 200 percent or more on long-term assets held outside the United States. A successful American could reduce his total lifetime tax burden as a citizen of any of more than 280 jurisdictions on the globe.” (p. 306)
- What do discussions of a transaction tax mean to you?
- If a transaction tax were to exist, what kind of transactions should be subject to tax?
- If a transaction tax were to exist and most transactions were to be subject to such a tax, what changes should be made to our current tax system to modify or reduce taxes collected in other areas, or other ways?
“The competitive conditions of the Information Age will render it possible to earn high incomes almost anywhere. In effect, the locational monopolies that nation-states exploited to impose extremely high taxes will be broken by technology. They are already breaking down.” (p. 307)
“Contrary to the popular impression in rich economies today, income inequality rose rapidly during the industrial period. An estimate cited by the World Bank suggests that per-capita income in the richest countries ballooned from eleven times that in the poorest countries in 1870 to fifty-two times in 1985. While inequality increased dramatically on a global basis, it often appeared otherwise to the fraction of the world inhabiting wealthy industrial countries. Income inequality rose among countries rather than within them.” (…)
Equal Opportunity in the Information Age: In the Information Age, familiar locational advantages will rapidly be transformed by technology. (…)
Earning capacity for persons of similar skills will become much more equal, no matter in what jurisdiction they live.” (pp. 234-237)
- Has technology provided you with enhanced earning capacity? How so or how not?
- Have certain effects of technology impaired or reduced your earning capacity?
- In your opinion, or your dialogue group’s collective opinion, has society made the best use of technology available to us today? Why or why not?
Today’s movements of capital around the globe in efforts to avoid taxation, combined with jurisdictions that traditionally shield the identity of individuals and corporations that hold accounts, have bumped into the advancement of the information society. This has resulted in leaks of information about the practice of offshoring, with various governmental reactions, including a US Treasury effort to address the issue.
As time goes on, changes in how people use technology in connection with currency will mean that individuals will need to spend less and less effort to reduce their liability. This is due in part to the growth of widely available encryption, and the eventual development of decentralized virtual currencies that do not rely upon governments or banks. (A discussion paper on various types of virtual currencies was published by the European Central Bank in 2012.)
As just one example, on March 28, 2013, the total value of bitcoins (a decentralized virtual cryptocurrency in use around the globe) in circulation passed 1 billion dollars. Because technology (such as TorWallet and ZeroCoin) is now available to anonymize the transactions of these virtual currencies, and because many technologies that do so begin as decentralized code with no single location, it is generally infeasible for governments to trace, control, or tax transactions involving decentralized virtual currencies. These are not based on gold or trust in a central authority, but rather, are based on how people value information, processing power, and relationships.
- What does the term ‘reduction of liability’ mean to you?
- In a world where an increasing number of transactions are conducted in a virtual realm, and where transactions and systems are becoming more difficult to track or control, what values or relationships would enable a “giving” or “donor” culture?
- What kind of organizations or services do you presently support voluntarily, by monetary donation, gift, or contribution of time and effort?]
Ultimately, it is likely that this liberating aspect of technology will eventually place even more control of development, production, and maintenance of currency systems in the hands of individuals, in essence resulting in governments being more subject to the interests of individuals, associations, and different types of corporations.
The question remains, what will networks of individuals do with this newfound ability?
- As information becomes currency, how do you think people should develop consensus to both operate their business and manage public resources?
- What will take the place of systems that traditionally were managed by the state, but will no longer be sustained due to diminishing governmental capacity to tax in a post-national climate?
- Can existing systems that government fails to maintain be “picked up” and maintained for the public good by non-governmental entities without risking the quality or quantity public service or resource in question? What are some of the pitfalls of privatization as traditionally conducted?
- In such a situation, who or what should handle parks, health, and / or educational systems?
- In an environment characterized by decentralization of systems, what is the individual’s role in the maintenance of public resources, or alternatively, public order? In such conditions, what would you do to help prevent or remedy any problems or adverse conditions associated with economic inequality, including poverty?
- Do you view the increases in the potential of individuals and networks to help others as Opportunity?
- What does Economic Inequality mean to me (or to the people I am exploring the issue with in this dialogue session)?
- What does Opportunity mean to me (or to the people I am with in this dialogue session)?
- (If exploring these issues with a small group of dialogue participants:)
Did your group arrive at consensus on these meanings? How did this occur?
- How does Economic Inequality relate to Poverty and Wealth in the United States?
Extending the Dialogue
(The following steps assume that the participants have additional time to explore the issues further or in greater depth over different sessions.)
- Describe your concerns, and to the extent that you developed shared concerns with others in a group while deliberating on these topics in this dialogue, describe any concerns that your group resolved or arrived at a consensus on.
- If there is more than one concern or issue, describe visually how they are connected. Use post-its, computer drawing tool(s), or anything that seems appropriate to visually characterize how the concerns or issues you discussed relate to each other. As part of this, visually describe the human relationships or connections that are relevant to these concerns as well as the connections between the concerns or issues.
- Tentatively determine some ways in which the relationships you are describing can be put to use, or alternatively, changed, to address the concerns in a meaningful way. Establish a “direction” that you’d like to go.
- Together, consider some scenarios involving steps that could help you move in the preferred direction that you tentatively determined above.