Social Contract

The Case for a Progressive Spending Tax

A traditional view of tax that viewed consumption taxes as a way to avoid taxing savings is flawed. A progressive spending tax stands between an income tax, which double-taxes all savings, and a wage tax, which ignores all savings. 

A progressive spending tax implements simultaneously two widely held norms about savings: the ordinary-savings norms, which holds that savings for emergencies or to smooth out uneven labour earnings through even consumption paths is commendable and ought not be ‘double-taxed’, and the yield-to-capital norm, which holds that savings that enable higher material lifestyles ought to bear some tax.

Why is the Inheritance Tax so Controversial?

Inheritance taxes have rarely ever contributed more than two per cent to the budget of any modern state. Nevertheless, in the twentieth and early twenty-first centuries some of the most vocal conflicts over taxation took place over inheritance taxes. This holds true for the United States as well as for many European countries. In the United States, estate taxation has been a topic of controversial political debate and will remain on the political agenda, at least until a decision has been made on what will happen to the tax after 2010. 

This policy brief addresses the question of why inheritance taxation is such a deeply controversial issue, arguing that the profoundly contentious character of this tax cannot be attributed solely to the material position of the testator and his or her heirs. Instead, these conflicts have much deeper roots in the way this tax relates to the normative fabric of societies.
 
The brief distinguishes four different principles that legitimize the inter-generational transfer of wealth: the family principle, the equality of opportunity principle, the social justice principle, and the community principle.
 

Tax Fairness and the Tax Mix

This brief considers the concept of tax justice or fairness in relation to each of these broad goals: the collection of revenues to finance public expenditures, the regulation of social and economic behaviour, and the distribution of economic resources. 

With respect to the collection of revenue for public expenditures, it argues that traditional principles of taxation according to benefits received and ability to pay provide useful criteria to assess the justice or fairness of taxes for this purpose. Regarding the regulation of social and economic behaviour, principles of tax fairness necessarily assume a different character, related to the justice of the regulatory goal, the presence of a rational relationship between the tax or tax incentive and the regulatory goal, and the distributional effects produced by the tax or incentive. 
 
Finally, it contends, where a tax is designed to affect the distribution of economic resources, principles of tax fairness dissolve into broader considerations of distributive justice which determine the manner in which economic resources are fairly distributed and the respective roles of taxes and transfer payments to achieve this distributive goal. 
 
Together, the brief concludes, these principles support a mix of taxes, including benefit taxes and user fees, a broad-based consumption tax like a value-added tax, excise taxes on specific goods and services, as well as progressive income and wealth transfer taxes.
 

Disability Benefit Reform and the Contract for Income Support

Many social security institutions are in the process of reforming their disability benefit programmes in an effort to reduce historically high numbers of beneficiaries on the rolls.
 
This brief will discuss the causes of this high recipient rate and will describe current disability benefit reform measures aimed at addressing the problem. It will then explore the policy reasons behind these different reform measures and examine how different types of reform measures might best address those policy concerns.
 
The manner in which these reform measures are implemented can be critical if they are to achieve their policy goals of greater integration rather than simply reduce benefit rolls.

The Rise in Uncertainty and Reforms of Social Security Systems in Chile and Sweden

In the new society, the individual and the family are subject to substantial increases in uncertainty in the economic environment. These are caused by globalization, technological changes, shifts in global power structures, and developments in labour and family relations.
 
Chile and Sweden set precedents in recent decades that were followed by many countries in their pension reform. In Chile, the universal pension coverage of pay-as-you-go was replaced by privatized plans which converted the system from DB to DC. In Sweden, the DB social security system was replaced by a combined notional defined contribution (NDC) system and a smaller privatized DC system. While the NDC is not privatized, it does shift most of the risk from the government to the participant.
 
The Swedish example has shown that privatization is not the only way to achieve the twin goals of fiscal stability and a viable welfare system, by combining the best of the market and government regulation to devise a pension system that is both economically efficient and equitable.

Pension Crisis or Pension Rethink?

There exists a widespread conviction that pension protection, along with many other social benefits, is slowly being eroded as responsibility for insurance and the associated costs are shifted steadily from government and employers to individual citizens and their family members.
 
But was there really a ‘golden age’ of pension protection? If so, what are the causes that undermined these guarantees, and what are the policy parameters and defining characteristics that have shaped pension policies during the last couple of decades?

The Feasibility of a Basic Income

This policy brief will discuss some normative and political aspects of the feasibility of a welfare reform based upon the idea of a basic income.

Firstly, it will make the case for  the increasing irrelevance of a wage-centred welfare state, in the wake of recent increases in economic productivity and, more significantly, the increasing social inequality confronting disadvantaged citizens.
 
Secondly, it will focus on some current debates in Germany, arguably the heartland of the welfare architecture of wage-based social insurances, in order to assess the practical implications of various theoretical approaches. 
 

Guaranteed Income as a Replacement for the Welfare State

A guaranteed income (GI) that replaces the welfare state is not currently on the political agenda, but it offers the possibility for a grand compromise that could attract a majority political coalition: for the Left, it represents larger government in that it constitutes a state-driven redistribution of wealth, while for the Right, it offers smaller government in terms of the state’s power to control people’s lives. 

The overarching reason to scrap the apparatus of the welfare state is that the welfare state is self-destructing. After a process that has taken decades, the welfare state has severely degraded the traditions of work, thrift, and neighbourliness which enabled the system to work at the outset. It is now spawning social and economic problems that it is powerless to solve.
 
The proposed GI may be expected to bring about a substantial reduction in extramarital births, and to increase, to an uncertain extent, labour force participation among young males currently outside of the labour force.

Jobs and Income Strategies for the Twenty-First Century

In the United States, ’welfare‘ and the politics of welfare – cash assistance for families, generally female-headed single-parent families with children – have been treated as a separable realm of policy, and too often as synonymous with all of anti-poverty policy. 

The debate needs to adopt a more holistic approach that treats jobs and income as inseparable aspects of the same subject. Moreover, the societal commitment should expand from a goal of ending poverty to a determination to achieve a living income for everyone. 
 
Just as the terms of the debate need to be recast, so the roles of the actors needed to effectuate the remedies need to be redefined. In order to instigate effective change, public policy, civic engagement, and personal responsibility must come together to form a three-dimensional and interactive relationship among individuals (and their families), communities (in a number of senses), and governments at all levels. 

A Community-Based Guaranteed Income

Guaranteed Income (GI) is usually defined as an income provided by a government to all adult members of a given nation at a uniform, fixed level, and at regular intervals. 

GI as public policy is typically characterized as a socio-economic right of an individual, or an entitlement provided by the legitimate institutions of a given polity. Many authors have supported GI on the grounds that it is a ‘human’ or ‘natural’ right, or some other variation of the basic rights argument.
 
Analysis reveals that these various rights-based arguments are predicated on a morally incomplete and sociologically inaccurate vision of society. By contrast, this brief advocates and analyzes a GI which both reflects and arises out of the responsibilities we have to one another as members of both smaller and more encompassing communities. 
 
This community-based analysis of GI gives rise to numerous implications for public policy.