A ‘Wealth Fund’ as Opposed to Direct Redistribution of Wealth
“Automation Guru” recently had this article on justifying a redistribution of wealth in the ‘capitalist’ (for lack of a better term) economy published in The Startup here in Medium. I responded to ‘the Guru’ suggesting the idea of a wealth fund, as opposed to any direct redistribution of wealth. Here I would like to expand on that idea — with the caveat that this is only off the top of my head, and not intended as the final answer. Maybe it can contribute to a conversation.
The basic idea would be to have a ‘wealth fund’ from which citizens could draw money. Those ‘draws’ could only be used for three things: post-high school education, health care, and housing. They would range from outright grants to interest-bearing loans, with the rate of interest (if any) depending on the income of the applicant (or for non-graduate-level education the income of parents). At some point the interest would become greater than banks would charge, at which point the potential drawer would voluntarily go elsewhere for the money.
In health care the money would be used to cover costs of treatment that exceeded what was covered by insurance, be it private or public (Medicare or Medicaid). In housing it would be used to provide the down payment on a house or condominium (say, 20% of the selling price).
One problem with any such scheme — which is shared by all forms of taxation — is arbitrariness. John Locke correctly equated arbitrariness in human relations with injustice (even if that was the only thing he got exactly right and even if it was only the assertion of a supposition on his part).
There is a certain arbitrariness inherent in instituting any such scheme in the first place. It cannot be denied that any kind of taxation or any other form of redistribution is intrinsically arbitrary. It is some people deciding that taking from some for any purpose is a ‘good’ thing to do and all being required to conform to that decision.
That kind of arbitrariness is ameliorated in a democracy by the justness of the democratic political process. A democratic political process is one in which there is freedom of political speech for all and there are no arbitrary restrictions on political rights (i.e. restrictions that are not at least potentially applicable to any human being). That makes it a just procedural process, so that any outcome of that process is a legitimate outcome. [We do need a more rigorous set of standards governing participation in the process, but that is another topic.]
Beyond that fundamental issue of arbitrariness related to the very existence of any such scheme is the issue of arbitrariness within any such scheme. Why should this level of income or wealth be taxed or not taxed, or taxed at this rate and not that rate? Moreover, it is inevitable that a meaningless difference in income or wealth — a single dollar’s worth — can result in a significant difference in the rate of taxation.
Some such arbitrariness is unavoidable, but for those reasons I would favor funding this wealth fund with a universal, flat rate of taxation. Every adult living in the U.S. at tax time would pay into the fund, with a minimum of, say, $10. Exact data proved hard to find, but it’s safe to say that total net wealth in this country of corporations and households is now more than $125 trillion. If every person (or household) and every corporation whose average net wealth for the year exceeded $1,000 paid into the fund 1% of that amount, that would be more than $1.25 trillion going into the fund.
Though that sounds like a lot, it is only roughly $5,000 per adult citizen. Of course, not everyone would be accessing the fund every year. Much of the money drawn from the fund would be paid back, a lot of it with interest. The fund could make money for itself by buying government bonds and perhaps other extremely low-risk securities. Still, for it to work it would seem that the rate for funding this scheme would have to be closer to 10% of net wealth than 1% (with a corresponding adjustment in the minimum).