French propositons for the post-Covid world - and 6 of my own proposals

Over the past couple of months, there has been an interesting attempt by 66 French deputés to organise a public debate about the sort of world we want to live in once the current pandemic is over.

They set up a site called "lejourdaprès.parlement-ouvert.fr" - the day after.  A total of 17,555 people particated, making a total of 8,687 propositions on a set of 11 topics.

1. The most important thing is health : what kind of health care system for tomorrow?
2. Metro, work, sleep : what kind of work world do we want?
3. Consume in moderation: towards a society of sobriety?
4. Social bonds rather than goods: how to rebuild solidarity?
5. Education and youth: how can we build a learning society?
6. Man versus machine: can we humanise the digital world?
7. A more open democracy: how can power be shared?
8. The future of our territories: what new contract to strengthen them and preserve their diversity?
9. Europe in the world: how can we recreate European and international solidarity?
10. Our wealth is invisible: how to better evaluate the common good?
11.  The key problem: what financing & what new sharing of wealth?

They then worked to produce a set of 30 propositions that reflected the most popular ideas, grouped into 4 main themes : Health, Sobriety, Solidarity, Soverenty. Here is their list (translated with the help of DeepL!).

Health

1. Make the hospital a national priority, increasing the share of the budget for hospitals, strengthening care teams, redefining hospital governance and imposing a moratorium on hospital bed closures so that the hospital can function on a continuous basis. 
2. Recognize caregivers, starting with a €200/month pay increase, in the framework of a large social dialogue on their remuneration, their careersand their working conditions. Home helpers, nursing auxiliaries, nurses, and category B and C hospital workers with a high proportion of women are essential to our system of needs, and they now need to be recognised as being of a statutory nature.
3. Open 200,000 additional posts in 3 years in homes for the elderly and home help services to better accompany dependent persons.
4. Prevent rather than cure, by encouraging changes in French diets, physical activity and the creation of environmental health centres which could be initiated by commissions on Environmental Health.
5. Guarantee  health security by reinvesting in scientific and medical research, by relocating the production of medical material in France and Europe, and by creating a strategic public establishment to manage pandemics.

Sobriety 

1. Encouraging part-time work to limit the carbon footprint of home-workplace commuting, wherever possible, while at the same time providing a better framework to avoid new nations
2. Undertake the evolution of carbon-free mobility and cycling, while stopping the subsidisation of fossil fuels and the use of the heaviest and most polluting individual vehicles
3. Reconstructing the city's inner city through a major plan for the energy-efficient renovation of public and private housing and buildings
4. Tax unnecessary and non-recyclable packaging, record the removal and implementation of a "zero plastic" plan
5. Integrate environmental issues at all levels of education, from kindergarten to higher education
6. Moving from intemperance to digital obviousness and ethics, including through a Digital Constitutional Charter
7. Better control of advertising in the public space
8. Accompany companies in this transformation by means of tax incentives, public orders and investment resources earmarked for the environmental transition
9. Open a full debate on the definition of European trade policy in order to adapt free trade agreements to environmental and human rights requirements

Solidarity

1. Provide a universal income, starting by extending the current adult income support schemes to 18-25 year-olds, so that young people are no longer excluded from the social minima. Build social protection adapted to self-employed workers and workers on the gig economy
2. Enhance occupational equality and inclusion in employment and involving more closely companies, and guaranteeing the right to training through a universal training allowance
3. Create a "zero-expulsion" fund to prevent illegal evictions and complement the anti-poverty plan with investment aid for communities and associations
4. Create an asset tax for the sole purpose of financing the Transformation Plan and review the income tax to make it truly progressive
5. Promote the learning of civic engagement at school and strengthen education against all forms of discrimination.
6. Strengthen budgetary means dedicated to gender equality: gender-responsive budgeting and gender-responsive budgeting and plan for investment in the fight against violence against women, education for equality and sexuality.`
7. Reform parental leave to make it more equal 
8. Promote international and European solidarity in support of public development aid (Objective 0.7 GNI points).

Sovereignty

1. €10 billion in investment by local authorities in ecological transition, water protection and biodiversity protection
2. Put an end to land grabbing and the artificialization of soils
3. Massively support the development of regional food projects for local, quality and short circuit agriculture, including urban agriculture
4. Ensure effective citizen participation, through a multiplicity of experimentation in the field of drawing and participatory budgeting initiatives, both at the local and national levels
5. Prevent private interests from undermining general interest: strengthening the regulation of lobbies; providing real education on misinformation
6. Establish a genuine European "GreenDeal" financed by a more cohesive European budget (backed up by a tax on financial transactions, a compensation mechanism for coal at Europe's borders and a tax on digital giants) to serve the territories
7. Set up a "BuyEuropeanAct" and study the need for vigilance to ensure Europe's strategic autonomy in economic and industrial matters and the respect of social and environmental rights in Europe and elsewhere on the planet.
8. Allowing for the creation of a genuine European level of resources by removing the unanimity decision rule

Overall, I think that they did a pretty good job, and there's not really much in the set of 30 propositions that I would object to.That said, some of the propositions are not very explicit.

I would say that the site itself was really good. Everyone's propositions could be discussed openly, and participants could support or criticize each proposition.

I made a number of propositions myself, some of which may have had some influence on the final choice. Here are my six contributions. I must say that I think that some of them could well be added to the 30 that made the final selection. Indeed, some of them are ones that are close to propositions that I made myself - they are the ones that I highlighted in bold. For those who can read French, you might like to follow the links, because there is some quite interesting discussion on the site - particularly for my proposal on financing a Universal Basic Income.

1. We have to stop the explosion in housing prices...

House prices in the Eurozone  have just risen by 4.2% in one year https://ec.europa.eu/eurostat/documents/2995521/10294612/2-08042020-AP-EN.pdf/d624aabc-eca8-029c-868b-f80efec5b89a

At the same time the general inflation rate fell to 0.7%.
https://ec.europa.eu/eurostat/documents/2995521/10294612/2-08042020-AP-EN.pdf/d624aabc-eca8-029c-868b-f80efec5b89a

Of course, this difference is very good for those who already own their own house or flat, and even more wonderful for those who own a lot of property.

But for tenants, and young people, it's catastrophic. And this discrepancy has existed for decades.

How is that possible? The key is that banks, when they make loans, don't need to have the money they lend. Don't you believe that? Listen to Bernard Maris
https://www.youtube.com/watch?v=B6H2v4DaEyo

Creating money out of thin air to lend to someone to buy property with the guarantee that, in case of difficulty the bank can take over the property is a great deal for a bank. It explains why it is easy to find fixed rate loans over 25 years at around 1% (at least in France!).

Why would a bank want to lend to businesses, where the risks much greater?

The solution is to change the way money is created. Instead of giving this function to commercial banks, any money creation must be exclusively in the public interest  - not the shareholders of private banks.

2. A basic income of 920 € coupled with the abolition of income tax and VAT!

It sounds incredible, but yes, it is possible! The Gironde department has set up a superb website where you can test your proposals for implementing a basic income, and try to finance it by adjusting the current levels of different taxes and benefits. https://simulrb.gironde.fr/digdash_dashboard/gironde/simulRB.html

So, while playing with their simulator, I developed the following scheme which is fully funded (there is even a net surplus of 8 billion euros!).

How is this possible?
I chose a system in which each adult receives a basic monthly income of €920 and half of this amount (€460) for every child under 18.

Based on these selections, the overall cost of the Basic Income to be financed would be €645 billion.
- 16.4 Million miners at 460 €/Month/Person: 91 Billion €uro(s)
- 5.3 Million 18-24 year olds at 920 €/Month/Person: 59 Billion €uro(s)
- 31.2 Million adults at 920 €/Month/Person: 345 Billion €uro(s)
- 13.7 Million pensioners at 920 €/Month/Person: 151 Billion €uro(s)

Secondly, I propose to finance this amount by fusing all the existing aids
- RSA and activity premium: 15.43 MD€.
- Housing aid: 17.4 MD€.
- Exemption of low salaries: 38.7 MD€.
- Elimination of tax niches: 34 MD€.
- Family benefits: 36 MD€.
- Pensions: 219 MD€.
- Unemployment Insurance: 38.06 MD€.
- Tax individualization : 37 MD€.
Then I propose to abolish income tax altogether! By fixing it at 0%, we lose 82.8 MD€ of income, because the current rate is around 9%.

But, instead, I propose to put the CSG (General Solidarity Contibution)at 30% (a strong increase compared to the current rate of 7.90%). Note that 30% is the rate chosen by the government for the tax rate on financial income (dividends etc). The idea is indeed to use the CSG to introduce a tax on any form of income - whether it be business income, retirement pensions, wealth income or investment products.

Then I have chosen to vary the other taxes in the following way.

Firstly, I propose abolishing VAT altogether too! We lose 130MD€, but VAT is a tax that particularly affects those living on low incomes. If you earn a lot, and you manage to save rather than spend all your income, your effective tax rate goes down. Cutting the VAT gives a selective increase in purchasing power to people who will spend their money (or pay off their debts), rather than to those who will save, with a direct and positive effect on the economy.

Next, I propose to increase the wealth tax to 2% (currently 1.18%) to get 84.74 MD€ of additional revenue. In reality, I think we could have an equivalent effect with a lower rate (1%, for example) but applied more widely (real estate, land, etc.).

To help save the planet, I set the amount of a carbon tax at €100 per ton (which generates 17.64 MD€).

I chose to promote the fight against tax fraud (20 MD€), a figure that is necessarily underestimated. The French Court of Auditors estimates that VAT fraud deprives the state  of €15 MD€ per year. By already suppressing VAT, we will recover at least this amount. And the fraudulent use of the current tax niches to reduce one's income tax would also be impossible with my proposals.

I also kept the €15M generated by the current tax on financial transactions. But I propose to increase this revenue by applying a micro-tax on all transactions in the economy - not just stock market transactions. According to BIS figures, the amount of transactions in France in 2018 was €440 trillion. I propose to tax all these transactions (including those of citizens!) at 0.012%. This would be a perfectly fair tax that would not target anyone in particular, would cost almost nothing to implement, and would be almost impossible to avoid. Yet, even with this derisory rate, we could generate €50M of revenue per year.

I chose this rate of 0.012% and 50MD€ because it was the maximum allowed by the simulation site. But it goes without saying that if we wanted to increase the Basic Income to 1000€ per month (for example), the additional 50MD€ needed could be financed by increasing this micro-tax to 0.024% instead of 0.012%. You want €1200 per month? Well, set the micro-tax at around 0.05%. Of course, traders will explain to us that with a 0.05% tax, they will stop working. But this rate is similar to the charges typically applied by banks themselves, so it's not true.

Voila! Thanks again to the people who allowed me to do these simulations with accurate figures.

3. A nest egg for every young person from the day they turn 18

Many people are proposing a basic income, but typically with a lower amount for those under 18. Should we conclude that a child is worth less than an adult? My proposal would really be to give the same amount to everyone, but to keep part of the amount for the children in order to build up a nest egg, which would become available to them on their 18th birthday.

With €300 per month, the total accumulated by the time he turns 18 is €64,800. What could this amount be used for? The idea would be to give the young person a choice. Many will want to go to higher education. Today the taxpayer pays most of the costs - about €11,500 a year in France. Instead, we could charge the real price, and use the money to finance the 3 years of a Bachelor's degree (including the cost of living) or even the tuition fees for a 5-year Master's degree, more specialized short-term studies, or studies abroad. It would be up to each student to choose.

But we could also finance apprenticeships in industry. Or allow young people to set up their own business. Or simply contribute to the purchase of a home. Some might decide to devote several years to community service, volunteer work, saving the planet, or spending a year or two traveling around the world.

Note that it is not a question of crediting the young person's bank account with €64,800! Each young person's project should be discussed with advisors to see if it is realistic. It is also a question of releasing the sum as needed. By financing studies, the sums could be paid out year by year. And the nest egg could also be used later in life.

Imagine the effect on young people in disadvantaged suburbs. They could use their nest egg to revive their communities, and could no longer blame society for forgetting them. And, by putting the finances directly in the hands of young people, we would have a kind of direct democracy where decisions are made directly by citizens.

Since the vast majority of young people today are in higher education, the total cost of the operation should not be excessive. Moreover, there could be a very beneficial effect on the quality of higher education, because in order to attract students, universities would have to ensure the quality of the courses on offer in order to remain attractive. 

4.  A 1% universal tax on real estate assets

The value of French real estate is considered to exceed €10 trillion. Let us suppose that a universal tax is imposed on all this real estate at a rate of, for example, 1% per year. Such a tax should generate about €100 billion per year in revenue for the state. One of the advantages of such a tax is that one cannot hide one's real estate assets in a tax haven! But, to avoid the accusation that this is a tax specifically aimed at the rich, I propose that every owner would be obliged to pay at the same rate. Thus, if someone owns an apartment worth €100,000, they would be obliged to pay €1,000 a year, and someone with a chateau worth €10 million would have €100,000 of tax to pay a year. One would also have to pay if one is a farmer, but with the average price of a hectare of land at €6000 and an average farm size of 27 hectares, one can estimate that an average farmer could have an annual bill of around €1600. And similarly, the owners of a factory, a supermarket, or a motorway would also have to pay 1% of the value of their real estate per year. There would be no exceptions to this rule.

Importantly, if the owner does not have the agent to pay (which is quite possible!), they would still have the option to transfer a percentage of the property to the state. Thus, the famous retiree from the island of Ré who couldn't pay the wealth tax could simply sell 1% of his land per year without having to pay any money (This was a classic criticism of wealth taxes in general). And in the case of a chateau, one could also redeem 1% of the value of the property per year. Thus, after 30 years of non-payment, the state would be entitled to 30% of the value of the property on sale. And if the descendants wished to keep the castle, they would be obliged to find the necessary amount to pay off the debt. One of the enormous advantages of such a system is that it is really fair - everyone is treated equally, which increases the sense of belonging to society. And tenants who don't have personal assets won't have to pay anything. So we could replace the wealth tax, and property and housing taxes with this system, which I think is much simpler.

Finally, if the basic tax would be paid to the state, the localities could add an additional percentage to finance actions at the local level without having to invent an additional mechanism. 

5. Stop paying interest on public debt!

Every citizen must understand that when we say that French public sector debt has reached €2380 billion, it means that a very large percentage of our taxes is only used to pay the interest on this sum. And that was before the current crisis.

Specifically, in 2019, we paid €34.9 billion in interest on the public debt. And if we add up the interest paid since 1995, we find the staggering figure of €1161.6 billion - which is 73% of the increase in public debt over the same period.

In other words, if we had not had to pay this interest, French national debt would have been halved! And we must also understand that the money that is lent to our government by the banks is created by the banks themselves. The banks don't need to lend money invested savers - they create money ex nihilo, without risk, and sell the bonds on the markets. These annual payments can be considered totally unjustifiable, especially now that the ECB has shown that it is perfectly capable of creating money - with more than 2.79 trillion in money creation since March 2015.

In order to restore the confidence of the citizens of the Eurozone in the institutions of Europe, and especially the ECB, our government must campaign for the ECB to use its money creation capacities to buy back the debts of the Eurozone states. These purchases should be made simply on the basis of the population of each country. Thus, instead of using the €2.79 trillion to bail out the financial markets, the same amount of money could have been used to buy back the debts of the states. With about 20% of the population of the Eurozone, France could have reduced its public debt by €500 billion since March 2015! And in less than 10 years, France's public debt could be completely wiped out.

Eliminating public debt in this way would have another very beneficial effect. Today, our governments are effectively at the mercy of the financial world, because any government that dares to antagonise financiers runs the risk of seeing its interest rates explode (as was the case for Greece, for example). President Macron could really convince the French people that he is really fighting for them (and not for his former banker colleagues) if he had the courage to tackle this thorny issue.

6. Limit dividend payments

In February 2009, Nicolas Sarkozy had proposed that when a company makes profits, a simple three way split should apply - one third of the profits should go to employees, another to shareholders (in the form of dividends) and the last third should be reinvested in the company "to finance its development". Christine Lagarde, at the time at Bercy, pronounced that this was not possible. http://www.leparisien.fr/economie/lagarde-la-regle-des-trois-tiers-est-impossible-14-05-2009-512919.php

But, maybe his time has come? Last year, CAC 40 companies distributed more than €54 MD, an increase of 5.9% (https://www.lerevenu.com/bourse/dividendes-un-nouveau-record-pour-le-cac-40).

The fact is that, under the current system, there is almost no limit on the amount of money that can be distributed as dividends. One can even have the situation where a company borrows money to be able to pay dividends! This was the case of SFR-Numericable in 2015.
https://lexpansion.lexpress.fr/actualite-economique/dividendes-pourquoi-les-entreprises-s-endettent-pour-recompenser-leurs-actionnaires_1726102.html
 
This may be explicable to keep the share price artificially high to avoid a takeover by a competitor. But increasing a company's debt for the benefit of shareholders cannot be a good long-term plan.

In the world afterwards, perhaps this dividend distribution needs to be regulated. If dividends were limited by law to (for example) one third of profits, there would be two advantages. Firstly, the employees of these companies would no longer feel that the fruits of their labour go mainly to people who do nothing useful for the company (once the first fundraising is done). But, moreover, the companies will have a good reason to make a profit.

Today, a company may very well try to limit its profits to avoid paying corporate tax. And to do so, they imagine all kinds of schemes, with structures in tax havens to hide their profits. If, by using these schemes, companies were to deprive themselves of the possibility of distributing dividends, it could make them think again.