Capital for the people-an idea that an era has come

If the U.S. states are, as a former U.S. Supreme Court justice Louis Brandeis Once said, “Democracy Lab”, then it is worth paying close attention to what is happening in California.

The threat of tax increases and the political atmosphere of “accepting the rich” has led some wealthy Golden State residents, including some tech entrepreneurs, go away For cheaper ranches, such as Austin or Miami. This, in turn, has raised concerns about large-scale immigration, which will not only affect the state’s tax base, but also the growth and innovation that makes California the fifth largest economy in the world.

This is an exceptionally worrying situation.Although no one now has too much sympathy for wealthy individuals or companies (witness the recent ProPublica leak Show how little tax is paid by the richest Americans), or really believe in trickle-down economics, the threat of taxation and regulatory arbitrage in other states is real.

The good news is that California is applying some typical creative thinking to this problem. What if there is another way to use the wealth of companies and citizens to benefit everyone?

An increasingly popular idea is the so-called “pre-distribution.” Different from the traditional method of redistribution, the state levies taxes on existing wealth and then uses it to support various projects and components. Pre-distribution is to use capital like investors, and then use capital Exceed revenue growth) to provide funding for the public sector.

The idea of ​​letting more people become capital owners has actually been implemented for some time.This California Savings PlanCreated in 2016, it allows individuals such as gig workers or independent contractors who do not have the right to use private sector retirement accounts to contribute to the professionally managed funds in the state-managed system.

Similarly, Proposal No. 24, California Privacy Act, Passed last year and will take effect in 2023. This actually creates a kind of invisible sovereign wealth fund, in which 93 cents per dollar comes from the company’s fees for infringement of privacy (given the nature of surveillance, capitalism, may be substantive) can be invested by the Treasury Department , Any proceeds from the proceeds are used to pay for government operating expenses. “This is a way to help us not have to raise taxes,” said California Senate Majority Leader and Democrat Robert Herzberg.

Together with some very wealthy Californians, including former Google CEO Eric Schmidt and Snap founder Evan Spiegel, he proposed to extend this concept to so-called “universal basic capital.” The idea is that the equity seed investment of a company or philanthropist can be invested in a fund, which can then be used by California individuals for retirement protection, medical care, and so on.

In the 2021-2022 budget, California Governor Gavin Newsom (Gavin Newsom) has proposed to use part of the state’s tax surplus this year-which is an additional investment in federal Covid relief. $100 million Enter the public treasury-open a college account for every low-income first-year student in the state.

One can imagine going a step further and allowing the country to hold a small amount of equity in start-ups, maybe 3% to 5%, just like this country Israel or Finland already done. Given that the current value of public companies in California is approximately $13 trillion, this is not an overnight change. If the state was able to acquire even a small portion of shares in top companies a few decades ago, then California’s atmosphere of “occupying” Silicon Valley may be much less now.

In my opinion, pre-distribution should not replace taxation. It cannot fill the gap, and taxation is a way to enhance citizens’ sense of responsibility and belonging anyway.But it should be seen as a new source of income, particularly suitable for network effects and Intangible assets Wealth is not only concentrated in the hands of fewer people, but also in fewer companies, which can generate huge benefits with fewer employees.

It can also help better coordinate public and private incentives and rewards. The huge wealth accumulated by leading companies is partly due to the power of public resources—good schools, decent infrastructure, basic research, and so on.As economists like Mariana Mazucato It is often noticed that why taxpayers have to pay for the laying of high-speed optical fiber without obtaining any commercial benefits?

In fact, if the pre-distribution works in a California laboratory, I expect it to be adopted at the federal level in some way. The Obama administration actually tried to implement its own version of the CalSavers program, called myRA, for the entire country, but it failed in part because the funds were only invested in super-safe, low-yield Treasury bills that rose faster overall.

Even at this moment of political polarization, the time for this idea may have arrived.Pre-allocation is supported by the unlikely same-bed dreams such as hedge funds Ray Dalio and left-wing economist Joseph StiglitzPerhaps this is because although it did not fundamentally change the market system, it did expand equity: a mix of capitalism and socialism, suitable for our time.

rana.foroohar@ft.com