THE CLAIRE FOSS JOURNAL
Fact Sheet on the Milligan Tax
A NEW APPROACH TO THE FINANCIAL TRANSACTION TAX (FTT)
HOW TO ELIMINATE DEBT, SLASH TAXES AND RE-VITALISE OUR COMMUNITIES
What is the ‘Milligan Tax’?
The Milligan Financial Transactions Tax (FTT) is an innovative proposal that is designed to help restore democratic control over our national economy and incrementally replace most if not all other forms of taxation. It’s a simple tax of .1% on all financial transactions ($1 on $1,000) whether domestic or international. It would be collected at source by financial institutions and remitted by them automatically and directly to the treasury of the nation. A defining characteristic of the Milligan tax, named for D’Arcy Craig Milligan, the Canadian monetary reformer who first proposed it, is that it would be a tax on gross transactions. It would particularly benefit nations who host stock exchanges, bond markets and foreign exchange trading and who will then be able to help other less fortunate nations from a position of strength. The uniqueness of the proposed tax lies in the relative simplicity of its collection and distribution. Its power lies in the fact that its benefits flow to the over-taxed majority – the ‘regular folk’ - and to the communities in which they live, work and raise their families.
The FTT revenue received by the national Treasury would be re-distributed to municipalities via provincial (state) governments on a per capita basis determined by the last available census population figures. They in turn would pass pre-determined funding to hospital and school boards for local use.
This version of a comprehensive Financial Transaction Tax has been dubbed the ‘Milligan Tax’ to distinguish it from the ‘Tobin Tax’, a somewhat similar proposal but one that targeted only foreign exchange dealings. The complexities of Tobin’s Foreign Exchange Tax are still being ‘discussed and debated’ by conventional economists some 27 years after the late James Tobin PhD received the Nobel Prize for its conception. Both collection and distribution of funds proved problematic and for this reason some guidelines have been suggested in the Milligan Tax proposal with regard to both areas.
Basis for the Milligan Tax proposal
Figures released by the DTCC, the Depository Trust and Clearing Corporation in the US show that the value of gross financial market transactions in 2004 exceeded the almost unimaginable sum of one quadrillion ($1,000,000,000,000,000) – a figure that continues to grow exponentially. The Canadian figure, when regular domestic bank transactions are also included, may be as high as $80-100 trillion. The Milligan Tax – even at a mere .1% – is therefore capable of reducing and even totally eliminating most if not all taxes, as well as injecting huge amounts of capital into local economies for the paying down of interest-bearing debt and the building of publicly-owned capital assets within the community.
Milligan argues that the implementation and collection of taxes as currently practiced places an onerous and unnecessary burden on that part of society least able to afford it and that the immense energy it consumes greatly and unnecessarily inhibits the creativity of our society. His proposal shifts the burden of taxation to those most able to pay but who under the present system have the skills and the ‘influence’ to legally avoid it. It calls to public service the financial institutions that have for generations gained such phenomenal profits at public expense and is designed to eliminate, in due course, the highly intrusive and Draconian role played in our personal lives by government tax authorities.
To benefit from the proposed personal and corporate tax breaks as they evolve a financial institution or investment company would need only to be legally domiciled in Canada and undertake to process all financial transactions through a Canadian chartered bank and/or the Canadian Depository for Securities (CDS) at the risk of severe penalties for the Directors of those institutions seeking to defraud.
Is there a need?
At the end of 2004 Canada's federal government debt ‘officially’ approached $550 billion but more truthfully exceeded an un-repayable $800 billion. Several factors accounted for this ‘discrepancy’. First, the system of government accounting was quietly changed to ‘full accrual accounting’ and now more accurately reflects the true value of the few public assets remaining. Second, the proceeds from massive privatization over the years were credited to General Revenue in order to support the false claim that the Canadian federal government’s deficit had been “wrestled to the ground”. These massive sales included Teleglobe, Air Canada, PetroCan, Canada Post and CN, but to this must be added our ill-publicised gold reserve sales that have placed our once wealthy nation below Bangladesh in terms of our current holdings. With few remaining saleable assets except our water, where do we go next?
According to a recent Fraser Institute report, when Program Obligations, unfunded Contingent Liabilities and Debt Guarantees are added, Canada’s total all-government liabilities exceed $2.7 trillion and we pay private lenders $65 billion a year in interest and bank charges. The biggest concern by far is the$1.5 trillion in unfunded liabilities that include Canada’s Pension Fund, Old Age Securities, Medicare and Civil Service pensions. We face desperate times indeed unless we give immediate consideration to a whole new financial/fiscal/economic model.
What are the principal benefits of the Milligan Tax?
First, this version of FTT has the potential to delay the painful consequences of an implosion of Canadian debt, while we replace the present usurious private money system with sound Constitutional money created by our publicly-owned Bank of Canada and spent into circulation interest-free.
Second, as they run out of public assets to sell, governments at every level face huge deficits and strong anti-tax populism among the electorate. They are looking for new sources of tax revenue that are not politically suicidal. The promise of an effortless new source of revenue is thus likely to be the primary motivation for reaching agreement to implement the Milligan Tax, despite the strong opposition to be expected from the ‘financial community’ who desperately fear anything that might be conceived as capital control.
Third, the tax would reduce the power that ‘financial markets’ (read ‘international bankers’) have over federal, provincial and municipal governments and give our elected governments - plus local hospital and school boards - more autonomy in determining fiscal and monetary policies.
Fourth, because Canada is not alone in this quagmire of usury we can show other nations the way and – to the extent they are willing to implement a similar or complementary system – help avoid the resulting global economic collapse now predicted to result from fatal flaws in our world-wide debt-money system.
Finally, such a minimal tax as represented by a .1% FTT will not hit "Main Street" and barely impact upon "Bay Street/Wall Street”. Those speculators whose gambling stakes are part of our casino economy are well able to bear a small charge. Furthermore, they will if domiciled in Canada or some other participating nation reap generous compensation as a result of the dramatic reduction in personal/corporate income taxes and sales taxes as these are increasingly replaced by FTT
How would collection work?
Canada’s share of the $1.2 quadrillion in total DTCC financial transactions projected for 2005 is conservatively expected to approach $80-100 trillion dollars, or roughly 6% to 8% of the DTCC total. A simple .1% Financial Transaction Tax, levied on every financial transaction in Canada—a single-page piece of legislation, with no loopholes and no exceptions—could therefore yield a total of more than $90 billion on foreign exchange and security transactions alone.
Add to that the .1% FTT revenue from Canada’s more than 1 billion credit card transactions, 82 million debit card transactions and 200 million on-line banking transactions per annum and it’s possible to see how, within a relatively short period of time, income tax, corporate tax, GST and all provincial sales taxes could begin to be incrementally reduced and eventually removed.
The figures necessary for accurate calculations are not available to ‘ordinary’ Canadians but it can be assumed that Canada’s total FTT revenue figure could well reach $100 billion in the first full year, a sum which equals half of the entire 2004 tax revenue of our federal government! (That $200 billion squeezed from hard-working Canadians in 2004 included $93 billion from personal income tax, a much reduced $27 billion from corporate income tax, $25 billion from GST, $7 billion from import tax and excise duties and $5 billion from gas tax).
To put the potential benefits of the $100 billion FTT revenue into even clearer perspective, it’s worth noting that our Federal government’s total expenses in 2004 amounted to $190 billion. This figure included a massive, unconstitutional - and therefore unnecessary - $36 billion in debt charges owed to private banks. It also included $27 billion in Old Age Security, $22 billion for health and social security ‘transfers’, $13 billion for national defence and $5 billion to run the Canada Revenue Agency.
The proposed .1% percent FTT (10 cents per hundred dollars, one dollar for every thousand, one thousand dollars for every million) is a tiny percentage compared to current sales taxes or corporate/personal income tax levels but, since all trades involve two transactions – one in and one out – it offers an immense but untapped source of tax revenue.
Who better than the banks themselves to gather it at source, for remittance directly to our federal government treasury under close scrutiny from the CRA? The simple technology required to do this automatically with each banking transaction - and the ability to track activity and remit these funds - would be a simple process given the sophisticated technology already in use by the finance/investment industries. Furthermore, given the grotesque profits raked in by the banks, there is no reason why this simple service could not be provided free of charge as a basic condition of their continuing charter.
How would funds be distributed?
As with FTT revenue collection, the key to sensible distribution lies in simplicity.
The gross FTT revenue collected by the national treasury would be remitted to individual provinces/territories for re-distribution to municipalities in direct ratio to the population figures from the latest available census returns.
The intention of the Milligan Tax is to ensure that the sole beneficiaries of FTT revenue would be Canadian citizens, local governments, local hospitals and local schools/colleges via the appropriate city councils and boards.
Let’s take an example using, for the sake of simplicity, only very approximate figures.
Against total Canadian FTT revenue of $90 billion in the first year and a population of 30 million, $3,000 per capita would be remitted by Ottawa to each of the provinces/territories, based upon their latest available census population figures.
Provinces and Territories – without deductions of fees or charges, without reduction of existing municipal funding or programs and using existing Finance Department personnel - would transfer a total equal to $3,000 per resident to every municipality.
On this basis British Columbia, with a population of 4 million would receive for re-distribution $12 billion and a city of 30,000 residents would receive from the provincial treasury a total of $90 million.
This massive injection of funds would need to be regularly monitored - from its financial source through to the municipalities - and randomly audited by independent authorities to eliminate the possibility of misuse, fraud and corruption.
We can be sure that Big Money will persuade some economists - and orchestrate a highly monopolized media - to scream warnings of “inflation!” but to address such unjustified concerns FTT funds should first be used to pay down existing interest-bearing municipal debt as a condition of transfer.
The savings on usurious interest and the ‘overage’ would increasingly finance the improvement of such vital community elements as medical and social services, water and sewage treatment plants and the construction of cultural, creative arts and sports facilities.
It would also allow the build-up of a Municipal Emergency Reserve Fund for unexpected needs such as natural disaster relief. Local governments could respond immediately to community needs and would not have to be totally dependent upon hand-outs from an increasingly cash-strapped federal government.
The only other condition would be an emphasis on the creation of capital assets, with FTT funding being used only for public projects that were a) needed, b) achievable and c) democratically approved via public referendum. We would for the first time in decades be able to move toward municipal debt relief, own our public buildings and water/sewage systems and pass on to future generations debt-free assets rather than a legacy of despair.
A major focus for municipalities would be to ensure that water rights, treatment and delivery remain totally in the control of local governments and that taxpayers do not simply finance expensive upgrades in order that this vital service can then be transferred to the control of private corporations via so-called PPP (Public Private Participation) or outright “privatisation” as is beginning to happen around the world.
Why the denial to federal and provincial governments of any funding from FTT?
Federal and provincial governments have other
constitutionally-demanded methods of creating the nation’s money
If we are foolish enough to allow
No country can consider itself ‘sovereign’ that does not control its own money The fact that we have allowed this most vital of constitutional rights to be usurped by private moneylenders is in direct conflict with Section 92 of Canada’s Constitution Acts, 1867 to 1982 and Section 14 (2) of the Bank of Canada Act. (Americans see US Constitution Section 8 – “The Powers of Congress)
How would transfers to local school boards and local hospital boards be handled?
Municipalities would be required to transfer to local hospital boards and school boards one third of the FTT funding they receive from the Finance Departments of their provincial governments. The division of this transfer would be in the ratio of two thirds to Hospital funding and one third for Schools. Such a distribution pattern roughly follows existing ratios of expenditure and would greatly reduce municipalities’ dependence upon poorly managed and corruption-prone provincial funding. It would provide greater autonomy for local hospital and school boards and in a city of 30,000 residents would add approximately $20 million to the benefit of the local hospital and $10 million to local schools. This would be in addition to present provincial funding and, as elsewhere, the initial focus would be on paying down current interest-bearing debt and the creation of badly needed capital assets.
Wouldn’t this FTT proposal cause inflation?
Creating new money and spending it too fast can certainly prove to be a formula for inflation but so is allowing private banks the power of unlimited money creation with high rates of compounding interest on private loans to governments, corporations and individuals, such as we’ve experienced for decades.
Compounding interest is the major component of inflation. It adds nothing to the quality of the product, it adds only to the cost at every level, from raw material extraction to retailing!
Using FTT funds to pay out existing interest-bearing debt could not possibly be inflationary. Neither could spending it to build debt-free capital assets on the public’s behalf. With such a large number of employable but sadly unproductive Canadians, the latter course would be highly advantageous in terms of constructive re-training and the reduction of welfare roles. Community infrastructure is the very foundation of our country – and the current needs at this level are monumental.
There are further counter measures that can be brought to bear on this issue
a) Restore to the Bank of Canada (BofC) the vital role it played in helping our nation recover from the Great Depression and assisting in the financing of WWII. Instead of allowing private banks to usurp the responsibility of creating the nation’s money, our own BofC created one third of the “broad money” (M3), doubling its balance sheet every year while keeping interest rates in the 0.38% to 3% range…totally without inflation! Today the BofC creates only a tiny fraction of the money in circulation and our governments pay $65 billion a year to “rent” money from private banks.
b) In order to curb the power of private banks to uncontrollably multiply the money supply, re-instate the fractional reserve requirements that were quietly removed by Bill C-19 in 1991.
c) We could also, as suggested in the early ‘90s by Economics Professor Emeritus John Hotson, simply move federal government balances from private banks to the Bank of Canada.
d) Finally, if after a trial year it were conclusively proven that FTT funding was inflationary, then the second year’s funding could very simply be reduced by spreading it over a longer period.
How hard would it be to implement?
Political will for passage is likely to be the major obstacle. Behind-the-scenes pressure upon senior bureaucrats and the Cabinet from powerful members of the ‘financial sector’ can be expected but the numerous advantages will be very hard for politicians to ignore and – as times get even tougher, as they surely will - a simpler or richer source of revenue is unlikely ever to be found. For federal legislation to be passed, community-level education and citizen mobilization will become critically important but never have we had the ability for broader communication with taxpayers/voters, politicians, economists and think tanks than is now offered us via websites, blogs, e-mail, fax, video, on-line discussion groups, home-based publishing and good old-fashioned pamphleteering. We have only to harness the immense power of this Age of Communication in order to help a miracle unfold!
What effect would the Milligan Tax have upon the Canadian economy?
In our debt-laden nation, the proposed Milligan Tax could generate important resources to support environmentally sustainable development, while stimulating the national economy, decentralizing the power of the federal/provincial bureaucracy and dramatically revitalizing our communities.
As such a scheme develops it would be capable of reducing and eventually even replacing all other forms of taxation, including personal income tax, the Goods and Services Tax, corporate tax and provincial sales tax.
Could the Milligan Tax achieve its goal without global support?
Unlike the Tobin Tax, the Milligan version of FTT would not require involvement by the IMF, the UN or other NWO ‘global power’. Given the sheer volume of the US financial markets it’s likely that US tax payers would be among the first supporters. Once popularized in Canada - given the enormous fiscal and economic benefits – it would probably be hard to stop other nations from following suit!
Could it be easily avoided/evaded?
Not if the introduction of FTT is a single-page piece of legislation initiated at the community level and written not in ‘legalese’ but in plain language. We would only need to vigilantly ensure that no critical wording was changed between the time of the Bill being introduced and its final implementation.
What are the possible disadvantages?
First, the ‘trio-poly’ of Moody’s, Standard & Poor and Dominion (the Coca Cola/Pepsi/Schweppes of the credit rating business) could be ‘influenced’ by the international money lenders who control them to lower Canada’s rating and therefore move interest rates higher on Canadian government loans. There are, however, powerfully creative ways of countering such a move if the political will exists.
Second, concern has been expressed that the Milligan version of FTT might help discourage short-term currency, commodity and stock trades, more than 95 percent of which are speculative. To be realistic, it’s very hard for big gamblers to change their ways and at least the “investors” being targeted can well afford to pay the tiny .1% FTT involved. They won’t exactly be taking food off the family table as is so often the case with the other forms of gambling our governments support as part of our ‘casino economy’.
Third – and this is an important factor - all concerned would need to have the good sense to agree to and honour non-inflationary wage and price contracts until our debt-monetary system is sensibly overhauled.
What can I do to get involved?
Supportive resolutions need to be introduced to municipal, provincial and national legislatures. Those who can must mobilize to encourage their city councils, school and hospital boards as well as elected politicians in higher levels of government to support this hopeful and totally viable proposal. Here are other practical steps you can take: