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’?
This updated version of a comprehensive Financial Transactions Tax (FTT) is an innovative proposal designed to incrementally remove the need for most if not all other forms of taxation, eliminate the burden of debt from all levels of government, dramatically revitalise economic activity at the community level and help restore democratic control over our national economy.
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 all financial transactions. Because of the immense size of our ‘financial market’ it is capable, at only .1%, of generating billions of dollars every year.
Since every nation now has a centralised banking system it could be of great international benefit but it would generate vast amounts of revenue to the many countries that host stock exchanges, bond markets and foreign exchange trading - and who would then be able to help other less fortunate nations from a position of financial strength.
This version of a comprehensive Financial Transaction Tax has been named 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 28 years after the late James Tobin PhD received the Nobel Prize for its conception. Both collection and distribution of funds under his award-winning formula proved problematic and for this reason some guidelines have been suggested in the Milligan Tax proposal with regard to both areas.
It’s a simple tax of .1% (10 cents per hundred dollars, one dollar for every thousand, one thousand dollars for every million) on all financial transactions whether domestic or international. No exceptions would be allowed. It would target Canada’s share of the astronomical US$1.4 quadrillion dollars (US$1,400,000,000,000,000 or $1.4 million billion) speculatively traded annually in foreign exchange dealings, corporate and government bond trading, common and preferred shares, derivatives, debentures, mortgages, commodity trading, mutual and hedge funds, strip bonds, futures etc. and a multitude of other “investment instruments”, plus all Canadian banks’ other domestic and international financial transactions.
It would be collected at source by banks and other financial institutions and remitted by them automatically and directly to the publicly-owned Bank of Canada for redistribution to municipal, provincial and federal governments in accordance with a pre-set formula. The process would be monitored and audited under the direction of the federal Minister of Finance. The primary mandate of the CRA (Canada Revenue Agency) would shift to this new function and away from the invasive harassment of ordinary working people, small businesses and the diminishing middle class.
The uniqueness of Milligan’s proposed tax lies in the relative simplicity of both its collection and distribution. Its power lies in the fact that its principal benefits flow directly to the over-taxed majority – we ‘regular folk’ – and to the communities in which we live, work and raise our families.
The FTT revenue received by the Bank of Canada would be distributed to federal, provincial and municipal treasuries on a percentage and per capita basis determined by the last available census population figures. Municipal payments would be remitted via provincial governments, who would in turn pass pre-determined funding to hospital and school boards for local use.
Basis for the Milligan Tax proposal
Figures released by the DTCC, the Depository Trust and Clearing Corporation in the US show that the gross value of ‘financial market transactions’ handled by them in 2005 exceeded the almost unimaginable sum of US$1.4 quadrillion – a quadrillion being a million billion, or $1,000,000,000,000,000.
This figure is expected to grow exponentially as global financial markets are continually forced to ‘open up’, inter-connect and centralise under IMF/ World Bank direction. The quickening pace of global ‘privatisation’, as taxpayer-owned (public) companies such as water and waste management companies, oil companies, telecommunication networks, airlines, postal services and railways etc. are bought up by private interests, will greatly increase the amount of revenue generated.
Never before in the span of human history has an opportunity been presented to move such astronomical amounts of money from where they serve so little purpose to where they are so desperately needed.
To put this US$1.4 quadrillion into perspective;
● If this amount were divided equally between the world’s population of
nearly 7 billion, every family of four would receive $800,000!
● It would take 32 million years to count to one quadrillion (one million
billion), one second at a time.
● The entire world’s GNP is about 18 trillion (18 million million); that’s the
value of all the goods and services produced by all the working people of
the world each year.
● The value of the entire world was recently placed at $33 trillion by a team
of economists, geologists and ecologists led by Robert Costanza of the
University of Maryland.
Only in the gambling casino economics of a world dominated and controlled by debt could a figure of US$1.4 quadrillion even be possible. To focus our major tax-gathering efforts anywhere else but on this huge ‘speculative investment’ market is totally inept.
Milligan claims 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.
The Milligan Tax calls to public service the financial institutions that have for generations gained such phenomenal profits at public expense and is designed to greatly reduce the highly intrusive and draconian role played in our personal lives by government tax authorities.
To benefit from any proposed personal and corporate tax breaks as they evolve, a financial institution, investment or insurance company would need to be legally domiciled and active (not just ‘incorporated’) in Canada and legally bound 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 CEO and any directors of those institutions seeking to defraud.
Is there a need?
Current federal government debt is ‘officially’ recognised as being around $500 billion but more truthfully exceeds an un-repayable $800 billion. Several factors accounted for this ‘discrepancy’.
First, the system of government accounting has been quietly changed to ‘full accrual accounting’ and now more accurately reflects the true value of the few unsold public assets remaining. Previously, a billion dollar asset might appear in government accounts as being worth a ‘nominal $1’, with its entire value being written off in the first year. It was a misleading and misguided accounting practice that would have bankrupted most private businesses.
Second, the proceeds from massive privatization over the years have been credited to General Revenue in order to support the false claim that the federal government’s huge deficits had been “wrestled to the ground”. These massive sales included Teleglobe, Air Canada, PetroCan, Canada Post and CN. It’s like selling off the furniture to make one more payment on the mortgage – and Canada has very little ‘furniture’ left!
To this must be factored in our ill-publicised gold reserve sales that have placed our once wealthy nation below Bangladesh in terms of Canada’s current gold holdings. With few remaining saleable assets except our water, where do we go next?
According to a 2004 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.
What are the principal benefits of the Milligan Tax?
First, the Milligan version of FTT has the potential to delay the severe consequences of a massive implosion of Canadian debt; giving us time to replace the present usurious and parasitical private debt- money system with sound 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 debts 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 principal motivation for reaching agreement to implement the Milligan Tax, despite the strong opposition to be expected from the ‘financial community’ i.e. the money lenders, who desperately fear anything that might be conceived as capital control.
Third, the tax would reduce the power that ‘financial markets’ (read ‘international banks’ such as the IMF, World Bank and the Bank for International Settlements, plus a highly select group of ‘merchant bankers’) have over federal, provincial and municipal governments.
Fourth, it will give our provincial and municipal governments, local hospital boards and school boards far greater autonomy in determining monetary and operational policies.
Fifth, Canada is not alone in this quagmire of usury-driven debt. The US federal government alone owes close to $10 trillion, making America the world’s largest debtor nation, and all the G-7 nations are equally bankrupt. To the extent that we can show other nations the way we can help avoid the up-coming global economic collapse due to 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 and active in Canada reap generous compensation as a result of reductions in personal/corporate income taxes and sales taxes, as these are increasingly replaced by FTT.
How would collection work?
As currently proposed, a simple .1% Financial Transaction Tax would be levied on every financial transaction in Canada, governed by a single-page piece of legislation, with no loopholes and no exceptions. No exclusions would be made for “gifts”, barter or lottery earnings or any other form of transaction in order to avoid abuse by the super-wealthy and to ensure the simplicity and effectiveness of the legislation.
FTT would be ‘built-in’ to the computer programming of every financial institution. It would automatically charge and directly remit .1% of every financial transaction to a separate FTT-designated account with the Bank of Canada. FTT accounting would be regularly monitored and randomly audited by the office of the Federal Minister of Finance under open public scrutiny and with severe penalties imposed for abuse, fraud, or any other form of malfeasance. The CRA would assist the Minister of Finance in this function.
Putting the figures into perspective
Because both the DTCC and its Canadian associate, Canadian Depository Services (CDS) are private entities with shares closely held by the banks; the figures necessary for accurate calculations are not available to ‘ordinary’ Canadians. We can, however, make an intelligent and reasonable estimate.
Canada’s participation in the DTCC process is orchestrated via the Canadian Depository for Securities (CDS) as part of a “seamless” global network involving more than 100 countries. As a founding member of the prestigious G-7, the Canadian share of DTCC’s 1.4 quadrillion dollars worth of global financial transactions is estimated to be around 8%, or roughly US$110 trillion. This is based on projections from earlier years when the system was more ‘open’ and on written exchanges with CDS.
When more than a billion ATM, on-line banking, chequing and other Canadian bank transactions are factored in, this figure could well exceed CAD$125 trillion.
An FTT of .1% could, therefore, yield as much as CAD$125 billion or more.
To put this amount into perspective, the federal government’s entire tax revenue yields around $165 billion. This figure includes $93 billion from personal income tax, a much reduced $27 billion from corporate income tax, $28 billion from GST, $7 billion from import tax and excise duties and $5 billion from gas tax.
The Milligan Tax could therefore, in one simple stroke, increase federal revenue by more than 75%. It is capable of dramatically reducing or even totally eliminating some of our more burdensome taxes, as well as injecting huge amounts of capital into provincial and local economies for the paying down of interest-bearing debt and/or the building of publicly-owned capital assets within our communities.
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 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. And it’s simple to understand and explain!
Who better than the banks themselves to gather FTT at source, for remittance directly to the publicly-owned Bank of Canada under close scrutiny from the Minister of Finance (for public accountability and information access) and the CRA? The simple technology required to do this automatically with each banking transaction - and the ability to track activity with up-to-the-minute accuracy - would be an extremely simple process given the sophisticated technology already in use by the finance/investment industries. It would certainly be far less complicated than the burdensome GST process forced upon small businesses. Furthermore, given the astronomical profits made 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 charters.
How would funds be distributed?
As with FTT revenue collection, the key to sensible distribution lies in its relative simplicity.
It is proposed that of the gross FTT revenue received by the Bank of Canada 30% would be made payable to the federal government, 30% divided between the provinces and 40% remitted via the provinces to municipalities. Both provincial and municipal payments would be calculated on the basis of population figures from the latest available census population figures.
Let’s take an example using approximate figures:
Against a total Canadian FTT revenue of CAD$125 billion in the first year, the Federal government would retain 30%, or close to $38 billion. This would allow for the total removal of an unwieldy GST that currently yields about $28 billion, while the surplus of $10 billion could be used, first, to reduce the personal income tax burden on the working poor and those on fixed incomes. This tax relief could then move up the gross income tables progressively, provided our federal government is prohibited from spending FTT income to finance foreign wars, mass destruction and human misery instigated by the US/Israel or others.
Assuming a Canadian population of 30 million, the provinces would each receive their proportionate share from the 30% provincial total of $38 billion.
BC, with its population of 4 million would receive roughly 4/30ths of $38 billion – or 13%. This would amount to approximately $5 billion. With a population of 10 million, Ontario would receive one-third, or approximately $12.5 billion, etc.
Such a boost in revenue would allow provincial governments to increase funding for health care and education by up to 25% and delay their creeping privatisation until, with public input, new policies are developed.
Payments to all Canadian municipalities, amounting to 40% of $125 billion – or $50 billion – would be handled via the appropriate provincial government. Such funds should be transferred without deduction of fees or charges, without reduction of existing municipal funding or programs and using existing Finance Department personnel.
For example, using the census-based per capita formula, the Finance Minister of BC would receive an additional 13% of $50 billion - $6.5 billion - for re-distribution to BC municipalities. The Finance Minister of Ontario would receive one-third of $50 billion, close to $17 billion for transfer to Ontario municipalities, etc.
On this basis, a small city of 30,000 people anywhere in Canada would receive approximately $1,500 per head of population, or roughly $45 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.
The savings on usurious interest, plus the surplus, would increasingly finance the improvement of vital community infrastructure such as medical and social services, water and sewage treatment plants, the expansion of library facilities and the construction of cultural, creative arts and sports centres.
It would also allow the build-up of local Emergency Reserve Funds for unexpected needs such as natural disaster relief. Local governments could respond immediately to their community’s needs for shelter and food and would not have to be totally dependent upon hand-outs from increasingly cash-strapped federal and provincial governments.
We would need to ensure that municipal governments maintain an emphasis on the creation of capital assets, with FTT funding being used 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 debt and 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.
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 administered 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 $10 million to the benefit of the local hospital and $5 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.
Why the lower percentage of funding to federal and provincial governments?
The intention of the Milligan Tax is to ensure that the principal beneficiaries of FTT revenue are Canadian citizens, local governments, local hospitals and local schools/colleges via the appropriate city councils and boards.
Federal and provincial governments have other constitutionally-demanded methods of creating the nation’s money interest-free. If we are foolish enough to allow Ottawa or the provinces to gain unlimited access to FTT revenue there would be no incentive for the federal government to desist from engaging in hate-filled foreign wars created by the US/Israel or others. There would be no incentive for either of them to correct wastage and corruption or the iniquities of a ‘borrow, sell-off, tax and spend’ debt-money system that has placed enormous profit and power in the hands of a few private bankers at the expense of millions of Canadians.
It is not our politicians but money-men – from international bankers at the Bank for International Settlements in Basle to unelected City Treasurers – who now make the important decisions that govern our lives.
Canada can never consider itself a ‘sovereign’ nation if it does not control its own money and credit, as required by our Constitution. The fact that we have allowed this most vital of constitutional rights to be usurped by private moneylenders is in direct conflict with Section 91 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)
Wouldn’t this FTT proposal cause inflation?
The important point to understand is that FTT funds are not new money; they are funds already in existence created via computers and transferred around the world in nano-seconds via satellite as an electronic impulse by a financial institution, with the DTCC as their final destination. This money is already in circulation, originally created out of nothing for the principal benefit of the money lenders
The major component of inflation is compounding interest. It adds nothing to the quality of the product, it adds only to the cost at every level, from raw material extraction to retailing. Furthermore, 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 once great nation – and the current needs at this level are monumental.
We can be sure that Big Money will persuade some economists - and orchestrate a highly monopolized media - to scream warnings of “inflation!” To address such unjustified concerns FTT funds should first be used to pay down existing interest-bearing debt; a move that would be strongly deflationary. One might ask any opposing banker to explain how a .1% FTT can be considered inflationary, while his bank’s 19% credit card rate is not!
Creating new money and spending it too fast can certainly prove to be a formula for inflation but so is allowing private bankers the power of unlimited money creation with high rates of compounding interest on private loans to governments, corporations and individuals.
There are further counter measures that can effectively be brought to bear on this issue of inflation reduction:
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 unconstitutionally from private banks.
b) In order to curb the power of private banks to uncontrollably multiply the money supply through debt and usury, 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 the late Economics Professor Emeritus John Hotson (R.I.P), simply move federal government balances from private banks to the Bank of Canada.
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 the financial sector’s extremely well-funded and powerful lobbyists is inevitable. However, the numerous advantages of the Milligan Tax 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. In reality, the debt solutions we so desperately need are most unlikely to be initiated by federal or provincial governments unless first kick-started at the personal and community level.
It is for this purpose that COGs – – and other similar community-based organizations are being formed. Their principal focus will be on public education around money/debt and the promotion of the FTT as a first step back toward fiscal and monetary sanity.
For the required federal legislation to be passed, such community-level education and citizen mobilization will be critically important. Fortunately, we have never in history had a greater ability than we have now for broad communication with taxpayers/voters, politicians, economists and think tanks. E-mail, faxes, videos, blogs, on-line discussion groups, community polling, home-based publishing and good old-fashioned pamphleteering offer immense potential. 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 and the Goods and Services Tax. It’s hard to imagine the myriad benefits that would accrue to present and future generations.
If every nation in the world is in deep debt at the same time, where is all the money?
Common sense dictates that it must be hidden somewhere within the banking/investment/insurance systems. The Milligan Tax is the simplest and possibly the only way to begin transferring such money back into the public purse without hardship to any segment of society.
We face desperate times indeed unless we give immediate consideration to a whole new monetary/fiscal/economic model. The introduction of FTT would be a step in the right direction and perhaps the only strategy capable of facilitating a major course change without creating chaos.
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 powers’. Given the sheer volume of the US financial markets it’s likely that American tax payers would be among the first supporters. Once popularized in Canada - given FTT’s enormous fiscal and economic benefits – it would probably be hard to stop other nations in the EU, South America and the APEC 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 critical wording was not covertly changed between the time of the Bill’s introduction and its final ratification.
What are the possible disadvantages?
First, the ‘trio-poly’ of Moody’s, Standard & Poor and Dominion (the Coca Cola/Pepsi/Schweppes or the GM/Ford/Chrysler of the credit rating business) could be ‘influenced’ by the international money lenders who control them to lower Canada’s rating and thereby move interest rates higher on Canadian government loans. There are, however, powerfully creative ways of countering such a move if the political will exists (see some of them above, under ‘counter measures to inflation’).
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 all elected politicians to support this hopeful and totally viable FTT proposal. Here are other practical steps you can take: