by Daniel Wortel-London

Private planes are one example of carbon-intensive luxury goods. (Hush Hush, Flickr)

Even as nearly a billion people go hungry every day, the wealthiest one percent of the world’s population is purchasing ever-more expensive toys. Yacht sales grew by an average of 22 percent per year between 2014 and 2022. Private jet sales have boomed since the start of the COVID pandemic. The global luxury jewelry market, already huge at $56.5 billion, is expected to grow 8.2 percent between 2023 and 2028. And the luxury car market is projected to double from $1.17 trillion to $2.55 trillion over the same period.

This kind of luxury consumption can be criticized not only on ethical grounds, but also on scientific ones. Luxury transportation contributes disproportionately  to humanity’s carbon emissions. Jewels and furs produced for the wealthy lead to biodiversity loss and air and water pollution. Add the economic injustice and health damages faced by the millions of men, women, and children who work to produce these luxury “goods” and it’s clear that luxury consumption is a powerful driver of social and ecological “bads” across the world.

To help curb the excessive consumption of the uber-wealthy, CASSE proposes adoption of a Luxury Cap Act (LCA) by the U.S. Congress. It benefits from successful precedents. Canada, for example, passed a Luxury Tax applying to new cars, boats, and airplanes in 2023. Connecticut and other states levy sales taxes on luxury clothes and vehicles. Even the federal government passed an excise tax on boats, aircraft, jewelry, and furs in 1990, although these provisions were repealed during the Clinton administration.

As environmental damage and inequality mounts, conspicuous and wasteful consumption by the wealthy is a logical and defensible target for action.

The Full Cost of Luxury

What is the cost of luxury? Transportation offers instructive examples. For starters, aviation is responsible for around 3.5 percent of global warming, but more than half of that damage is caused by only one percent of the world’s population.

The wealthy’s outsize impact from flying results from several factors. First, they fly most frequently, with 70 percent of flights taken by just 15 percent of people. In addition, wealthy people often travel first class, leaving a carbon trail as much as seven times larger than the economy-class passenger’s. And of course many wealthy fliers have their own jets. These produce 5–14 times more pollution per passenger than commercial planes. In 2020, private flights in the USA pumped as many tons of greenhouse gases into the atmosphere as all bus travel nationally.

Jewels arrive to market at great social and environmental cost. (International Gem and Jewelry Show, Flickr)

Meanwhile, luxury yachts emit up to 1,500 times as much carbon dioxide as a family car. In the words of the environmental news outlet EcoWatch, they are “by far the worst asset to own from an environmental standpoint.”

Luxury automobiles are similarly wasteful: Compared to standard vehicles, they emit more carbon and use uncommon materials like rare woods. One study found that luxury vehicles produce, on average, 50 percent more carbon emissions than their conventional counterparts.

Carbon pollution isn’t the only harm caused by luxury consumption. Take jewelry, for example. Silver and gold mines cause enormous damage to ecosystems. Nine percent of the Amazon forest was lost between 2005 and 2015 as land was cleared for mining operations. Mining of precious minerals also contributes to air pollution via emissions of atmospheric mercury. These mines also use toxic chemicals like cyanide and sulphuric acid to separate metals from ores. The social and ecological costs of these operations can be horrific. In Nigeria, 400 children were killed in 2011 due to polluted drinking water from mining operations.

Then there’s luxury fashion. A recent study of nine luxury brands—like shoe and bag vendor Prada and general luxury retailer LVMH—found that the companies emitted 13.5 million metric tons of C02 to create products in 2021—as much as the economy of Lithuania. Luxury brands are often worse than their mass-market competitors at addressing labor exploitation in their supply chains. And the chemicals used to process luxury furs such as mink and sable contribute to water and soil contamination. In fact, fur clothing has the highest environmental impact of any textile.

These are just a few of the ways that luxury consumption damages the environment. The list could easily extend to a broad range of luxury goods and services from elite resorts and spas to private helicopter and airline tours. None of these indulgences is necessary, and all are harmful. Of course, curbing luxury consumption won’t solve all our environmental problems. But reining in these excesses would be a good start toward creating a more sustainable and equitable world.

The Luxury Cap Act

The Luxury Cap Act (LCA) is meant to curtail the production and consumption of socially and ecologically harmful luxury goods and services. It will empower the Treasury Department to impose taxes on these goods and services, a tried and true method of lowering demand. The LCA is designed to be both a stand-alone bill and a component of the larger Steady State Economy Act.

Following a short title, findings of Congress, and definitions, Section 4 of the LCA targets frequent flyers. It imposes an escalating tax beginning with the passenger’s second flight and increasing with each flight thereafter in a calendar year. The Federal Aviation Administration will be responsible for creating the database to track flight frequency for implementing this section. Exceptions are made for flight crews, passengers and crew on emergency and public service flights, and similar persons who need to fly regularly. Section 4 serves as a complement to CASSE’s broader Forgoing Flights for America the Beautiful Act, which proposes a broader curb on flying and airport expansion more generally.

Yachts like these are symbols and drivers of our ecological overshoot. (Frans Berkelaar, Flickr)

Sections 5, 6, and 7 impose taxes on luxury aircraft, boats, and passenger vehicles. The tax will equal ten percent of the price of any vehicle listed at more than $557,000 (in the case of aircraft), $223,000 (boats), and $70,000 (passenger vehicles). Aircraft used for seeding, fertilizing, and training, and boats used for commercial activities, will not be subject to this tax.

Sections 8 and 9 address furs, clothing, jewelry, and accessories like handbags and watches. Both sections impose taxes equal to ten percent of retail price greater than $10,000. Section 10 provides for adjusting these taxes for inflation, and Section 11 clarifies the provisions governing taxation in cases when luxury goods are leased rather than sold. This section reflects congressional precedent: in 1990 Congress passed the Budget Reconciliation Act of 1990, which levied taxes on furs and luxury clothing, as well as on luxury yachts, cars, and planes. Most of those taxes were gradually eliminated by Congress, but the LCA re-instates them.

The Luxury Cap Act may be revised pursuant to reader responses and the input of CASSE allies.

The excesses of the one percent cannot be allowed to degrade our planet any further. Such excesses constitute a problem serious enough to warrant federal legislation. Thus the Luxury Cap Act. Those who are not limited in lobbying (like a 501(c)(3) non-profit organization) might consider bringing it to their representatives in Congress.

Daniel Wortel-London is a Policy Specialist at CASSE.

The post Introducing the Luxury Cap Act appeared first on Center for the Advancement of the Steady State Economy.

Image by Gerd Altmann from Pixabay

“Let’s face it, the universe is messy. It is nonlinear, turbulent, and chaotic. It is dynamic. It spends its time in transient behavior on its way to somewhere else, not in mathematically neat equilibria. It self-organizes and evolves. It creates diversity, not uniformity. That’s what makes the world interesting, that’s what makes it beautiful, and that’s what makes it work.”

Donella H. Meadows, Thinking In Systems: A Primer

The Mont Pelerin Society was founded in 1947 by Friedrich von Hayek. The tenets of its faith can be described best in the words of David Harvey in his book ‘A Brief History of Neoliberalism’.

“Neoliberalism is in the first instance a theory of political economic practices that proposes that human well-being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterized by strong private property rights, free markets, and free trade.”

Whilst it took a few decades for its proponents to win their arguments, since the 70s it has formed the backbone of political and economic thought that has driven public policy globally through national governments, and institutions like the IMF and the World Bank.

Mrs Thatcher was enamoured by Hayek and his book ‘Road to Serfdom’ which she read as an undergraduate at Oxford. It is reputed that at a Conservative party policy meeting, she took her copy of another of his books, ‘Constitution of Liberty’ from her bag, slammed it down on the table and declared, ‘This is what we believe’. From there, everything is history. Her insistence that ‘There is no such thing as public money, there is only taxpayers’ money’, provided the modus operandi for successive governments of all political stripes to implement policies that reflected Hayek’s political and economic beliefs.

It led to, as David Harvey also went on to say, ‘ the financialisation of everything … A power shift away from production to the world of finance’. It has overseen over those same decades the dismantling of public services, social security, deregulation and the breaking of labour and the unions, as well as huge increases in poverty and inequality.

Inevitably, this toxic philosophy has made the rich elite richer in what can only be described as an ongoing wealth grab. It has been responsible for the exploitation of some of the poorest countries in the world, who not only have had to watch as their own resources are plundered by Western corporations, but also have had to watch as their own existence is threatened by a climate crisis, not of their own making, but which keeps the profits of global corporations flying high.

Let’s fast forward to the present, where the consequences lie before us in all their horror. With a particular emphasis here on the UK and the effects of neoliberal dogma on the lives of citizens, which has resulted not just from decades of such policies, but the last 13 years of Tory austerity which have done so much damage to the public and social infrastructure meant to provide the foundations for a functioning economy and societal well-being.

Analysing the effects of austerity on the population, a study compiled by the Glasgow Centre for Population Health and the University of Glasgow (and debated in the House of Lords) ‘adds to the growing evidence of the profound and deeply concerning changes to mortality trends observed as a result of UK Government economic ‘austerity’ policies. These have slashed billions of pounds from our public services and social security system with devastating impacts. Without support, people have been swept up by a rising tide of poverty and dragged under by decreased income, poor housing, poor nutrition, poor health and social isolation – ultimately leading to premature deaths…’

The response to the pandemic which began in 2020, highlighted as nothing ever could, the effects of cuts to public spending on public health systems and social care services, and the inhumane effects of welfare reform on working people and some of the most vulnerable in our society. The human reality is shocking.

Last week’s Autumn Statement exposes not just that cruelty, but also highlights the false narrative upon which that cruelty is meted out by politicians, and the economic dogma which directs public policy and spending.

Jeremy Hunt was clear; ‘There’s no easy way to reduce the tax burden. What we need to do is take difficult decisions to reform the welfare state’. His Chief Secretary to the Treasury was even blunter, people must ‘do their duty’, get back to work, sick or not, or face the consequences, lose benefits. As if these were choices to be made by the sick or those struggling with their mental health, and not political choices borne of a political class that has lost its way.

As Ayla Ozmen at the Charity Z2K commented, ‘There is no evidence to support the idea that there are fully remote jobs available that are suitable for these groups. This is simply a cut for those of us who become seriously ill or disabled in the future and need the support of social security, and risks worsening people’s health and pushing them further from work.’

Frances Ryan, disability campaigner and journalist at the Guardian put it even more starkly. ‘The Tories are back monstering people on benefits.’ This was nothing to do she said, ‘with saving money’, but was, in fact, ‘performative cruelty’, ‘nothing more than a raid on the income of those who already have the least whilst being demonised by those with the most.’

We have, as she said, been here before. People died. It can be no accident. This is a deliberate choice by a currency-issuing government to inflict harm on those least able to defend themselves, and to be frank, those who have suffered more than their fair share of the politics of austerity and cuts to public spending.

The Spectator predictably chose a divisive headline for this month’s publication, ‘Britain’s welfare system is out of control,’ writing that, ‘the number of Britons claiming sickness benefits – 2.8 million – will still keep rising to 3.4 million by the end of the decade. Reversing this trend, it seems, is a political impossibility.’ 

The more accurate headline would have been, ‘Tory Government out of control’, since the reality is that government austerity lies at the heart of an ailing nation. A government displaying psychopathic tendencies couching its plans in the language of reducing debt, taking a responsible approach to public spending, and rewarding hard work. Language reminiscent of George Osborne in 2012 when he commented in a radio interview that it was, ‘unfair that people listening to this programme going out to work, see the neighbour next door with the blinds down because they are on benefits. The nasty party isn’t back, it never went away. It is depressing to note, equally, that the opposition, in its rhetoric about fiscal discipline and growing the economy to raise the revenue for public services, promotes the same lie that drives their proposed policies.

Household budget economics rules the roost. A narrative that is designed to deceive by shifting responsibility away from the government, to create an ever more divided society, whilst at the same time shovelling more and more wealth upwards as data published by Oxfam at the beginning of the year demonstrated. That the richest 1% of Britons hold more wealth than 70% of Britons.

This is a government already using its currency-creating powers to serve wealth, but covering its tracks by using a false narrative about how it spends, so it can justify cuts to spending on serving the public purpose. Whilst the poorest must ‘do their duty’ and sacrifice themselves on the pyre of austerity, this as the evidence shows, does not apply if you are wealthy, a corporation, or an arms manufacturer selling death and destruction. The, ‘there is no alternative’ slogan applies only if you are poor, hungry, homeless, old or sick. See the contradictions?

It’s not much better in the Labour camp.

Whilst Wes Streeting, the Shadow Secretary of State for Health & Social Care, on the same neoliberal wavelength, proposes an open door for the private healthcare sector, (ignoring the fact it’s been open for decades, in fact since Tony Blair), he claimed a few weeks ago that ‘the money simply isn’t there to continue NHS spending because the Tories have trashed the public finances.’

Streeting, like his Labour colleague Rachel Reeves, promoting the myth that there is a finite pot of money and the Tories have spent it all, which will require some fiscal discipline, which will in turn involve not being able to afford free school meals for all children, or a functioning NHS.

‘I’m not going to be able to magic money out of nowhere’, said Rachel Reeves with her serious, former economist at the Bank of England face. As if she couldn’t possibly know how government really spends. But in a horrible game of, ‘we’ll be fiscally responsible one-upmanship,’ she is effectively denying monetary reality and condemning people to more hardship. Well, not the corporations of course. They’ll come in for some star partnership treatment. Labour’s proposal for a ‘partnership’ with business, as if somehow it doesn’t have already the monetary tools it needs to create an economy that works for everyone, not just those that have sufficient power and influence to swing the rules in their favour.

Next up, we have Gordon Brown, a former Chancellor of the Exchequer for Labour, who just prior to the Autumn Statement, and in the same vein, advocated partnerships with big business and charities to address the growing poverty that has arisen out of the politics of Tory austerity and neoliberal dogma.

Heady words like Corporate Social Responsibility were banded about by the man who advocated deregulation and a light-touch government, praising the City of London for its achievements. All just before the financial sector came crashing down around our ears and the government was forced to bail it out, using those elusive currency-issuing powers the current government is denying long-suffering citizens. His light touch led to the politics of austerity by the Tory government, the dismantling of public and social infrastructure, cruel welfare reform, food banks and growing homelessness, all based on a false narrative of how government spends.

Dear Gordon, we don’t need big business or charity to sort out this avoidable disaster. With 3.8 million people, including one million children, destitute in Britain today, what we need is a government that is politically motivated to change things for the better to give people the tools they need to live productive lives that enrich their existence and not condemn them to a life of penury. We need politicians to embrace how money really works, not the lie that passes for reality.

While Gordon Brown calls on companies to step in, the new Chair of the Charity Commission vowed to crack down on ‘squeamish charities accepting donations’ and accused wealthy British citizens of ‘not pulling their weight when it came to charitable giving.’ A little bit of philanthropy does you good, apparently, not to mention reducing the tax bill.

Putting aside the proposed crackdown on squeamish charities in an era when ethical and moral considerations have been thrown out of the window by a political class more concerned with serving the dictates of the US hegemon and its corporate masters, anyone demonstrating such values should be praised not castigated.

As we have said many times before, charities are a failure of government. Their purpose is to mitigate a rotten economic system designed to exploit and impoverish some people and enrich others. Whether charities like the Trussell Trust feeding hungry people or the myriad charities supporting the homeless living in temporary accommodation or on the street, they function as an alternative to state involvement in serving public purpose.  This was the point of Cameron’s ‘Big Society’ to shift responsibility into the wider society.

Such charities are now struggling to meet growing need as a result of government-imposed austerity that has ironically led to cuts in their funding. This is a government-created vicious circle deriving from the politics of austerity, the demonisation of deficit and public debt, and a market-driven neoliberal ideology that favours a small state, with charitable provision of welfare, and privatised public services acting not in the interests of citizens, but rather the state acting as a cash cow for private profit.

It also derives from a toxic ideology of personal responsibility designed to absolve the state from any duty of care for its citizens. This has involved blaming and shaming people for what we are told is personal failure. Just what the neoliberal doctor ordered to keep citizens poor, downtrodden, divided and struggling to survive by forcing them to sacrifice themselves to preserve the economic status quo for the already excessively wealthy.

A status quo which is transferring more wealth into the hands of corporations and wealthy individuals who, in turn, are then invited to do their bit and donate to charity. As if people are dependent on their philanthropy, their goodwill, on their largesse to keep body and soul together. A fabrication that rests on the false notion that the government needs taxes to spend.

This narrative is constructed on the lie that government spends like a household budget, that its sources of funding are taxation or borrowing. Economic well-being depends on neither. It depends on a government that puts the needs of citizens as a priority to create a functioning economy and a healthy, thriving society. That in turn depends on the political decisions a government makes as the currency issuer, imposer of taxes and legislator. Decisions about how real resources are distributed and to whom. In fact, we are talking here about the sort of society we as citizens want to live in.

Instead, we are told that our economic and social well-being is dependent on the state of the public finances, whether the economy is growing enough to afford public services, or for those on the left, how much we will need to tax the wealthiest to pay for public infrastructure.

We are living a destructive lie that is readily promoted by a self-serving media. The daily round of nonsense that passes as monetary reality.

Whether it’s Philip Inman in the Guardian suggesting that since the days of cheap investment credit are over, chancellors must find a different source of revenue, namely increased taxes, The Times implying that a lower borrowing bill will give the Chancellor some ‘fiscal headroom’, as if he’s suddenly found a few more quid in the pot to spend or deliver a tax cut because of it. Or indeed, Andrew Neil, who explained to his attentive audience in the Daily Mail, that ‘the bond markets are where governments go to borrow money from investors […] when their spending plans exceed the amount they are able to raise in tax.’ Apparently, we need to ‘free ourselves from their tyranny.’  ‘The era of big government, cheap money and untrammelled borrowing is over’ he said.

Presenting the public accounts as if the government were a business or private individual that has to cut back in hard times or borrow to fund its spending because it has a limited pot of money. The Treasury gnomes working hard to balance the books, find some spare money down the back of the sofa, rob Peter’s department to pay Paul’s, or beg the capital markets for a loan. All rubbish.

As Professor Bill Mitchell notes, ‘debt issuance is a redundant part of the process… a hangover from past currency arrangements.’ Clearly the media hasn’t caught up. This is the con that drives public policy decisions and leads people to believe that government’s primary role is to balance the accounts, rather than deliver a functioning, stable and sustainable economy, the corollary of which is societal well-being.

The bottom line is that lower interest rates for government borrowing make no difference at all to the capacity of government to spend, or indeed cut taxes.

The cost has been high and will continue to be. Neither of the main political parties frames its role as an initiator of public purpose, rather they think they are Dicken’s Mikawber borne again. We have two political parties obsessed with fiscal discipline, whilst at the same time aiming to shift responsibility into the wider economy and society through partnerships with business or charity. Full on neoliberalism. Full on Hayek vision for government and society.

This is how the government and ones in waiting, and media lackeys like Andrew Neil keep the public trapped in a lie about how government spends, by presenting government finances as a household budget. It serves as an ideologically driven justification for cuts to public spending, not because it’s necessary, but to keep the neoliberal stranglehold in place which is about dismantling public infrastructure and enslaving citizens. This is what Andrew Neil supports. This is the big lie that distorts reality and will ultimately be the death of us if we fail to grasp its fundamental importance to our survival.

According to this narrative, money is a scarce commodity. Which it is not. The role of government is not to balance the books, but to serve its citizens. To decide how real resources are distributed and to whom, through its spending, taxation and legislative policies. It should be pretty obvious by now, who the current beneficiaries are, the corporate estate, the military machine, and those with excessive wealth, power and influence.

This distribution is a political choice driven by ideological aims and it is regrettable that those seeking progressive change are still caught like rabbits in Mrs Thatcher’s headlights. There is a lot at stake. A liveable planet where world citizens have their needs met and crushing poverty and inequality cease to be the norm. When a Labour spokesperson justifies Rachel Reeves watering down her green transition pledges because of the state of the public finances, and that fiscal rules were more important than any policy, you know that without a doubt we are in serious trouble.

What happens in the wider economy starts at the top with the government and flows down resulting from its spending, taxing and legislative policies. We need to understand that the state of the public finances is an irrelevant sideshow and that the real test is what government has done to ensure a functioning and balanced economy, that respects the planet and the human beings that depend on it for their survival.

We need as a matter of urgency to understand what a functioning democracy, with an informed public no longer willing to throw themselves on the pyre of harmful austerity could achieve. The art of the possible to save humanity from a political class intent on serving the interests of a small group of people, not to mention their own interests through the revolving door. As Jason Hickel notes in his book ‘Less is more: How degrowth will save the world.

“When people live in a fair, caring society, where everyone has equal access to social goods, they don’t have to spend their time worrying about how to cover their basic needs day to day – they can enjoy the art of living. And instead of feeling they are in constant competition with their neighbours, they can build bonds of social solidarity.”

It is currently no more than an aspiration for change, but the struggle must continue to make it a reality for humanity.

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The post The empire of lies (and its consequences) appeared first on The Gower Initiative for Modern Money Studies.