The leftist income tax

"From each according to his ability, to each according to his needs" is a slogan popularised by Karl Marx in his 1875 Critique of the Gotha Program. Who is supposed to implement this in a socialist society? Naturally this has to be government, otherwise who is to establish ability and who will establish need. If people have to go to court for everything, such a society will spend most of the time in court. It demands special people with impartial ability to judge ability and need, almost a magical quality. Such people don’t exist by the way. 

What kind of slogan suits a capitalistic society? If I have to invent it, it would be “to everyone at the same price”. And who sets the price? That of course is market, demand and supply. Capitalistic society has no need of any government, except the need to ensure security of markets and to ensure that markets are fair. The capitalistic society fails to comprehend public goods.  Without pricing, it can’t understand the value or relative value. The irony is that what capitalism produces is essentially a pubic good, a fair market. Everywhere markets emerge, it creates equality of access through pricing. We can think of pricing as the impartial ability to judge ability and need and that exactly is what socialism requires.  Capitalism in essence is the best implementation of socialism, the one that actually works, fairly. 

What are brands and what is insurance, both products of capitalism? Isn’t branding trying to get from each according to his ability to pay and insurance trying to give each according to his needs? Socialism is a vision of society better implemented through capitalism. A powerful capitalistic government is then a contradiction in terms. Capitalism doesn’t wants anything from government, it is just a necessary evil to ensure security. 

The question that bothers me in the capitalistic society is that of income tax. Income tax comes straight from the socialism text book - “from each according to his ability”. Why do we have income tax brackets and why is it based on a percentage? An equal society should share the cost of running the nation equally. If government is a public good, why should some people pay more? The right tax in the capitalistic society may be called Nation Building Fund. Whatever money is needed by the government beyond its sources of income should be divided equally between all the people of the country. During the financial year 2017-2018 the personal income tax  collected was 4,19,884 Crore.  Number of people who filed income tax in the same period was 6,32,50,002. India has a population of about 1.3 billion with roughly 40% children below 18 years. Number of people in the country that enjoy the benefits of living in a country are around 780 million. The number of people who pay income tax in India is around 5%. On average every tax payer paid around Rs 66 thousand. If all the capable people of India (not children) had to contribute the same amount, per person contribution would come to Rs 5383. It will actually reduce the income tax paid by people in the smallest slab from 10% @ 2.5 lakhs i.e 25 thousand by 80%. Thus every tax payer on average is carrying the burden of 11.3 non tax paying Indians.

Rs 5383 per year Uniform Nation Building Fund sounds very good except when we look at the definition of poverty in India. India has some 20% of the population below poverty line which is roughly around annual income of Rs 10,000.  Rs 5383 is more than 50% of the annual income of everyone who is under poverty line. 

I understand that many people cannot afford to pay a Uniform Nation Building Fund contribution . That is fine. What I don’t understand is that 95% of the Indian population which enjoys leftist  benefit, however meager they are and still use the word leftist as a slur? I hear the references to swabhimaan allover the social media, but doesn’t swabhimaan applies to paying for what you receive from the country? Indians have been protesting and vandalising public property for as long as we have become a country, but suddenly people are asking for recovering damages for destruction caused to public property. That is good start and I love it. We should have started earlier. Irony is that statistically only 5% of the people deserve to be asking for it. Rest 95% had no contribution to building that public property in the first place. Why so much gap between the words and reality? 

I love the management principle that one can only manage what one can measure. It is time we start the Uniform Nation Building Fund and Nation Building Loan Fund. Our income tax contribution should be split between these two funds. Rs 5383 goes to Uniform Nation Building Fund and any excess goes to Nation Building Loan Fund which gives nominal interest on that excess paid tax. If we pay less than Rs 5383, then the balance comes from Nation Building Loan Fund as a loan at the same nominal interest. If we don't pay any income tax, then all of it comes from the Nation Building Loan Fund. Let’s just calculate this for few years (actually, we can do this calculation with the given tax data) and see how are people doing.  May be government can make name tags with percentile scores (0-100) or some platinum, gold, silver, bronze stuff and call them swabhimaan tags. That will be a good way to build the swabhimaan of the country. I am sure many people who are poor by income tax standards will pay Rs 5383 to buy their swabhimaan. If swabhimaan  sells, use it.  Why take away the opportunity of taking pride in their contribution to nation building from people?  Why hide the interdependence of people from each other and make them enemies, if we can make them understand and align towards nation building? 

We don’t need to go to history to look for swabhimaan, we can use swabhimaan to build the country and create swabhimaany Indians.  

Reservation by Religion vs Reservation by Constitution

When we talk about reservation, most of the anger comes towards reservation by constitution. This is the 21% reservation for scheduled castes and scheduled tribes in educational institutions and government jobs. The other reservation which is the reservation by religion is never called out. The reservation I am referring to is reservation by caste, not post-constitution but pre-constitution, the one that we lived with since inception of the universe according to mythology. If we date it according to what we know when Vedas were written, it will be some 3000 years ago. Hinduism is a religion based on inequality and 100% reservation based on caste. Son of priest can become a priest and son of a ruler can become a ruler. This is pure 100% reservation of education and profession by caste. 

Thanks to British who opened up schools and universities that other castes who could afford education could finally get it. Assuming people end up having kids by the time they are 25, the 100% reservation by caste sanctioned by religion lasted some 120 generations. This makes the religiously reserved castes the biggest beneficiaries of reservation in the whole of known human history.  The constitutional scheduled castes by comparison are just 3 generations old and that too taking just the 21%.  Am I missing something here? 

The good part is that some of people from the religious reserved castes after 120 generations of 100% reservation are against 21% reservation for those people who were denied the education and opportunity to grow for 120 generations because now they believe in equality of opportunity for everyone. This is wonderful news! Finally we are past the inequality advocated by Hinduism and questioning the inequality created by constitution inspite of promising us equality. This is a conversation worth having. 

Let’s try to deconstruct the equality of opportunity. India abolished inheritance tax in 1985. Before that India had 85% inheritance tax through constitution. Perhaps the idea was to bring about social equality through equality in opportunity by levelling the economic playground. If the unit of nation is an individual, his tax is individual, his vote is individual, his crimes are individual,  then it seems appropriate to assume that his accumulated wealth is individual too. Why should children get the benefits of work done by their parents? In short, inheritance tax makes sense. Alternatively, the unit of nation is actually a family and not an individual. In which case it makes sense for the family to appropriate all the wealth i.e no inheritance tax. (As a side note, this will be an excellent way to discourage corruption if family inherited property as well as crimes and their punishments). If the unit of nation is a family, then the unit of reservation should be family as well.  This fits nicely with the idea of constitutional reservation. Reservation is bad when looked at from the equality of opportunity of an individual, but it is fair given the economic reality of family as unit of nation and opportunity. The idea of having equality of opportunity at individual level but conservation of property at family level is not equality, it is simply an abuse of notion of equality. We are comparing apples with grapes here. If we believe in meritocracy, we have to argue not only for abolition of reservation but also bring around high inheritance tax. If we believe in right to inheritance, we need to accept the economic consequences of it and support reservation. Without this balance, we are simply asking formula one cars and cyclists to compete on the same track in the name of equality. This is pretty far from equality of opportunity, on the contrary,  it is a mockery of meritocracy. What we are comparing in this example is not merit, what we are comparing is access to resources. 

Apologies for being a “castehole”: explaining world through caste, but I feel caste is better understood through economics and not religion. It is just the economics of caste that make it appear as a construct having some predictive value, but the actual economics is never discussed or debated. Simply abolishing reservation will not bring equality, it will just widen the economic gap and the explanation will be caste. Not abolishing the reservation creates the feeling of undue privilege, hatred and still nurtures the thinking on caste lines. There is no version of this in which caste doesn't win.  We either have religion reserved castes or constitutional reserved castes, but reserved never the less. For some time now, we also have some overlap where religion reserved castes are also constitutional reserved castes. Looks like the idea that unites us is also the same idea that divides us: reservation. 

Slavery world over has always been explained through laziness of slaves and their lower moral character. Colonialism was explained as white mans burden to librate the natives. Explanations explain and hide. Words reveal and conceal. Language unites and divides.  If there was no caste or at least no reservation by caste pre-constitution we would never have had the need for reservation by caste post-constitution. We are all biological neural networks, we do as we are trained, except we have the power to intercept our learned responses with reasoned responses. We can learn from each other, converse and correct our biases. It takes time and as Montesquieu said “Success in majority of circumstances depends on knowing how long it takes to succeed”. Sometimes generations. Caste is both social and economic phenomena and we need to fix at least one side to fix the other side. 

Who are you?

The answer is some name and a story. Every society invents a story of themselves and their enemies. I say invent because Big Bang and Dinosaurs appear in no one, though we have enough evidence to prove that both of them happened. My best guess is that life is a virus, some core fragment of DNA which mutates giving rise to species. Sex works like a checksum to ensure that mutations can be recombined back to the core, resulting in birth. Death is main mechanism to ensure that evolutionary mistakes are not long lasting. Of course that is not the kind of story we are talking about. We are talking about the story of God and how he created men and women and what to do with neighbours etc. Something straight out of children’s story book and not a combination of philosophy, computer science and genetics. 

Let's be clear that all stories are false. They are precisely false because no one knows what the hell are we doing on this planet in the middle of no where, who created us or why.  But stories are good. Once enough people agree to a story, it becomes truth. Sometimes it takes more than a story to make it a truth. It needs monuments like temples and places of worship, things people can see around them. Sometimes it takes posters, flags and little symbols which people can keep in their homes. It also needs fashion statements, like beard or turban or cap or thread or necklace or uniform or something like that, so that you can carry your stories with you, everywhere you go. It takes festivals to remind to yourself and others of your existence and your difference and your special story. It needs loud music and songs to make it easy for people to remember the story and to force others to live with its noise. Being able to make money out of your stories cannot be understated. Money helps in giving livelihood to people whose sole job is story repetition and propagation.  The recent tools include WhatsApp messages, Facebook, ringtones, caller tunes, Display Picture, back glass of the car, door, etc. Story exists on its exposure, in minds of other people. Sometimes it takes violence, to kill others to assert your story over other stories, to teach others a lesson on not to mess with your story. The more other people need to adjust their lives to your story, the stronger your story becomes. Stories need investment and time and faith in face of difficulty. Story can only give so much power to you as much you are willing to invest in it. 

One precondition for the story is that it should include creation. Don’t worry about its stupidity. Every story demands faith and something is better than nothing. Who gives a damn about the specifics of the story? It is just means to an end. The stupider the story, the more faith it requires, the stronger it binds the people. The reality is unbelievable and uninteresting. The more you try to discover, more you get lost. The healing power of stories comes from faith not believability. It is a container, a placeholder. Here is where the buck stops. Social animal knows his own inadequacy and feels safe in the herd. We are the figment of our own imagination. We are a story, invented or borrowed or inherited. When many people share a story, it is called identity. Identity maintenance needs reinforcement, reciprocation, replication. It needs real hard work. 

Here are some ideas:

• Sun was horny and he wanted to marry the most beautiful princess in the whole world. King knew about this and kept the princess in a cellar, away from Sun. She used to come out only at night. The god of clouds was friend of Sun and he wanted to help him. One evening, he cluttered the sky with so much clouds that the king thought it is already night. When the princess came out, the clouds vanished letting the Sun take a look at her and she got pregnant by his sight. Knowing what has happened, the king threw the princess out of the kingdom. The son of the princess started a new kingdom. The rulers of that kingdom were called X. 
• The dark clouds had gathered and world was becoming a dangerous place to live. The wise men knew that something wrong was about to happen. The enemy was at the gate. They looked at the sky and heard the God say “Bring the water of seven rivers in one bucket and make the strongest bull drink it”. So they did as they were told and when the water was finished, instead of a bull they saw a warrior in its place. The great warrior defeated the enemy. The sons of that warrior are called X.
• I especially like the creation story which works through declaration. God was upset with the way the world has become and it was not going according to the plan. Then God said, let there be X and X was created from the earth and fire and God himself put breath it him. Then he told X to save the world, create a temple, give the offering and spread his message.  
• There was a King who liked to hunt elephants. One time he went to jungle with his army to hunt and found an elephant which was really huge and strong. He wanted to kill it. As the army came near, the elephant killed all his army. Then he looked at the King and was going to kill him, when the King bent down own his knees and asked for forgiveness. The elephant had mercy on the King and let him live. King requested the elephant to come and live with him in his palace. When the news of King coming to the palace with a big elephant was heard by the people, they started to worship him, thinking King has subdued the elephant. As soon as the elephant entered the palace, the King had him poisoned. It didn’t kill the elephant but made him sleep. The King tried to kill him but his skin was so strong that no weapon would cut him. Finally the King had him chained and put him in one big jail. The Kings glory started to spread as the news of his capture of a dangerous elephant. He organised a festival where people from his kingdom come and throw stones at the  elephant. The elephant undisturbed kept sleeping. One day it rained so much that the elephants jail was filled with water. He suffocated and woke up. Finding himself in chains, he easily broke them. He realised what the King has done and started killing everyone. He killed everyone in the palace, then he went to villages and then to other cities and in no time the whole kingdom was reduced to corpses. The God realising that someone is going to kill all of the mankind, appeared before the elephant. He turned the elephant into human and gave him the power of forgiveness. With the power of forgiveness elephant gave life back to everyone except the King and became the King himself. Thus started the reign of X. 

We also need a name but that is probably easier problem to deal with. Stories are the stuff that countries and religions are made of and so are people. They are just the necessary evil of social existence. Borrow one or make one, because if you don’t someone else will write your story and it may not be the one you like. 

Economics of Identity Politics

Before we go into the details of Identity Politics, we need to spend some in understanding the concept of life time value of a customer. Let's say a toothpaste tube lasts one month. Let's assume that X  is 20 years old and his expected life expectancy is 70 years. If the price of toothpaste is Rs 100, the life time value of X for the toothpaste manufacturer is (70-20) * 12  * 100 = Rs 60,000. 

Let's take another example: Let's say X’s kid goes to some school and he is in grade 1. The yearly school fees is Rs 2 lakhs. The lifetime value of the kid to the school is 12 * 2 = Rs 24 lakhs. What this calculation enables is putting a cap on maximum money manufacturer or school can spend on acquiring the customer. They may not make money on the first few sale, but over the lifetime of the customer, they will still make money. 

Let's try to see how this applies to politics in a democracy. In theory, in a democracy political parties will come up with policies and then the voters will judge them on the basis of these policies. The party with better policies win. Democracy in theory is like economics, where the invisible hand of rational self interest will cause parties to come up policies that matter to most and the voters will choose the most representative government. Just like everything else, theory is not quite applicable in practice. Coming up with better policies and doing good work is just plain hard. Even harder is selling the idea of why their policies are “better”. Let's have better tax collection to make infrastructure better is a really bad idea. No one likes it and no one wants to pay more tax. It so happens that “better” is different for different people. The worst part of this strategy is that the party needs to compete in every election to get back the people who voted for them the last time. This is very expensive and uncertain politics. This is bad business. 

Identity policies is a far better strategy. Voters are not expected to change their identity, by definition of identity. Once the voter is sold using identity, voter is acquired for lifetime. This amortises the cost of voter acquisition over the life time of the voter. What it means is that if the voter decides to vote because of identity, he will continue to vote for the same party unless he invents a new identity or other parties claim the same identity. No amount of good policy from competitors can swing his vote. This is a gem of a strategy. Not only do party reduced the cost of voter acquisition, increased voter stickiness but at the same time got complete independence from voter judgements around policy.

I love this quote from Sin City where Senator Roark says  “Power don't come from a badge or a gun. Power comes from lying. Lying big and gettin' the whole damn world to play along with you. Once you've got everybody agreeing with what they know in their hearts ain't true, you've got 'em by the balls”.  Identity voting is a pact with the devil, sale of soul. Once sold on identity, any rationale against party policies would either insult the identity or the self. It looks almost impossible to beat the vote unit economics of this strategy and the freedom of action it gives to the party. It attacks democracy exactly at the point which it was not evolved enough to handle, namely tyranny of the majority. The only available counter strategy against identity politics is more identity politics. The problem of course is that what looses out in this game is the integrity of nation. You only win this game by destroying the stadium.

Counting Representation

Democracy is great and so is the idea of representative government. The point where it starts hurting is that majority wins. By definition, majority is representative of just majority.  Even majority representing majority is questionable. Majority does represents majority when we have just two parties. But when we have more the two, we can be easily sure that majority is not represented. For example, in a three party, highly contested elections 34% would count as winning majority and it excludes 66% (real majority).  Essentially, majority of votes don't translate to majority in representation.

Surprisingly, it is easy to fix. All we need to change is what we count. The basic idea is to add the dimension of time to representation. Instead of the crude approximation of majority, we can have complete representation for everyone over time.  As popular is management circles, you only get what you measure.

How do we measure representation? As we discussed earlier, votes don't translate to majority representation. Well some of the votes do translate to representation. The votes which are cast to the winning party. The votes that are not cast and the votes that are not cast to the winning party are useless. They don't count toward representation.

Without much ado, here are the rules of the game:

1. Votes which result in representation are "spent"
2. Votes that don't get representation are "not spent"
3. Votes that are not cast are "not spent"

In other words, votes can be stored and used across elections.  Each vote is worth 5 years of representation. They work just like currency as store of "political value".  For example: say we had a two party system with 100 people and say party A won the election with 51 votes. These 51 votes are counted as spent. Rest 49 people get to keep their unrepresented vote for later use. In the next elections, 49 people will have 2 votes each and 51 will have one vote each. It is easy to see that with 98 votes, these 49 people will we able to easily get their representation.  

Given 65 years of life expectancy and 18 years as voting age, people get to vote around 10 times in their life. If the number of political parties is less that or equal to 10, even some 10% of the population will get a chance to form a government during their life time. To make this work with even larger number of parties, we will need to either have more frequent elections or allow inheritance of "political value", just like property and money.  This makes it possible for any arbitrary group of people to eventually form a government, perhaps once in few hundred years. 

It is easy to see that this method of counting representation leads to representation of all people over time. It will probably help stop the madness around "winning" elections and all that goes into it. Why? Because if you win, you make it easy for others to win the next time. If you loose, you chance of success increase over time. 

From what I could reason about, the system has two equilibriums. One: If people are cleanly partitioned into groups, over time each group gets representation and world becomes fair in terms of representation. If the groups are greedy, they will choose policies which advance their own groups. Sadly, the same strategy will be used by each of the other groups. Sad, but fair. 

The second equilibrium, would be towards enlarging or growing the size of these groups. Essentially, if the two groups can sort out their differences and work towards what is common and important for them, we get one less group and hopefully policies which work towards welfare of all the people in this larger group. The recursive logic will bring us to some manageable number of groups or even just one.  We might even see groups getting split when they cannot reconcile their differences, but that still leaves the process fair, just and representative. 

No matter which way the wind blows, we can always be sure that everyone is getting represented over time. If nothing else, it reduces the cost of running political parties and hopefully that is the money which can be used for advancement of the country and providing public goods. 

Criticism is most welcome!