Community Script

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donOld
Community Script

Would unions back the use of local, community script (money) if it was accepted as a means of paying local property taxes? Put another way, would unions support a suggestion that a small portion (say 10%) of unionized public sector workers' wages be paid using local, community script? The script would be interest-free, local money created and valued by the real productive labour available in the community.

donOld

p.s. I realize that this question is highly theoretical at this point in time, but please indulge me with your answers.

Sean in Ottawa

I don't understand what the purpose is-- why do we need a new currency-- how would it be issued-- who else would receive it?

It is possible unions would consider a widespread use of alternative currencies if there was a purpose for them.

I can't see any union choosing to accept some of their member's payment in the form of a more limited currency in place of a wider use currency if others in the community did not also. This is not just a question of if they have to -- if this is not a widespread thing then there would be problems with others accepting and using the money making it not very useful.

I really can't make out why this would be a good idea. It does sound interesting -- so perhaps rather than just asking the question -- do you want to lay out a case for it including how it would work in practice?

There are of course lots of problems -- although many could be overcome if it were worth it. How do you see this working and why do you want it?

If the purpose is to force union members to buy local then why not find mechanisms to make this a more general thing.

All that said, in China they had for a long time a form of two currencies one internal and one could be converted-- I would have to ask how that worked and what the issues were. It might also not be possible given our trade straight-jackets. It is in fact a protectionist policy.

Another question-- what in fact is produced locally other than services that must be produced locally? Exactly how much of the local economy is in competition with non-local sources. I ask because this might be a question of closing the gate after it is already empty. Beyond food production, what do we actually have a choice about between local and non-local supply?

Are there less costly and restrictive ways of making the local supply of whatever it is viable?

I'm just asking-- I am skeptical but not opposed as I have too little information.

Pogo Pogo's picture

Of course the script would have to have a premium to account for it being less liquid.  Are you assuming that this has been legalized as part of the currency system.

I could see the value of this in border towns where a different tax structure within travelling distance is luring customers, or maybe in communities whose business district is stressed by developments elsewhere.  Otherwise I wonder what the value is.

Sean in Ottawa

If you have a failed currency-- you can consider measures like stimulus through injecting local trade currencies. But when you have a viable currency which we do have this is not needed.

So then the point is to protect local industry-- in that case, as I said you weould need a local industry network that is in competition with non-local industries. Unfortunately, this is now rare and such a measure only works when you have enough trade to make it work.

And then who is local? A sole operator? a local head office? a franchise? a branch of a big company? your utility company?

Perhaps there is another way to introduce such a currency. If there were a few businesses and we wanted to support a local economy we could give them some form of coupon or rebate that they could give back to their own local customers funded in part by the municipal taxes they pay. I'd have to think about this. The objective would be to find a way to make local more attractive. So we tax all businesses but give each a percent back in local redeemable coupons they can give to their community. I am not sure how you make sure that there is no fraud but I guess that could be done via deposits back to a local bank. It would be an interesting way to stimulate the economy with public funds-- better than what we did last year. What I am outlining would leave the workers with more choice and a better deal rather than a restriction on what inmany cases is a pay cheque that is already too small and falling behind. Of course the problem is you would need to fund this with a tax on local people so in the end what will we have achieved? You only have additional economic activity that multiplies if you ahve a range of trade options which brings me right back to the same problem -- you need a variety of local busiensses to get this going.

Snert Snert's picture

There's always [url=http://www.torontodollar.com/FAQ/index.php]Toronto Dollars[/url]

 

Usable for purchase in Toronto, or blowing one's nose in Alberta.

donOld

Sean in Ottawa wrote:

I don't understand what the purpose is-- why do we need a new currency-- how would it be issued-- who else would receive it?

One of the main purposes would be to educate people about the tremendous opportunities that a fair and social monetary system could provide. By providing a hands-on working model at the community level, people would be better able to understand the problems inherent in our national monetary system.

Another primary purpose would be to emancipate the neglected human potential that currently exists at the community level. A shortage of money is limiting the development of human potential, and restricting the creation of material wealth, needlessly across the nation. Unemployment and under-employment wastes human potential and causes deep resentment and frustration, leading to anti-social attitudes and acts. The community level is the most logical place to begin to relieve this pressure and restore a sense of fairness and social justice.

Community currencies are a unique, locally-controlled way to increase both the access to, and the volume of, investment capital. They are entirely legal as long as they remain purely a local script. They are normally issued and administered by a volunteer board of directors serving a non-profit foundation. The greater the diversity in the socio-economic makeup of the board, the greater the chances of success. Many different models have been tried. Generally the main factor that limits their success is the usefulness, or degree of acceptibility, of the script. Personally, I don't believe that it is even worth trying to launch a script unless the local municipal government agrees to accept it as partial payment for property taxes. Before they can even be approached, however, the public sector unions would need to be onside.

Before I descibe how it might work, let me state upfront that this is merely my suggestion of the best way to approach it. Others may have different opinions about the matter. To work, all suggestions must be considered and then voted on by the board. I first became interested in community currencies in 1994 when I travelled to Ithaca, NY to study their Ithaca Hours program. I was also heavily influenced by the work of Father Jimmy Tompkins and Dr. (Father) Moses Coady and the pre-war Antigonish movement (one of the forgotten treasures of Canadian history) see: http://en.wikipedia.org/wiki/Antigonish_Movement

Community currencies should be made available to anyone who is genuinely interested in providing their productive talent and energy to the community market pool of goods and services. Either individually, or together in groups, people could apply to the board for the creation and issue of labour credits (the basis of the script). If you have read any of my other posts you already know that I favour the use of hours to denominate the currency. Experience has shown that local script works best when it is used to stimulate labour intensive activities where the need for traditional capital investment is small. However, as more and more people get involved, and the diversity of the pool of local goods and services that are available to purchase with the script grows, this becomes less and less of a factor. Initially people offering their own individual services get involved first, things like dog walking, housecleaning & yard work, computer training & coaching, etc. Some offer a limited production of goods, like baked goods, knitted products, garden produce, etc. Community script can be very useful for stimulating the creative arts like music, art, pottery, etc. As more people in the community become aware of the initiative, a crucial step becomes to combine the power of community currencies with the collective power of cooperative labour. This is where the potential truly gets exciting. Not only does the diversity and value of the pool of local goods and services really start to grow and become significantly more useful to a much broader range of buyers, but many of the former capital costs of operating a business are replaced with local alternatives priced in script. As more and more of the barriers to capital are removed, the growth of the currency accelerates.

Perhaps it is best just to give an example of how the system might work.

Suppose that 5 people have come together and wish to start a restaurant. If the community currency system is relatively new, then the script would most likely only be useful to reduce a portion of the required labour start-up costs. If the currency was more established, a portion of the equipment, rent or other start-up capital costs might also be reduced by using the script. The 5 would develop a business plan and then meet with the board that manages the community currency. The 5 would still need to have sufficient traditional capital to cover their other start-up costs. If the board approved of their initiative, a deposit of labour credits (equal to their request for a percentage of their total start-up labour costs) would be recorded in their account at the community credit bank. It would be similar to a loan in the respect that the 5 are now obligated to achieve what they promised in their business plan. It would be different from a loan in the respect that if the 5 do achieve what they promised and the restaurant opens for business, that their obligation is fulfilled completely. They are not responsible for paying back the credits to the credit bank. The wealth that they created through their combined labour to launch the restaurant remains in existence for as long as the restaurant continues to operate, so why should the script that represents that wealth be extinguished? This is the way that the currency is created and brought into circulation, and it is backed 100% by the labour of the 5 who created the wealth that an operating restaurant embodies.

for more information on alternative currencies see http://www.monetaryreform.com/MR/linksPage.htm

Quote:
Another question-- what in fact is produced locally other than services that must be produced locally? Exactly how much of the local economy is in competition with non-local sources. I ask because this might be a question of closing the gate after it is already empty. Beyond food production, what do we actually have a choice about between local and non-local supply?

Great question. It is true that local communities have become far too dependent on non-local sources for almost everything. It would be naive to believe that community currencies could ever change this. However, as I said at the beginning, one of the main purposes would be to educate people about the tremendous opportunities that a fair and social monetary system could provide. Once this understanding takes root at the local level, it could more easily be spread to the provincial and national level where, in Canada at least, we do still have ample resources to produce pretty much anything we really need or want.

Long enough post for now, hope it helps clarify my question.

Sean in Ottawa

Very interesting and I can accept the merit of it.

Two things however-- first, you mention that this is used when there is a shortage of money and acknowledged that there is often a shortage of money. This would mean that people should not be paid for work in this money that they would have been paid using regular money otherwise we are not increasing the amount of money in the community but simply limiting the use of what is available. The approach should be to increase the available pool-- perhaps for trade that cannot happen otherwise-- for services etc. Perhaps for volunteers or a straight injection into the hands of people with income below the poverty line.

I do not see the public sector unions needing to be on side in fact I think this as a requirement would create needless strife and local conflict leading to less acceptance. I do agree with the property tax idea. I think the local board of trade needs to be on side.I also think there needs to be an injection of new money rather than a replacement of old salaries to make this work. If you consider your example of five people there is no need to have union workers working for the city involved-- they are already fully employed. I think the key is to get trade among people not fully employed -- both individually or those with goods and services to trade.

Thank you for the time you have spent on this post-- very helpful. It is an interesting idea but the model would need to be constructed carefully.

Sean in Ottawa

And if you can pay property tax using it -- could you pay rent? Would provincial and federal governments also accept it as currency or would the earning of such money not be subject to income tax (and indeed that might be the very way to get public worker buy in). It would seem unfair to receive this "limited use money" and have to pay income tax on it using the national tender.

If there was an agreement that public workers received 10% of their income this way to spend locally but that amount would not be taxed then this would provide stimulus to local economies in a sustainable way. For this the key is not public sector buy-in as with the non-taxable income designation on the table workers would buy in -- the key is if provincial and federal taxation departments will buy in. Having 10% of your income tax free in exchange for needing to spend it locally is a fair trade. And the additional kick to the local economy would leave the tax collector better off rather than worse off. I think this is the formula.

The more I look at the idea, the more I like it and the more I can imagine solutions for the problems that first appear.

6079_Smith_W

I think government would never take it because the banks would never take it. And if they did, it would just turn into a different version of the same money we have right now and defeat the whole purpose.

That is the limit of this system, in my mind, but there is a lot of room to work within that.

Sean in Ottawa

I don't mind so much if govenrment does nto take it-- but then they should agree not to tax it. If they can agree to that as a stimulus measure, I think overall government revenues may not go down and the program could succeed. But I cannot see public workers or anyone else wanting to take this currency if they ahd to pay tax on the transaction using the more available currency.

6079_Smith_W

Sean in Ottawa wrote:

I don't mind so much if govenrment does nto take it-- but then they should agree not to tax it. If they can agree to that as a stimulus measure, I think overall government revenues may not go down and the program could succeed. But I cannot see public workers or anyone else wanting to take this currency if they ahd to pay tax on the transaction using the more available currency.

 

Technically they already tax barter exchanges. Go to the site for Calgary bucks and you can download Revenue Canada's form with all the details.

6079_Smith_W

I have seen alternative currency used as part of a barter goods and labour system. I think it's a great idea, though I have never had to use it myself because I have always done such exchanges or "lending a hand" directly, so no tender was necessary.

I'm not too familiar with it  used as ersatz currency (though I have seen a few, and of course some businesses take Canadian Tire money), but I have always thought people turned to it in a more serious way when there is a lack of regular currency coming into the community, or when that currency is highly unstable. This new variation seems to be the opposite of its original conception, as a way to make a market function when it was isolated from where all the money was. The new wave is more designed to promote local allegiance in the midst of a large system.

I see the sense of a local currency, though looking at the Toronto system it seems to be in part a more complicated version of a discount system - 10% off at participating local businesses - although anyone can recirculate that cash presumably it will be businesses which eventually exchange them in for 90 cents on the dollar.

I like the fact that the money it generates goes to fund projects, and I presume that the network is big enough that it can jusfity the infrastructure and labour that goes into making it happen. Not every community has that size of critical mass.

Also on the question of taxes and expenses which require legal tender, I presume some businesses might run into a cash crunch when it comes to rent, taxes, CPP, and, to get back to the OP - payroll. Accepting only a percentage of payment in scrip is an option, since ultimately a business needs hard cash, and can't afford to take all payment at a 10 percent loss.

Also, no local market is entirely isolated. Businesses do have to buy things from away, and many businesses (like ours) do not have a  strictly local customer base. Use of alternative currencies is always going to be tempered by that, I think.

I don't know that much about these alternative currencies, but I think the question in the OP is a good one, because it points to a significant shift in the level of use. When is an alternative currency going to be used as an advertising scheme to keep business local (with some benefits, as in Toronto), and when does it become a real currency? I think the point at which it is not just businesses but workers accepting it, in part, as tender that the leap starts to happen. Of course there are already situations in which some workers have barter arrangements that are off the books, so it is not that great a stretch, but it marks a significant shift in how seriously people are willing to back up the currency.

Great topic. Makes me want to learn more about it.

(edit)

Just thought of one drawback. Of course there is no reason to cash in script when you have hard currency, and the ideal is to keep it circulating and not exchange it. Still, the only time anyone would have to cash in script is when there was not enough hard cash to cover the bills. If it were used for paying wages I think the burden of that 10 percent loss would be shared by businesses and people who were most cash-strapped.

 

Sean in Ottawa

I know they tax barter exchanges-- that is why I am saying they would need to stop doing this if such a proposal on a grander scale is going to work.

The tax amounts are high enough when you add them all together that I don't think I would be happy to have a significant (even 10%) of my income arrive taxed in a form I would have to use the rest of my income to pay. As well the buy local is a neat idea but depending on who you are it may not work.

Like many people the majority of my income goes to rent, utilities etc. If suddenly I had income that could not be used for those things and I had to pay tax on that income from what was left for those things, life would be more desperate. And I don't have a bad income -- I just live in an area that has high cost of living. (in Ottawa the crappiest of townhomes plus utilities will cost about $1500/month of your after tax income).Then you have food, insurance, gas, clothing, expenses for schools etc. and most of the balance of a moderate income is spoken for. It is of course much worse for lower income and for disabled people etc. But there is little margin for lower-middle income people to take such a hit and a lot of union jobs are in that category. My income is fine for a single person person sharing an apartment etc. -- not so much when supporting a family. For this reason I'd be careful to avoid burdening public sector workers with the brunt of this idea which otherwise may have a lot of merit.

The idea of property tax being paid with this money is prejudicial since home owners could just use much of it for property tax but what about renters like me? And if I could pay my rent with it there would be no point to it as I would direct it all to rent which is far, far, more than 10% of my income.

When it comes to food I don't buy much that is local-- I buy what is cheapest because that is what I can afford. Our family does not have much luxury money or discretionary money so if I received a portion of my income that could not go to the necessities in life I must pay for this would cause real hardship. If I still had to pay tax on it then that would put us over the edge.

In order for this to work this money could not be taxed in regular currency as that would be even worse than barter exchanges where the transaction is your main income that you need to live on. Government would need to support the program for it to work and that means not ignoring it and taxing as if it did not exist. Property tax is not enough since we don't all pay that directly.

 

6079_Smith_W

Sean in Ottawa wrote:

I know they tax barter exchanges-- that is why I am saying they would need to stop doing this if such a proposal on a grander scale is going to work.

I figured you probably did. I said it more for the benefit of the room.

donOld

Sean in Ottawa wrote:
This would mean that people should not be paid for work in this money that they would have been paid using regular money, otherwise we are not increasing the amount of money in the community but simply limiting the use of what is available. The approach should be to increase the available pool...

I think of it more like adding the script to the regular money, diluting it if you will, so the total volume increases, is more fluid and it can flow into the cracks where regular money alone doesn't reach.

Quote:
I do not see the public sector unions needing to be on side ...I do agree with the property tax idea.

The municipality won't accept the script for taxes unless it can easily spend what it receives. Since it is a labour-based script it is only logical that they would want to use it to pay for a portion of wages. As long as you can pay your taxes with it, city workers shouldn't object to receiving at least that much annually.

Quote:
Thank you for the time you have spent on this post-- very helpful. It is an interesting idea but the model would need to be constructed carefully.

You're welcome. Agreed.

donOld

6079_Smith_W wrote:

I think government would never take it because the banks would never take it.

Provincial and federal governments won't be interested in it, but municipal governments should be. In Ithaca, the credit unions came onside, so the only adjustment the municipal government would need to make (to enable payments to workers) is to open a new account at a participating credit union.

I love Sean's tax-free advantage idea, I'll have to look into that.

KingofthePaupers KingofthePaupers's picture

Jct: Community Scrip is what I based my Bus Bucks campaign on for what are bus tickets but community scrip that can be used to reward useful contributions to a city's upkeep. See my Bus Bucks mayoral campaign at http://johnturmel.com

nousury

Readers are invited to review the "Innovative Proposal" as the content therein focuses on how any municipality can take an active role in implementing a usuryfree community currency. Simply do a search for "The Innovative Proposal" or click on this link:

http://usuryfree.blogspot.com/2010/04/innovative-proposal.html

AND there is lots more relevant information posted at The UsuryFree Eye Opener: http://usuryfree.blogspot.com

donOld

KingofthePaupers wrote:

Jct: Community Scrip is what I based my Bus Bucks campaign on for what are bus tickets but community scrip that can be used to reward useful contributions to a city's upkeep. See my Bus Bucks mayoral campaign at http://johnturmel.com 

Love your commitment to your ideas and your fearless involvement in community action. Good luck to you.

Sineed

The union for the municipal workers is CUPE - you could maybe float this past them.

I can't see getting the provincial unions on side due to the highly local nature of this initiative (though I could be wrong).

donOld

nousury wrote:

Readers are invited to review the "Innovative Proposal" as the content therein focuses on how any municipality can take an active role in implementing a usuryfree community currency. Simply do a search for "The Innovative Proposal" or click on this link:

http://usuryfree.blogspot.com/2010/04/innovative-proposal.html

AND there is lots more relevant information posted at The UsuryFree Eye Opener: http://usuryfree.blogspot.com

If the monetary reform movement and the community currency movement could find enough common ground to form a common front, a great deal of new public awareness about the purpose and nature of money could be generated. Whether or not enough common ground actually exists is a question worth asking. Both attempt to expand the money supply without creating any new interest-bearing debt. Could this be a starting point?

JKR

There are other groups that support monetary reform. Most notably many Muslims are attempting to come up with alternatives.

Finance in Islam

www.islamic-finance.com

The new age movemnet also is looking for alternatives. The late great Alan Watts had some very insightful things to say about money and economics.

Alan Watts - Money - YouTube

Alan Watts - Abstraction or Reality - YouTube

Alan Watts synthesis of Jungian psychology, Christianity, Hinduism, Buddhism with other modern philosophies is something to behold.

donOld

JKR wrote:

The late great Alan Watts had some very insightful comments about money and economics.

Thank you for these links. Alan Watts' writings have been a lifelong friend. He has an amazing intellect and a beautiful, social soul. I have never searched to see if he had written anything about money ...and now I don't have to. The shortage of inches analogy he uses is perfect and all that he says about money reinforces what I have written about the true nature of money in my "A Better Way" suggestion.

6079_Smith_W

The only thing that concerns me about having an alternative scrip too integrated with the money system is that sooner or later some organization is going to figure out some scheme to exploit it - just like WalMart paying their employees just little enough in some jurisdictions that they don't have to pay benefits, and use systems that are supposed to benefit low income people to prop up their business.

I'm not down on the idea. I just think it is important to look at why one should use a currency in a given situation and not some other discount or loyalty system. Again, some of these systems were developed in places where they needed to replace money because there was a shortage of it. That's not the reason why some urban systems are turning to it now.

Rod Manchee

Some problems not yet discussed:
How do you produce, monitor and pay for this scrip, and on what scale? If it’s just 5 people who know each other, surely simple barter is what’s really happening, so why formalize it with more paper? If it grows to a scale that they don’t know each other, what’s to stop someone getting a copying machine and cranking out scrip? The history of currency is the history of its debasement(think Archimedes, and remember that if it wasn’t for gravity, optics and Principia Mathematica, Newton would be remembered as the Master of the Mint). Look at a bill, say a $20 - it isn’t fancy and full of hidden markers because somebody wanted to be remembered as a new Leonardo, but rather to make a challenge for counterfeiters, some the scrip carries an additional to make it “safe.” And unless the volume of scrip is controlled and integrated with standard currency you’re just inviting inflation on the scale seen in Germany after WWI.

If the idea is to redistribute assets in society, increasing the money supply is a bit of a shot-gun(and usually counter-productive) way to try to do it. If you want to improve the lot of the poor then an approach like making our income tax system more progressive, perhaps even to the degree it was before Mulroney and Co took the wrecking ball to it, would be much more effective. If you want to improve the lot of tenants then making tax benefits similar to those enjoyed by homeowners would be much more effective. If you want to restore, or even maintain, our public services, then reducing the tax base by excluding some of the national wealth from the tax base doesn’t sound like the way to go.

Sean in Ottawa: said some curious things:

“It would seem unfair to receive this "limited use money" and have to pay income tax on it using the national tender.”

The “limited use money” is to facilitate access to a portion of national resources, in the same way standard currency does in a less limited way, so why should the former be immune from taxation?

“If there was an agreement that public workers received 10% of their income this way to spend locally but that amount would not be taxed then this would provide stimulus to local economies in a sustainable way.”

It might increase the velocity of money(or not) but would not actually result in the production of real(as opposed to virtual, or nominal) wealth.

“For this the key is not public sector buy-in as with the non-taxable income designation on the table workers would buy in -- the key is if provincial and federal taxation departments will buy in. Having 10% of your income tax free in exchange for needing to spend it locally is a fair trade. And the additional kick to the local economy would leave the tax collector better off rather than worse off. I think this is the formula.”

So this is really just a tax shift? So where’s the benefit going and what public services will the reduction in public funds cripple?

Sean in Ottawa

To be fair my point that you have not acknowledged is that if income is provided in a currency that cannot be used to pay tax you have a problem-- I don't think that is a curious point as i explained above. The only alternatives are to not tax it or to allow the tax to be paid with it. Otherwise you will hammer people who have tight budgets.

Rod Manchee

On October 25, 2010 Sean in Ottawa said:

“To be fair my point that you have not acknowledged is that if income is provided in a currency that cannot be used to pay tax you have a problem-- I don't think that is a curious point as i explained above. The only alternatives are to not tax it or to allow the tax to be paid with it. Otherwise you will hammer people who have tight budgets.”

You don’t necessarily hammer people who have tight budgets, you just reduce a bit of the relief that people who have tight budgets and use this tool might have hoped for. But you also reduce the advantage that people who don’t have tight budgets hope to get over people who, for one reason or another, don’t have access to this particular financial vehicle. That’s one of the points here - the effect of the proposal is really nothing substantive if the interest is in providing relief for the financially stressed... it may help some a little, but the real effect is unfocussed. If we really want a redistributive effect there are much more effective ways to do it.

As to the currency issue, any currency is simply a mechanism to simplify the distribution of real goods and services, whether “official” or “scrip”(scrip by the way is not new, it has been used by armies for centuries for example). What seems to be being argued is to not tax some class of transactions, namely those using scrip, but there is no observable benefit not available more efficiently to standard(and less corruptible) standard currency.

If there is a standard conversion rate between scrip and official currency then it can easily be taxed to stop it from evading its fair share of public expenses. If there isn’t a standard conversion rate, then somebody’s going to get royally ripped off while somebody else gets equally rich. This will be no less real because it will patly hidden in the underground economy.

The key point is that any currency is just a tool to ease the distribution of real goods - very few people actually eat loonies or drive $20s to work. If the problem is inadequate or misallocated effective demand the answer is not to just expand the demand tool(official currency or scrip), but rather to re-allocate the demand tool. Unless, of course, you just want everybody to have a higher income, able to buy the same amount of higher priced goods.

donOld

Sean & Rod, you both have raised excellent points about the practicality and unintended consequences of using scrip (damn I wish I hadn't put that extra t in the title). The main intended community benefit with scrip is to increase the local money supply without generating more interest-bearing debt. This is a particularly important benefit to those who a) would not qualify for a traditional loan denominated in the national currency because they lack sufficient collateral, or b) would not risk starting a business if interest charges increased their start-up & operating costs.

A second major benefit with scrip is to localize the money creation process, making it more flexible and adaptable to serve local priorities and needs. With scrip, the determination of "acceptable risks" is community based, not externally based.

A third major intention of scrip is to generate new productivity or real wealth that would otherwise remain dormant using only the national currency.

Sean's very perceptive comments about taxes are extremely important. For easy math, if my total pre-tax income is say $40k and my net income tax rate is 20%, if I earn only national currency I would pay $8k in tax leaving me with 32k to spend. If however 10% of my $40k is paid to me in local currency, I have only $36k with which to pay my $8k in taxes, leaving me with only $28k in national currency to spend. If $30k of my essential expenses must be paid using the national currency then I simply can't afford to use the local currency.

Likewise, Rod's comments about the possible destructive side of income tax exemptions for local currency are very shrewd. It is highly unlikely that if the trading volume of any community scrip became substantial that the fed & prov governments would allow it to remain untaxed.

It is extrremely disappointing to me to see that once again the system wins because of something as unjust as our current tax regime.

JKR

With community scrip, who decides how much money is printed?

All you would need is one unsrupilious person to print up extra money to bring down the whole system.

I don't see people trusting community scrip with a significant amount of their money. Many people don't even trust regular government backed currency.

And what about high-tech counterfeits? The justice system and police systems aren't about to use their resources to protect different community scrips. And without a secure currency, people will shy away from using it.

And businesses would also not want to use a currency that is not secure.

Sean in Ottawa

Donold and it is important to remember there is no 20% bracket. The tax is higher than that.

Sean in Ottawa

The lower your income the higher the percentage of it must go to fixed expenses. A 40k salary may sound good but if you are supporting a family on that then a substantial amount of that income is going to go to rent, heat, fuel, hydro, etc. There is no room for local spending if there is no discretionary spending. If none of those key expenses can be paid with local script then you just pushed that person over a financial cliff. The question was would unions go along-- no they could not go along with something that would see their memebrs be damaged to pay for a stimulus of the local economy. You can't get a narrow group of people to be the exclusive bearers of a public benefit without complaint. The base must be widely distributed otherwise it just is not fair.

Sean in Ottawa

Another point we have not discussed is support payments-- what if the employee has support payments to pay?

So if you have a $40,000 income your tax payable is $6432. After tax the income is $33,568.

Then there are other than tax deductions CPP 4.95%, EI 1.73%, union rates and other rates= we'll deduct 7% flat for ease of calculation $2800. Now we are looking at a take home income of 30556.

For one child, child support would be $4404 per year so now we have $26152 in disposable income. $2179 per month.

Let's assume the following expenses do not use the local currency. Lets assume some basic figures of household expenses (yes we can argue some are not essential but these are what people have typically if they rent and live in this income range and have a family):

Rent $1000; heat $150; hydro $100; insurance $120; gasoline for a car $100; telephone, internet, cable, cell $175;-- that is $1645. That leaves $534 left over for everything else including food clothing etc. Now if 10% of your income came in local script but was taxed not in local script then you would have $4,000 in local script or $333 of the remaining money. So now you have $333 in local script and $201 in national currency.

Clothing, food, school supplies, a car, who knows what comes from there. Now the purpose of the local script is to force people to buy local-- and that usually means paying more otherwise you would not be forced. So they will pay more for what they buy and have a lot less. It seems pretty clear from here that if this hypothetical family in this case with a child support payment, did not have a grocery story taking local script, they would not eat.

 

Sean in Ottawa

Perhaps I should be clear that the child support example was just an example-- I could have spoken about a parent with a child in university paying tuition; people trying to support their parents in long term care; people struggling to supoprt a family member that needs pharmaceuticals that are not covered... You get the point-- what little disposable income can be eaten up by a single priority easily and if you cannot use a certain part of your income to pay that you hurt that family.

Now if I go further, we were looking at the 40,000 family renting-- lets imagine this with a 60,000 income-- perhaps there is a mortgage involved. The amount of tax that would need to be paid from a diminished national currency amount would only make it worse. I believe some people would lose their homes. The 10% that must be spent locally only works if 10% of your gross income represents net disposable income after taxes, specific liabilities or priorities, and basic expenses. Many working people even with good incomes don't have that much disposable income. Any household with a single income would likely be devastated by such a policy.

The original poster gets this now but then someone else suggests my concerns are "curious" it is to others who like theories without considering practical realities and that "curious" person I address this.

JKR

Curiouser and curiouser!

I think that person was Alice in Wonderland.

or maybe a rabbit.

Sean in Ottawa

Rob Manchee is a rabbit? Who knew?

Sean in Ottawa

Oh, and JKR-- you are quite right, there would be concerns about counterfeit-- only a high volume currency can have the economy of scale to make such design measures safe enough in today's world of technology.

The answer of course would be some form of electronic accounts-- like paypal rather than a physical currency. Then those who take it would take it electronically. This would solve one problem but not the issue I raised.

radiorahim radiorahim's picture

I first heard of something like this while listening to an episode of (I think) the "Smart Cities" programme on NPR.

They have a programme like this called "Ithaca Hours" in Ithaca, NY where you can pay someone in "Ithaca Hours" in some cases.   It's not a replacement for real currency, but rather a kind of local barter system.

You can read about it here.

siamdave

The talk of union support being required is a bit of a red herring, and is not really relevant or true, I think. At least in the beginning stages, community currency is not meant to be a replacement for, or challenge to, existing currencies - it is a supplement for an overall system one of whose features is a lack of money, which limits opportunities both for those who have work to be done but their cash flow is too limited to pay for such work, and those who are able to work and want to work, but cannot find anyone with 'real' money to pay them. It is not meant for the union worker who already has a job, but for the people in the community who have no job and cannot find one, and potential employers who have work to be done but no "real" money to pay for such work. Community currency can bring these two groups together.

Saying that using community currency as 10-20% of existing income would put a greater strain on 'real' money is the backwards way to look at it. CC would not be used to pay taxes or other things for which 'real' money is required, but would be used for things available from the local community, and thus actually put less strain on the 'real' money. That is, if your 'real job' income is 40 thou, and you do some local work and get paid in 5 thou CC (just for an example), then many of the things you get locally, such as food at the farmer's market where the local CC is accepted, will actually increase the amount of your 40 thou in real money you have available for non-CC expenses.

At the first, CC should not attract any government interest, and thus should not be liable for any kind of taxes, etc. It's maybe something to keep in the back of your mind, but don't worry about it at first, cross that bridge when you get to it. If this local currency ever gets tax people looking at you, it means you have been very successful, and by that time will have lots of able people involved who can work it out one way or another,

I would suggest also keeping in mind that this is only a bandaid solution - the real problem is a national currency controlled by private interests for their own gain, and very much 'our' disadvantage, and this is the real battle, wresting control of 'our' national currency away from these private interests, and regaining control of 'our' country, and 'our' money.

donOld

siamdave wrote:

I would suggest also keeping in mind that this is only a bandaid solution - the real problem is a national currency controlled by private interests for their own gain, and very much 'our' disadvantage, and this is the real battle, wresting control of 'our' national currency away from these private interests, and regaining control of 'our' country, and 'our' money.

All of what you say in your post about CC is true, and it is the conventional way of using scrip. I brought it up here to see if it might be possible to go beyond the limited use that is normally tried. Making it useful to pay local taxes or purchase municipal services such as bus rides would make it much more interesting and relevant to a lot more people. The trick has always been getting enough producers to use it, to generate real consumer interest.

I also agree that CC has been limited to being a bandaid solution to a national currency problem. This is precisely why a better model for spreading the use of CC needs to be created, so that people will have a working, local, community-based example of what our national currency could achieve if it was created and issued interest-free by the national government for the common good of all people.

There may be other ways to stimulate a greater diversity of local production of goods and services (and thereby achieve a broader public acceptance of CC) by issuing upfront labour credits to co-operatives to help them get started at a much lower cost (in $ national). A good working example of the way to issue interest-free credit locally would be very valuable as a working model for the national currency.

Perhaps a way around the tax issues is simply to declare at the outset that the agreed upon redemption value of 1 hour of CC is just 1¢ of national currency. Let them tax away.

Rod Manchee

Actually, Sean in Ottawa, I was the Walrus(in a Gr 2 play, at least)

One problem with “Perhaps a way around the tax issues is simply to declare at the outset that the agreed upon redemption value of 1 hour of CC is just 1¢ of national currency. Let them tax away.”(DonOld) is that the agreed upon value will just be ignored and an imputed value will be assigned. For example, if 1 hour of CC resulted in purchasing power of goods costing $100 in standard currency, then a court may declare that to be the imputed value and any tax will be based on that value.  That is the approach now taken with many “gifts.”

A CC approach can work in a totally closed economy, and one that is sufficiently large that there is a perfect(or near perfect) match between what is demanded and what is supplied. Otherwise you get currency conversion problems and inefficiencies - it’s a spin-off of the law of large numbers. The ideal would be to have only one world currency, since with national ones the currency traders and speculators take a cut on any trade(which produces no real wealth, just paper) but then you have the problem of what authority controls the volume, etc. With each addition currency(national or more informal) more is wasted.

Sean in Ottawa

As SiamDave says the issue is this money normally is an add in payment for new exchanges not a partial (10% or whatever) replacement for existing exchanges.

When it is a replacement for existing exchanges fully taxed it must be understood that as a limited currency it is worth less than common currency and therefore it is a wage rollback to those being paid with it.

donOld

Rod Manchee wrote:

...the agreed upon value will just be ignored and an imputed value will be assigned ...and any tax will be based on that value.

You are probably correct since the government has assumed the right to do basically whatever it wants, to whoever it wants.

Quote:
The ideal would be to have only one world currency, since with national ones the currency traders and speculators take a cut on any trade (which produces no real wealth, just paper) but then you have the problem of what authority controls the volume, etc.

The problems of what authority controls the volume and whether or not the currency is issued as interest-bearing debt, have far more important consequences than the speculative profits that currency traders can make. A simple Financial Transaction Tax would quickly cut currency traders out of the game. But national central banks are the very foundation of national sovereignty and economic democracy. Lose our central bank and the game is over, we become a puppet state in the new world order.

siamdave

donOld wrote:

siamdave wrote:

....

All of what you say in your post about CC is true, and it is the conventional way of using scrip. I brought it up here to see if it might be possible to go beyond the limited use that is normally tried. Making it useful to pay local taxes or purchase municipal services such as bus rides would make it much more interesting and relevant to a lot more people. The trick has always been getting enough producers to use it, to generate real consumer interest.

- sorry, I got reading to quickly in the middle part and forgot to check the opening post. One would think / hope any union with anything that could be called 'progressive' leadership or membership would be all in favor of a well-managed CC option - after all, society includes all of us, not just the better-off (which most union people are these days). Likewise local community governments - again, same reason, every community has less well-off people, and CC is designed primarily for people with low incomes but work that needs to be done, or who are available to work, who have skills to share with the community and should be paid for such things. Union people aren't likely to convince large capitalist employers to pay them in CC in even some small percent, but there is no reason they could not support local CC organisations by accepting some change from local merchants in CC, which they could use in other places such as the local farmer's market - more money circulating will, in the longer run, benefit everyone. Likewise local governments - they could pay some percent of wages in CC, and accept some percent of local administrative charges (such as taxes, or bus fares as you mention, etc) in CC. As you know, there are many very successful CC systems which have most problems ironed out which anyone in Canada interested in starting one could turn to for examples of how to set one up with a minimum of problems.

Quote:

I also agree that CC has been limited to being a bandaid solution to a national currency problem. This is precisely why a better model for spreading the use of CC needs to be created, so that people will have a working, local, community-based example of what our national currency could achieve if it was created and issued interest-free by the national government for the common good of all people.

There may be other ways to stimulate a greater diversity of local production of goods and services (and thereby achieve a broader public acceptance of CC) by issuing upfront labour credits to co-operatives to help them get started at a much lower cost (in $ national). A good working example of the way to issue interest-free credit locally would be very valuable as a working model for the national currency.

Perhaps a way around the tax issues is simply to declare at the outset that the agreed upon redemption value of 1 hour of CC is just 1¢ of national currency. Let them tax away.

- as for the rest, a lot of 'maybes' that would be worked out in various ways - but I think everyone should, as I said and you agree, understand well that any type of CC is just a temporary solution to a much, much bgigger problem, that of private control of what should be *our* national money supply. In a big country, we don't really want to be dealing with dozens or more likely thousands of 'local' currencies - we need something trusted all across the country, like the Cdn $$ . Building this kind of trust is a big job, and we don't need to reinvent any wheels, what we need to do is simply remove the parasitical private bank interests from having any influence on the control of this money we already have. If we do have a national currency properly managed for *our* good, then there should be no need at all for any local currnecies.

siamdave

Sean in Ottawa wrote:

As SiamDave says the issue is this money normally is an add in payment for new exchanges not a partial (10% or whatever) replacement for existing exchanges.

When it is a replacement for existing exchanges fully taxed it must be understood that as a limited currency it is worth less than common currency and therefore it is a wage rollback to those being paid with it.

- I disagree with this idea. First, as has been pointed out, a CC is in no way a 'replacement' for a national currency, it is a supplement, when the bankers are restricting the money supply and causing hardships - small businesses need workers but cannot get money to pay them from the banks, and the community has people who want to work, but nobody has money to pay them. A CC is a locally-controlled system to get around this problem by taking OUR money into OUR hands - and in this small system, working in a small way to complement the larger, inadequate system - a buck is a buck, as they say. And with any method of money, if my locally grown produce is worth $10 dollars in Cdn scrip, and we have a viable CC system, then exactly the same $10 in Green Island Dollars will be fine - and when I take that $10 GID to one of the local merchants where I want to, say, have my kid's teeth checked, which costs $100 - I expect $90 Cdn plus $10 GID will be acceptable, and etc and etc, however the CC money circulates in the community (assuming, of course, the dentist is participating in the CC system - nobody is 'forced' to accept the CC). Everyone understands that the CC is only usuable in the local community - and accepts that. The fact that the CC cannot be used for Cdn gov taxes is simply irrelevant, in this small system-within-a-system. We are doing things that we could not do if we could only use "official" Cdn money - and we all understand that this is a good thing, for our local community. Nobody is forcing anyone else to particiipate - but anyone truly interested in the wellbeing of all citizens in the community will be trying to make this work, not looking for ways to torpedo it. Anyone talking about 'discounts' is just trying to game the system, and it's time to beware - the shyster capitalists are looking for a way to steal from us, as they are there like bad diseases always trying to infiltrate anything healthy.

(PS - not directed at you Sean in any personal way! - just the comment .... )

JKR

donOld wrote:

But national central banks are the very foundation of national sovereignty and economic democracy.

As countries such as Greece have recently found out.

A global currency would only work if we had a truly democratic system of international governance. Even then the interests of areas with greater populations would override less populous areas.

Political decisions can not be separated from economic decisions. If an area wants to maintain political autonomy, they have to control their currency.

siamdave

Rod Manchee wrote:

One problem with “Perhaps a way around the tax issues is simply to declare at the outset that the agreed upon redemption value of 1 hour of CC is just 1¢ of national currency. Let them tax away.”(DonOld) is that the agreed upon value will just be ignored and an imputed value will be assigned. For example, if 1 hour of CC resulted in purchasing power of goods costing $100 in standard currency, then a court may declare that to be the imputed value and any tax will be based on that value.  That is the approach now taken with many “gifts.”

- the thing is, if they want to say something is worth $100 bucks in one sense, they kind of paint themselves into a corner - if you want me to pay tax on my CC money - then it's going to be hard to argue that the same money does not qualify for unemployment income, or CPP income, etc. But it is still an argument that can, and should be, deferred - getting the system functioning in the first place is by far the first objective - we'll deal with the objections of those who are jealous of their control of the money supply once we become strong enough to be seen as a threat to them ...

 

Quote:

A CC approach can work in a totally closed economy, and one that is sufficiently large that there is a perfect(or near perfect) match between what is demanded and what is supplied. Otherwise you get currency conversion problems and inefficiencies - it’s a spin-off of the law of large numbers. The ideal would be to have only one world currency, since with national ones the currency traders and speculators take a cut on any trade(which produces no real wealth, just paper) but then you have the problem of what authority controls the volume, etc. With each addition currency(national or more informal) more is wasted.

- two things:

First, the CC is very much NOT a 'closed economy' - it is a supplementary economy, working within a larger, very domiinant economy, but which is insufficient for some reason to allow the transactions that many people want to do, but are prevented from doing for lack of some means of exchange, no other reason. There should be no 'conversion' problems at all, in a properly functioning CC system - it works together with the larger system, not in some kind of competition with it.

Secondly - the idea of 'one world currency' is really, really scary - any system needs diversity to be strong. In a world with many currencies, if one country screws up and elects some half-wit politicians who do really stupid things like printing massive amounts of money that crash their currency, then *they* have problems, but the rest of us are ok - but if the same idiots take control of the world currency - they could crash the entire planet. Monocultures are very bad ideas, in any system. Checks and balances, etc.