Self-Funding Harberger Taxes

Over time I have become more and more skeptical of Harberger taxes, which I first encountered somewhere in the works of Heinlein.<p>The idea is that you are taxed based on your own estimate of the value of a thing, with the estimate being public and binding as a sale price.<p>This sounds incredibly simple, with a natural mechanism of enforcement; if you undervalue a thing to pay lower taxes then you risk losing it at that price.<p>But I don&#x27;t think this would work in reality. Pricing things is super hard. In a very liquid market it is difficult but doable, in an illiquid market (of one non-fungible asset) it is practically impossible. At what cadence do you update the estimate? How long is it binding for? If the value suddenly changes, how long a grace period do you have before you have to update the price?<p>You can try to patch this by saying that you have a right of first refusal -- that if someone offers to buy the asset at the price then you can accept their valuation as the new estimate of the price, and pay taxes going forward on the new value.<p>But then this defeats the point of the process because effectively the valuation is non-binding. So you have to put in all sorts of structures to prevent abuse -- maybe levy fines for past underpayment when the pricing is adjusted, or limit the number of re-pricings per time period.<p>And it incentivizes nuisance bidders, because owners will defend their property. So you have to put in restrictions like forcing escrow before the sale, or limiting bidding by a single entity.<p>Not to mention the difficulty in maintaining this registry of ownership of these assets, along with how to deal with more complicated deals about the rights involved -- film rights vs. tv rights vs. print rights, rights to individual characters, temporary licenses, etc., and all of that needs to be mechanized to allow a certain fixed list of the types of rights that can be granted, which right now is as extensive as a contract can contain -- if Sherlock Holmes were still in copyright, what if I just wanted to license Watson or make a film about Moriarty?<p>This is all just hopeless technocratic pie-in-the-sky dreaming.

As always, and tediously, I want to remind people that the lifetime of the artist should largely be irrelevant in thinking about rewarding the creation of new works. An author writes their most lucrative bestseller when they&#x27;re 20 years old, makes K dollars; another author writes their most lucrative book at 75, makes N dollars. Why are K and N different? The answer today is mostly that they&#x27;re not, because the lifespan of the copyright itself is taken into account when compensating the author. Without that system, the 75-year-old author would earn drastically less than the 20-year-old, despite creating the same value.

I hadn&#x27;t heard before about Harberger&#x27;s work from 1965, but circa 2004 I was inspired to come up with a similar idea but with a twist after reading someone&#x27;s Slashdot sig that said something like &quot;If copyrights are property, why aren&#x27;t they taxed?&quot;. As I wrote in 2004: <a href="https:&#x2F;&#x2F;www.kurtz-fernhout.com&#x2F;oscomak&#x2F;AchievingAStarTrekSociety.html" rel="nofollow">https:&#x2F;&#x2F;www.kurtz-fernhout.com&#x2F;oscomak&#x2F;AchievingAStarTrekSoc...</a> &quot;As an alternative to a direct buyout of media companies or other major copyright holders, since the copyright bargain has been broken now that copyrights are effectively indefinite in duration, copyright holders could be asked to pay an annual 5% tax on the value of their copyright. This value could be a self-assessed buyout value which anyone could pay to place the work into the public domain -- essentially, it is an amount at which the rightsholder would be happy to accept in exchange for returning the copyright to the public domain. Presumably copyright holders would review their portfolio for profitability and future use and only the most important copyrights to their business would be kept and paid for annually. Those copyrights which were maintained would have current contact information for potential licensors available through the IRS or a delegated copyright contact information management authority. Assuming the value of all strategic copyrights in the US would be self-assessed at a trillion dollars (a wild guesstimate) then this might bring in another $50 billion a year, to help offset the chilling effects, prison costs, court costs, enforcement costs, rightholder searches, missed opportunities for derivative works, and so on that effectively indefinite copyrights impose on society.&quot;

The usefulness of copyright is that in theory, I am automatically own anything <i>I</i> create.<p>The &quot;market&quot; then decides how much its worth, and I decide how much I want to enforce it (either by assigning rights to people, or removing them entirely by applying a liberal licence.)<p>However Harberger taxes require me to _pay_ something first. This means that in practice only rich people have copyright, and aggregators like meta, google and ticktok will take all the profit allowing no legal recompense from me.<p>Which is almost like what we have now.<p>The issue with copyright is less about how copyright is assigned, its more about how fucking long it lasts. Life + 25 years is probably enough for almost all cases.<p>But the &quot;its really bad that an artwork cant be used&quot; sentiment is wrong. I made it, I want to control whos using it. The point is that the owner has the right to choose. Do they want thier artistic vision to be fucked up by someone whos only out for money? Do they want someone who they vehemently oppose to use thier stuff for thier own game? (think politician that you don&#x27;t like)<p>So no, Harberger taxes will make the worst parts of copyright default, and limit access to the small people who actually really need it&#x27;s protection.

The international Berne Copyright Convention was founded in the late 1800&#x27;s precisely because Victor Hugo thought artists shoudn&#x27;t have to think about such things. Copyright is automatic upon creation of the work and guaranteed for at least 50 years after the author&#x27;s death.<p>Almost all countries are now party to the Convention, including the USA.

I&#x27;d note you have to pay money to extend the life of a patent so a patent perceived to be worthless by its inventor expires quickly.

It&#x27;s important to note that the author suggests this approach for estates where the original creator has already died.<p>This reduces the risk of a work being mis-valued, since it&#x27;s probably already had time to mature in the market.<p>That said, it does feel like this would give even more creative control to holders of capital, which is already a problem in the United States.

Laws should exist to support people in their life and endeavours, not to force them to participate in some form of market economy where they get shafted if they don&#x27;t play the game perfectly.<p>This article shows that the paperclip optimization risk isn&#x27;t limited to AI. We&#x27;re running on that slope just as well.

Gwern, some anecdotal thoughts from the world of business, where this sort of blind committed self pricing is sometimes called a &quot;Mexican Standoff&quot;. Same idea on, say a cap table -- both parties agree that in event of a dispute, they will make sealed binding offers for the whole company; higher offer must pay. I often recommend this to young startup CEOs when they have a team they haven&#x27;t worked with before, and I&#x27;ve occasionally suggested it to business partners.<p>Although I like the intuitive simplicity and game theoretic aspects of the arrangement, I&#x27;ve never seen it get through a partnership agreement or shareholder agreement round of redlines. Often lawyers feel nervous about it, and they&#x27;d prefer to litigate anyway; a space they are comfortable assessing and handicapping (and billing for). Often one party feels less sophisticated than the other, and thinks there might be a trap somewhere in there. Most sense, I think, that this sort of arrangement benefits the wealthier party. I think Harberger taxes suffer from the same sort of problem: the most money wins the asset.<p>You mention, rightly, the absolute trash heap that Brian Herbert has made of Dune. You speculate, wrongly, I think, that this arrangement would have cut him out and protected the IP. Au contraire -- I think Brian has done very well financially from this IP ownership -- sadly, enshittification pays -- and I don&#x27;t see any reason to think that better stewardship would have resulted in more money to go buy out the IP than Brian&#x27;s made.<p>Particularly in a world of art and human creative output, I&#x27;m negative on forcing IP rights to the wealthiest owners -- I&#x27;d prefer a system that leaves it in the hands of people who might have a variety of interests that could dominate, even if that gives us some tragedies in exchange.<p>Anyway, a system of transparent IP with buyout values (or reference values) attached is not, to my mind, uniformly better than what we have -- the reference values will be wrong, they will not capture non-monetary value, and they don&#x27;t guarantee a ready buyer. It&#x27;s hard to see what we&#x27;d gain; I agree that we wouldn&#x27;t lose a lot, but there&#x27;s a lot of social and legal work to implement between here and there.

One question here would be that how derivative works are handled? Like let&#x27;s use some character as an example. They appear in movie with other characters. Would you need to pay for each character and movie separately? If movie gets bought out would that allow making other works based on characters in the movie?<p>Also, would licenses terminate when copyright gets bought out?

The dynamics are more interesting if you make a small change to this scheme: force the owner to accept public domain buyout if the value in the fund (+ interest less overhead) exceeds the current valuation. It also acts as a built-in termination period for orphaned works, since there may be no owner to actually accept an offer.

This is a really good idea, at least for now on large-scale abstract things such as radio spectrum and airline gates. Problems about liquidity can be solved with access to finance, which exists on easy to model things (such as, again, radio spectrum and airline gates) and then gradually expanded over time.

I think asking people to put a value estimate on a thing is a hopeless task. The idea of having some sort of structured market for it is even more hopeless.<p>Better to just have a fee structure that starts off as the price of a carton of eggs and doubles every year that you extend it.

Copyright and patent are legal privileges (specifically a time limited monopoly on a work or invention), not natural rights.<p>The US Constitution proposes them as a way to “promote progress in the useful arts” and specifically calls out their time-limited nature. I think that “authors life + 95 years” arguably stretches “limited time” beyond reasonableness, but I digress.<p>There is a real cost, both to the society the law serves, and in the operation of law enforcement and judicial infrastructure needed to support copyright and patent enforcement.<p>Even if you 100% believe in copyright and patent, it seems like a reasonable thing for the direct benefactors of copyrights and patents to substantially bear the cost of enforcement. A one-time filing fee (for patents) and nothing (for copyright) seems low.<p>There is also a societal cost in suppression of innovation by allowing these to last long periods of time, so it seems reasonable that the cost structure should be (1) related to the value of the work to the creator&#x2F;inventor, and (2) incentivize shorter times, especially if the values involved are low.<p>I don’t fully grok Harberger taxes but it seems to me that they try to satisfy both my proposed criteria, but are flawed in that the value is stated by the inventor&#x2F;author without proof. Maybe I’m misinterpreting but I see other comments to that effect.<p>My proposal is to make the fee structure impute the value, by increasing over time. For example, we could require a fee of $1000 for issuance of a copyright or patent (separate from the application fee). The term would be for one year. The patent&#x2F;copyright holder can extend for as many years as they want, but the cost goes up 10x each year. If it’s a valuable asset, you’ll keep paying until the cost of extension exceeds your perceived value. Now the value is established by the most informed party in the market.<p>This is my proposal. You can of course tinker with lengths and amounts and increase factors.<p>In sum the idea is that for valuable works (a Marvel Avengers movie or the patent on the RSA algorithm or a cancer drug) the copyright&#x2F;patent holder will keep paying for many years until it’s not profitable anymore. For works that have little market value, they would fall into the public domain quickly and be able to help improve other works or inventions, and inhibit rent seeking. It practically eliminates the incentive for patent trolling, or for suing an artist decades later for having a beat similar to a song 40 years ago, or for establishing huge defensive patent portfolios. The economics aren’t there anymore.

It was surprising to only recently learn how little money Gwern makes and lives off of.<p>And then beautiful to see how the internet responded.<p><a href="https:&#x2F;&#x2F;x.com&#x2F;Suhail&#x2F;status&#x2F;1857102763249004655" rel="nofollow">https:&#x2F;&#x2F;x.com&#x2F;Suhail&#x2F;status&#x2F;1857102763249004655</a>

Is dynasty (family) inheritance of copyright assets (books and music) really that big of a problem?<p>Was Dune mismanaged? We got a lot of movies, TV shows and a famous video game from it!<p>Was Borges estate mismanaged? Wiki talks about two examples that are not dramatic.<p>What is the idea?

The idea that I have to &quot;self-assess the value&quot; of everything I create, and if I don&#x27;t, I effectively lose my rights to it, sounds absolutely terrifying to me. This proposal completely misses the fact that most creatives are creative because they want to make stuff, and that money comes second at least. I want to be able to write a song, play it to friends, put it on the internet for free and then if it blows up (which is very unlikely), I <i>still</i> want to be able to profit from it. The idea that I need to pay money now so that if I maybe ever score a hit record, I get to keep the rewards, seems very aggressively anti-art to me. It turns every creation into a wager. If I want to speculate I&#x27;ll open Robinhood, not Ableton, thank you very much.

It&#x27;s interesting to see such a long discussion of the value of a peice of art without <i>any</i> real attempt to wrestle with what the actual value of the art is. The copyright of Tolkien&#x27;s work isn&#x27;t just an amorphous blob of future cash flows. His estate is as much interested in protecting the artistic integrity of his work as it is managing the finances. To put another way, should you be forced to sell your home if your neighbour offers the government to pay more property taxes on it than you would?<p>I think fundamentally this article seems to be asking &quot;There are these guys right, and they have created this fantastic stuff and it&#x27;s protected by copyright, but they&#x27;re not choosing the most economically productive way to use their stuff, so we should find a way to take it off them&quot;. And I&#x27;m not sure that premise is correct. If you want to create economic value from a copyrighted material please... go create some copyrighted material with economic value.

Sounds like a mix of the ancient Athenian liturgy tax and Georgist land-value tax. I&#x27;m a big fan of the second one.

As AI takes hold it&#x27;s obvious parents and copyrights will have to be revisited.

I don&#x27;t see malice sufficiently addressed. A billionaire could identify arbitrary copyright arbitrage opportunities in particular communities or among groups of individuals and buy out copyright, and hold on to them out of spite until the value of a property is lost, or manipulate memes and the spread of culture.<p>Deliberately giving things to the public domain, software licensing, and other issues arise in the context of hostility and malice and bad people existing. Stuff like this would only work if everyone participated in good faith.<p>By the time we figure out any sort of sensible copyright rules, AI will have made a total mockery of our systems, anyway.

The fundamental idea here is that you have no intrinsic right to the things you already possess. Should we force people to pay additional taxes on other property in order to continue to possess it? I think that would be wildly unpopular, but unless you&#x27;re willing to do it in general, aren&#x27;t you just picking on subpopulations you don&#x27;t like?<p>The fact that BigCo. might be able to exploit an IP for some purpose -- perhaps making commercials out of popular songs -- in a way that would lead to revenue does not intrinsically suggest that it would be a good thing. Why shouldn&#x27;t the artist retain control? Why shouldn&#x27;t his heirs (who have already paid inheritance taxes) retain control?<p>Should an individual unable to pay taxes on his own organs lose them to someone who will pay the market value? I think most of us would think that grotesque. And it&#x27;s grotesque because the viewpoint behind it -- that the highest bidder should automatically win, that it is intrinsically the &quot;highest&quot; and best purpose -- is grotesque.