Profits obtained under the protection of an IPR should be taxed higher than when obtained competing naked.

Sir, Martin Wolf discusses the vital topic of how intellectual property rights could, simultaneously, be agents that help promote the ideas and inventions needed for a better future, and an obstacle to competition. “Let knowledge spread around the world” April 25.

I have also grappled with this issue and although it might surely not be the only option, for a long time I have thought that placing a special tax on profits obtained under the coverage of an IPR, could help to bring forward that moment when sharing out freely the rights, instead of exploiting these up to the tilt, would make more business sense.

Also what justice is it in that those who have to compete completely naked in the market, should be taxed at the same rate as those who the society defends by defending their IPRs?

By the way, that special tax on IPR profits should go to partially fund, by means of a Universal Basic Income what could be considered as a Human Heritage Dividend.

@PerKurowski

What does “stored wealth” mean? Is it really redistributable, just like that, without any consequences?

Sir, Edward Luce writes: “America’s elites have stored more wealth than they can consume. This creates three problems for everyone else” “The discreet terror of the American bourgeoisie”. February 8.

What does “stored wealth” really mean? You do not hide your main-street purchase capacity in cash under a mattress; you hand it over to someone else in exchange for an asset or a service.

When some very wealthy recently bought Leonardo da Vinci’s “Salvator Mundi”, he froze, with a sort of voluntary tax, US$450 million on a wall or in a storage room. Those US$450 millions were received and used by some other wealthy or not that wealthy. Should that not have happened? Should he have used his money better? What if those who now have his money know how to put it to much better use?

The war against wealth is raging. Whenever wealth has been obtain by criminal, or by unjustified means, like monopolies or excessive intellectual property rights exploitation, that war makes sense. But, those who preach that all will be well and dandy, if only wealth is redistributed, like from the 1% to the 99%, never explain how one now converts a Salvator Mundi, into fresh main-street purchase power, and the consequences of doing so.

We could assume that much of that lack of explanation is because many of the wealth redistribution fighters are in fact redistribution profiteers interested in increasing the value of their franchise.

PS. Not long ago, visiting the Museum of Louvre, it dawned on me that most of what was exhibited there would not have come into being, were it not for the existence of the filthy rich. Can we really afford, do we really want, to live without them?

@PerKurowski

What if we in writing had to authorize phone companies to listen to our calls, in order to have access to phones?

Brooke Masters writes: “when I link our Amazon Echo speaker to my son’s Spotify account, I have no idea whether I am violating one of the thousands of terms and conditions he agreed to with his account. Furthermore, does that act give Amazon the right to send him advertisements based on the songs we play?” “Take ownership of the sharing economy” December 29.

She is absolutely right. The rights we seem to have to give up in order to gain access to social media and alike, though defined in small letters in thousands of unreadable pages, is one of the most undefined issues of our time.

Some questions:

Should the marginal cost for social media owners to access, and waste, so much of our limited attention span, be zero?

Should we be able to copyright our own preferences so that we at least can have something to negotiate with?

How much can we allow being distracted during working hours before our employer has the right to deduct our salaries paid?

How will such working hours distractions be accounted for in employment statistics?

How is all this free or very cheap consumption paid by used attention spans be accounted for, for instance in GNP figures?

Should social media owners be allowed to impose their own rules or should that not be subject to some kind of a special arbitration panel?

How our global differences be managed? Does a government that interferes with its citizens’ rights of access to social media have access to other web sites of other nations?

@PerKurowski

Profits obtained under cover of patents should be taxed higher than those obtained when competing in the nude

Sir, Rana Foroohar writes about the clear ‘you can’t have the cookie and eat it too’ conflicts present in the area of protection of intellectual rights. “A better patent system will spur innovation” September 4.

In 2008, trying to build a bridge that could resolve some issues, I ended an Op-Ed with a proposal of introducing a special tax on all profits generated under the cover of any IPR, for instance a patent.

As I have since repeated many times, it is not logical the same tax rate applies to profits obtained when competing naked in the market, than when the profits are obtained under the cover of a protection.

Such tax should, as a minimum minimorum, at least cover all costs for society of awarding and enforcing IPR protections.

Nowadays I would also argue that tax should also be a source of funding for a Universal Basic Income. That because, most or even all of these protections, truth be told, are sort of unfairly awarded to whoever runs the last leg of a relay that has been run, with ingenuity, creativity and strenuous efforts, by generations of humans.

@PerKurowski

What causes more inequality, or feelings of poverty, some CEOs’ obscene high salaries, or some prices, like those of Viagra?

Sir, I refer to David Crow’s “Cost of Viagra increases 27% as Pfizer raises US drug prices” June 3.

I have no idea why but my doctor has ordered me a different brand, so I am not a user of Viagra. That said it was astonishing to read that one single Viagra pill is now $73.85. That price must surely only be possible because of the official protection of intellectual property rights.

There should be a difference between the protections of a pharmaceutical industry, so that it can afford develop new medicines, and the protection of an extortion racket. As is, 10 Viagra pills would, at this price, represent a fairly decent monthly Universal Basic Income.

In a world in which so many prices are going down-down-down, among others because of automation and robots, can we afford to impact this way those who have to earn less and less and less income, or stay more at home, only because of automation and robots?

Perhaps Trump, instead of thinking of building up Mexican walls, should be thinking about tearing down some intellectual property protection walls. Open ended ones, like those that allowed “Martin Shkreli to raise the price of an Aids medicine from $13.50 to $750 a pill, reflects very badly on the state and governance of our society.

About a decade ago I wrote an Op-Ed in which I held that it was not logical that profits earned by means of protected intellectual property, were taxed at the same rate than those profits obtained from competing naked in the market. That argument is still valid, especially if those extra tax revenues become tax neutral, by feeding monthly UBIs.

PS. In the same vein, now we perhaps have to add a proposal on that profits generated with the use of robots, should be taxed higher than profits generated with the help of humans.

PS. Some years ago a friend, wanting to launch little-known-me as a candidate for the presidency of Venezuela, what a "friend", suggested a populist campaign based mostly on “Free Viagra for everyone”. He argued that would have more impact that my promises of sharing out all net oil revenues directly to all Venezuelans. He might have a point.

@PerKurowski

Maybe it is time to revisit the whole concept of progressiveness in taxes.

Sir, John Gapper, perhaps solely wearing his hat of a writer, basically proposes creating a publisher monopoly in order to counter the growing strength of a distribution monopoly such as Amazon, “Publisher must become giants to take on Amazon”, May 29.

As a reader, I am not certain I want to be squeezed by those who clearly would then have an interest coming into some agreements that might not benefit me, though the truth is that technological advances married to the reach-out of globalization, do seems definitively to be leading us down that path.

And what can we do to keep alive our alternatives? I have not given too much thought on how it could be implemented but I think that the introduction of tax-rate progressiveness, for corporate profits and or dividends, based on market shares, could be something worthwhile to explore.

Why for instance should “The Shop Around the Corner” have to face the same tax structure as Amazon?

And of course, in the same vein, why should a company that fights naked and unprotected in the markets face the same tax structure as one that operates under the protection of intellectual property rights?

When referencing cash, remember it is usually not really cash... & do we need special taxes on profits from patents?

Sir, I refer to Sarah Gordon’s “Be wary of the tax incentives in pharma’s deal financing” May 1, in order to make the following two observations:

First I believe that we should take the opportunity of the inequality frenzy that Piketty’s Capital has brought on, to discuss the treatment given to intellectual property right profits… as there can be little discussion that patents and similar, are among the biggest de facto inequality drivers. I, for instance, have held for some years that profits obtained under the umbrella of patents, and or of extravagant market shares, should be taxed higher than profits obtained from competing naked in the markets.

Second, when Gordon writes about the “$1.64tn of cash” that Moody estimates US companies held at the end of 2013, she would do better referring to “$1.64tn of liquid assets”… since we have no reason to believe the CFO’s of those companies keep stacks of notes hidden in their mattresses. I say this because we should not forget that any alternative use of these assets, will require their disposal… which has other effects in the market.

When fighting inequality, before redistributing, eliminate some of its worst man-made causes.

Sir, on the front page you label Martin Wolf’s “A more equal society will not hinder growth” as “Robin Hood’s economy” April 23. Just in case, and since so many have recently been mixing up Robin Hood with the Sheriff of Nottingham, let us be clear in that Robin Hood indeed helped the poor, but he was not a tax collector for King John… much the contrary.

Many years ago in an op-ed, I wrote that since justice lies on a never ending continuum, which made it hard to know where you find yourself, the most effective way to fight for justice was by attacking the much easier identifiable injustices. In the same vein, since it is hard to define what equality we need, before the grave, it is better to combat the most egregious sources of inequality.

Right now many economic injustices firmly anchored in what is known as rent extraction or crony capitalism are important inequality drivers. Trying to make up for the bad results, by for instance a tax on wealth, without correcting those drivers will lead to even more inequality.

There are many man-made causes for inequality. Two of those that I have been proposing to end are:

First: It makes no sense if we want to make our capitalism vigorous that the usually ample profits obtained under the protection of a patent, or through the power of an extravagant market share, should be taxed at the same rate, that those more meager profits resulting from having to compete naked and unprotected in the market. As a result the capital accumulation of “the protected” will be higher than that of “the unprotected” with very dire long term implications to the dynamism of capitalism.

Second: It makes no sense whatsoever to allow banks to obtain higher risk-adjusted returns on equity when lending to “the infallible” than when lending to “the risky”. And that is the direct result of those so obnoxious risk-weighted capital requirements. Robin Hood would never agree with allowing banks to lend, in risk-adjusted terms, more favorably to the “infallible sovereign” or to the AAAristocracy than when lending to a “risky” Sherwood Forest entrepreneur.

Again, let us be sure that we fight inequality by reducing its causes, not by increasing the profits of the intermediaries in redistribution, the merchants of inequality reduction.

PS. Sir, just to let you know, I am not copying Martin Wolf with this, as he has asked me not to send him any more comments related to the capital requirements for banks, as he understands it all… at least so he thinks.

In the absence of QEs and TARP, would Piketty have written the same “Capital in the Twenty-First Century”?

Sir, I refer to Martin Wolf’s review of Thomas Piketty’s, “Capital in the Twenty-First Century” April 15.

First, I need to make two disclaimers. I have not read the book and, as suddenly references to it exploded on the web, I must confess I first thought of it as a too pushy publisher campaign, and I have not been able to free myself from that impression. From the little I have read of it, that in significance it is going to be up there with Hayek’s “The Road to Serfdom”?… no way Jose. 

Now if I could only make two questions on Piketty’s book these would be:

Would Piketty have written the same Capital in the Twenty-First Century in the absence of QEs and TARP which obviously helped to keep the wealth… or if profits derived from protected intellectual rights had been taxed at a higher rate that profits derived from competing naked in the market?

Where does Piketty think all inherited but dissipated wealth has gone? Is he unaware of the real difficulties of keeping the value of an inheritance?

By taxing more the profits derived from patents you might, on the margin, reduce conflicts between true inventors and trolls.

Sir, Richard Waters discusses that delicate issue about a too rigid or too lax patent allocation system and so rightly states “The trouble is, one person’s abusive troll is another’s deserving inventor”, “Tech industry opens a Pandora’s box of patent strife”, April 4.

One way to diminish the conflict might be to reduce, on the margin, the worth of patents and other intellectual protection.

Since some years I have for instance argued that it does not really fair that profits obtained by competing naked in the market, without any safety net, should be taxed at the same rate as profits derived from an activity that has the protection of a patent… especially when the government is expected to spend tax revenues in its protection.

Tax income from protected intellectual property rights at a higher rate than income from when competing naked in the market

Sir, Martin Wolf writes “Property rights are a social creation. The idea that a small minority should overwhelming benefit from new technologies should be reconsidered. It would be possible, for example, for the state to obtain an automatic share in the income from the intellectual property it protects”, “Enslave the robots and free the poor”, February 12.

And that as you know, is a theme close to my heart. On it I have written to you, to Martin Wolf and to other of your journalists many letter over the years. In fact only last week I wrote you a letter referring to Martin Wolf's article titled just like this one. I did not copy Wolf, and you might have not either.

Though it might very well have been thought of earlier by someone else I started to formally promote such a tax scheme in 2008, by means of an Op-Ed in El Universal, Caracas, titled “We need a tax intellectual property rights’ income”.

Wolf also writes “We must reconsider leisure… let people enjoy themselves busily”.

And that is another theme that I have often written about, as I feel it is of utmost importance for any society to know what to do well with its structural unemployed. As a example you can read “We need worthy and decent unemployments”

PS. Sir, I leave it in your hand to copy or not copy Martin Wolf with this letter, since I do not wish to receive a letter from him telling me again I write too much, or that he already knows what there is to be known, on issues such as the risk-weighted capital requirements for banks.

Income derived from protected intellectual property should be taxed at higher rates than income obtained from competing naked.

Sir, Martin Wolf refers to “the role of rental income, particularly from intellectual property” as one explanation of “rising inequality of labor income and of the distribution of income between labor and capital”, “If robots divide us, they will conquer” February 5.

In this respect I would just want to note that for years I have argued that all income which results from an intellectual property that is being protected should be taxed at a higher rate, than any income that is produced by competing in the markets naked.

But I need also to express certain uneasiness with the concept of capital getting more and more rewarded than labor, because the truth is that, currently, because of artificially low interest, very much capital is almost not being rewarded at all. Many pensioners are not receiving what they should be receiving for that capital they worked and saved so hard to obtain.

Finally, with respect to the prospect of robots conquering us, I would hate that to happen, but, on the other hand, these would never ever come up with such crazy notions of basing the capital requirements for banks, those that should primarily be there to cover for unexpected losses, on the perceptions about the expected losses, and much less on these perceptions being correct.

And what about a special intellectual property monopoly tax?

Sir with today´s technology I am not that sure John Lennon will never ever sing another song, as John Kay holds in “It´s mad to give my heirs rights to a student lit crit essay” March 23. But, yes, John Lennon will not write another song, and even if some computer wizards used his old material to generate a new John Lennon song, we can rest assure John Lennon would not appear as the beneficiary of that copyright.

This touches on an issue not covered in John Kay´s excellent article, namely that all or at least most of the intellectual production rights, gets credited only to whom who ran the last leg of the corresponding human relay... and that to top up that injustice, the rest of us have to pay for the protection of these rights. I have often held that revenues that derive from the monopoly rights the society has awarded should be taxed on a higher rate than those revenues someone has to fight for all alone and without a protective shield.

Let the government charge for the protection racket services it already provides.

Sir your “Vice of necessity” July 25, where you start hinting at legalizing drugs so as to raise the taxes fighting this crisis needs, opens up our eyes to a lot of unexploited taxing opportunities.

Among these: charging for the protection services already provided to intellectual property right holders; imposing a special tax on government created monopolies and oligopolies such as those of the credit rating agencies; and finally a big special tax on all bonuses derived from capitalizing all those splendid arbitrage opportunities that the financial regulators provide.

Alternatively of course, and like what you seem suggesting, is to get out of protection racket altogether so that much of the illicit and informal economies that most probably are still growing at healthy rates, can join the rest of the economy and be taxed as all of us.

What does not seem logical though is to remain in the wishy-washy middle ground.

We need to look at other possible explanations than trade

Sir Jagdish Bhagwati in “The selfish hegemon must offer a New Deal on trade” August 20, complains that “the labour lobbies believe, without any compelling evidences, that the American wages have been stagnant because of competition from the developing countries”. But, even if he is right, since he offers no other alternative explanation for the widening gap between the returns to capitals and the returns to labour in the economy, he is actually helping to keep the focus on trade as being the culprit.

Bhagwati would serve his worthy cause better by pointing out the effects of other developments that have run in parallel to the growth of global trade. How much of the capital-labour gap could be explained by the following?

1. The discrimination implicit in risk based pricing that has allowed the financial sector to charge some groups with extremely high interest, based on some quite dubious logical reasons. Borrowers that cannot pay the high interests should not have received the loans to begin with, at least not at those high rates, and those who can serve the loans have de-facto evidenced they merited lower rates.

2. The growing tendency to use intellectual property rights of all sort and kinds to create unregulated monopolies that capture rents.

3. The increased regressiveness of taxes that results from the tendency of turning away from taxing income to taxing consumption.

Net out the effect of those three factors and you might not have anything left to blame trade with.

Yes, it is awfully hard to have the cake and eat it too!

Let's face it, globalization is awfully hard to discuss when "like most of us do we try to have our cake and eat it too and Martin Wolf's "How to preserve the open economy at a time of stress", May 21, is but another example of it. I agree with it all, full-heartedly, yet I have not the faintest idea of what I really have agreed with. It might be that we need to simplify the whole globalization equation in more manageable pieces.

Martin Wolf mentions for instance "redistributing the spoils of globalization, not sacrificing them" and which sounds a quite sensible thing to do. But that would have to start by identifying the spoils and perhaps wake up to the fact that the spoils are not to be found in a faraway country but in your own neighbourhood, in your own friendly neighbours courtyard.

Trying to speculate about where the non-obvious spoils are to be found, as those arising from higher prices of commodities are easier to identify, I frequently end up making two questions that might indicate possible new direction, exactly the purpose of questioning.

The first is. Is it logical that profits made by competing nakedly cost to cost in an efficient market should be taxed at the same rates that profits derived from an activity to which society has provided special shelter, like intellectual property rights?

The second, much more mundane, is why should a sportsman that earns a fabulous amount because he plays in a franchise with global reach pay income taxes based on where he slugs or kicks it out? Should he not pay it to his homeland or proportionately to where his audiences are?

Martin Wolf did right opening the cage!

Sir who could have thought a year ago that we would read Martin Wolf say “Why regulators should intervene in bankers pay”, in the Financial Times, January 15, and agree that he has a valid point; that the system cannot stand to see many franchises of public confidence so savagely exploited by so few. Mind you, on a much different scale, that is exactly how we ended up turning over Venezuela into the hands of an instigator of hate.

Perhaps what we now need is a new layer of progressive taxes specially designed for those who earn more than 100 times the income per capita of the country. The argument seems also applicable to the area of intellectual property rights. When we the society agreed to award patents and invest money defending these so that new inventions would follow, we never did it in order to help the general managers of those patents to earn salaries like hedge funds managers or bankers.

But also what could be most needed, in this case for all, instead of new regulations, is to restore the power of the shareholders since as long as management can decide their own salaries, the market constraints have really not a chance to operate. There’s a fiction making its rounds in the world that the big salary checks are all well deserved and well earned. Who do you think put a spin on that theory?

Financial Time’s Hillary Clinton interview

Sir the following is my reaction after reading the interview of Senator Hillary Clinton, conducted by Financial Times ’s Washington bureau chief Edward Luce.

Protectionism: Full fledged competition in a globalized world would have eroded the profitability of many companies had we not awarded them the protection of intellectual property rights, and invested some serious money in making that shield mean something. Can you imagine Microsoft in a world where efficient software copiers are free to roam?

Therefore since most of labor have not been furnished similar new protections, and some old ones have in fact been taken away, it should not come as a surprise that the share of labor income as a percentage of GDP is dropping, and that this is, certainly and rightly, creating a source of conflict.

So what’s to be done? There are only two choices? Either we award to labor similar protections which would set us all on a de-globalization route, a lose-lose proposition; or we must require that the beneficiaries of intellectual property rights give back some extra of their quasi-monopoly based extra earnings to the society. As an absolute minimum, this should represent the direct cost of enforcing and defending their rights. Is this protectionism? No at all!

Review of existing trade agreements: Absolutely. In some of the US bilateral agreement some prohibitions were imposed on developing countries because at the time they were considered as appropriate, but hindsight has led to other conclusions and so these clauses need to be revisited. For instance some US trade agreements prohibit any restrictions on capital movement even though now these restrictions are deemed quite good at taking away some of the excessive volatility that the waters of the global financial oceans can have on local bathtubs.

Energy and environment: “the most important thing is getting the US focused on energy efficiency, on clean renewable energy, combating global warming on raising gas mileage etc.” Just like the recent Nobel price recipient Hillary Clinton does not have the courage of spelling out what is primarily needed to really alter the energy and environment realities in the US, namely a substantial tax on gasoline consumption.

Housing crisis: Just like the US can sometimes use a Strategic Petroleum Reserve I would suggest the government buying a large amount of the houses currently involved with subprime loans; at a price below the current outstanding mortgage; financed by the current mortgage holder; and giving the current debtor a option to repurchase his house in a couple of years at a price that would keep the tax-payer form being harmed. That’s what I would do… but then again I am no PhD and so I could be wrong

FT, keep cool!

Sir, I understand perfectly well the sentiments that you express in “Europe abandons the sanity clause” June 25, where you complain about the EU is dropping the principle of “free and undistorted competition”. Having said that I believe that you should be very careful sounding too principled on this issue, not only because most facets of competition will one way or another always be present in life, no matter the wording of any Treaty, but also because so much of the free competition preaching has lately gone hand in hand with the very strong intellectual property rights assertion trend, and that in many cases has signified a much more serious obstacle to” free and undistorted competition”. Therefore, may I suggest you take it easy and keep cool, as we truly need FT to be very clearheaded on this issue.

Brands are brands and that’s the way it is!

Sir, of course brands are useful when they motivate you to keep the name of the Financial Times in good standing, and me to do the same with my name. Having said that I feel you might have gone a bit overboard when in “Red Hot Brands” you defend so strongly the utilitarian value of brands, and I suspect it has to do with you feeling a bit uncomfortable with some of the questions those anti-capitalists that you refer to make, some of which are indeed quite difficult to answer. Forget it, there is no reason to be ashamed, brands are brands and just another fact-of-life that results from our human desire to identify and be identified. The next time some anti-capitalist nags you about brands just ask him about his Che.

And so, having hopefully cleared the ideological hurdle, let us now discuss objectively one of the main consequences of brands, which is that they frequently create quasi-monopolies that among other allows for wider profit margins. For instance one of the (mostly ignored) reasons for the declining shares of labour income in gross domestic products is most probably the growing importance of brands, plus of course all other type of intellectual property rights. And, so what can we do about it? I haven’t the faintest. I guess you could speculate on some progressive tax on brands depending on their market penetration but most probably, when in so much doubt, the best we could do, is to do nothing at all, letting the market to take care of that, as it sometimes seems to be doing through the pirating of brands... offering generic Louis Vuittons.