Participatory Budgeting

Fiscal Policy

Definitions

Participatory budgeting is the process in which all the citizens decide where the government is going to invest or spend its money. 

 

Participatory fiscal policy is the process in which all the citizens decide how the taxation system will work.

The Current Situation

Right now the elected politicians decide where to spend the government’s money. The government’s money is either collected through taxes, obtained through loans, or created through monetary policy. 

By deciding where and how to spend the government’s money, the politicians influence the economy and the circumstances of every citizen.

For example, if the politicians decide to spend on buying militarized weapons for the police, then they will generate very different circumstances than if they decide to spend more money on social services, like health services and non-police first responders. If the politicians decide to invest in the military, the future of the country might be very different than if they decided to invest in education.

A lot of the government’s power comes from their capacity to decide where and how to spend the government’s money.

Another source of government power is their capacity to decide who and how much to tax and to collect the taxes. Fiscal policy is the combination of tax policy and budgetary policy. The combination of both of these factors greatly influences every citizen's circumstances.

For example, if politicians decide to tax medicines then the circumstances for sick people might be harder. If politicians decide to tax carbon emissions, then they generate a stimulus for companies to be more carbon-efficient or carbon neutral. If politicians decide to give tax breaks to the rich, then the rich can accumulate more wealth more easily. If the politicians don’t tax enough then the government will not have enough spending power to fulfill some of society's needs. 

A lot of the corruption that happens right now in many governments of the world has to do with fiscal and budgetary policy. The wealthiest people in every country, lobby through legal and illegal means or threaten governments with capital flight to obtain a fiscal policy that benefits them. On the other hand, many companies and wealthy people invest in politicians' political campaigns to gain their favor, so that when they develop the budget, they favor and give contracts to those companies and wealthy people.

A lot of government power comes from deciding where to get its revenue and where to spend or invest it.

There are many political ideologies that contest how taxes should be collected and how the money should be spent. These different ideologies generate enemy political parties that divide and polarize the population destroying the social fabric. The politicians use the enormous power of tax collection and government spending to divide the population and to convince them that the ones that think that the fiscal or budgetary policy should be different are their enemies. 

 

For example, the politicians might convince a portion of the population that the opposing candidates and electorates are their enemies because they want to charge them more taxes, therefore they want to oppress them. On the other hand, the politicians of the opposing side might convince their electorate that the opposing side is not paying their fair share. This generates division and polarization among the citizens who might decide something different if they had the chance to decide for themselves. However, right now political parties and politicians decide what options to present their constituents with and they try to convince them that their opponents are their mortal enemies. 

Democracy means government by the people not government by the politicians elected by some of the people. Right now the politicians control too much power in their hands. With this power, they influence the world in which we live, and the opportunities we have available.

The Solution

Participatory budgeting and participatory fiscal policy are partial solutions, but they are a start in the right direction. 

Right now the elected politicians have power and rule over the citizens; through participatory fiscal policy some of that power will be taken away from the elected politicians and distributed equally among all citizens. Citizens will have more power and responsibility in their hands.

An efficient democratic process would be one that will efficiently organize citizens so that they can make decisions in a democratic way and in a time-efficient manner. If citizens have power but they don’t have organization or processes that facilitate the democratic decision-making process then the society will stagnate, disintegrate or tyrannical expedient factions will emerge. 

The first part of the solution will be to convince people to take power away from the politicians and to distribute it horizontally among all citizens. The second part of the solution is to devise a process or system to organize the citizens and facilitate the decision making process.

For the second part of the solution, we propose using the process of Average Democracy and we are developing the APP: "Democracy in your hands", to help citizens around the world to organize and to facilitate a time-efficient democratic process. 

To know more about Average Democracy, click here.

To know more about the APP that we are developing to help citizens make participatory budgeting and fiscal policy, clik here.

How Participatory budgeting works

The basic principle of participatory budgeting is that the citizens decide where to invest the government’s money. The easiest way to do so is to let people choose their budget, not based in specific amounts of money but on percentages of the overall budget. This means that people do not need to decide to spend 1,000,000 USD on education, they need to decide what percentage of the budget that is available will be used on education. For example, you might think that from all the government’s money at least 20% should go to education. The APP will then calculate how much that 20% percent is so that you can see the exact number. 

 

The process will be as follows:

  1. Every person has 100% of the budget to decide what to do with it.

  2. Every person writes a list of items where they want their government to spend their money.

  3. Every person assigns a percentage of the budget to each of the items on their lists.

  4. The items can be as generic or specific as they want them to be, with the knowledge that, generic items will be selected by more people, and specific items will be more isolated.

  5. The lists of every single person with their respective percentages are taken in and averaged to obtain the list of the whole society with the percentage of the budget that will be spent on each item. This generates the society's budget in a democratic and time-efficient way.

 

For example:

You might want your government to spend 30% of their budget on education, 10% on police and security, 15% on social services, 10% on environmental protection, 15% on military and international security, 10% on infrastructure, 10% on equitable economic development. On the other hand, one of your neighbors might want 30% on education, 30% on police and security, 30% on military and international services, 5% on social services, 5% on infrastructure. Yet another neighbor might want 40% on education, 10% on police and security, 20% on social services, 20% on environmental protection, 10% on the economic development of the underprivileged. If we average your budget proposal with those of both your neighbors the final budget will be: 33.3% for education, 16.6% on police and security, 13.3% on social services, 15% on military and international security, 10% on environmental protection, 5% on infrastructure, 3.3% on equitable economic development, and 3.3% on the economic development of the underprivileged.

How Participatory Fiscal Policy works

There are many ways in which participatory fiscal policy might work and be put into practice. We have developed a method that involves average democracy and we are developing an APP to facilitate the process of democratically deciding a country's fiscal policy.

Taxation policy is usually compromised of income taxes, capital taxes, consumption taxes, property taxes, estate taxes, and international trade tariffs.

A comprehensive way to handle the tax policy decisions to the citizens would be to address each and every one of these types of taxes individually and divide each one in a comprehensive way. 

For example, we can take income taxes and divide the income levels of society in 10. The lower-income people in society will be at level 1 and the highest paid people in society will be at level 10. The citizens will be able to see the range in income that each income level has. For example income level 1 might earn from $0 to $1,000 each month. Every citizen in the country will give an amount that they think should be taxed to this income level. The answers from every citizen are averaged to generate the final answer of what the society as a whole thinks should be the take on people earning from $0 to $1,000 monthly. If our society is compromised of 10 people and 9 of them choose 0% taxes on income level 1, and 1 person chooses 10% taxes on income level 1, then the average will be 1% tax on people earning from $0 to $1,000 monthly. The same process applies to every other income level. 

The citizens themselves get to decide individually what the taxation should be for every income level, and the answer every individual assigned to each income level is averaged to obtain the society's decision of what the tax on that income level should be.

This will be the most effective if the citizens can view in real-time how the tax they are proposing will affect the income of every level. For example, if the citizens have to decide the income taxes for the highest earners, they should be able to see that this group is compromised of around 10,000 people and that their income ranges from $1,000,000 to $100,000,000 monthly. A person might decide that they should pay 40% in taxes, so they will be able to see that this group will now earn from $600,000 to $60,000,000.

In essence, this is what participatory budgeting looks like. And the same principle applies to every other type of tax.

Products are divided into categories, from necessary to luxurious, the citizens can individually decide how much to tax each category and the answers that are assigned to each category are averaged to obtain the tax on each category of products.

If you want to know more about participatory fiscal policy, click here.

Notes

We are aware that the implications of these decisions affect every citizen's lives, and that an effort should be made to educate people more on these issues and that there should be constant debates and discussions about these issues. That is why it is so important to develop comprehensive tools and educational material.

The democratic theory does not assume the people will not make mistakes when they govern themselves, but politicians, elites, aristocrats, and kings have seldom been without fault themselves. To err is human. But an error of a free self -determined person will enrich him more than the errors or successes of a ruler.

If you want to know more about the APP we are developing to promote and facilitate participatory fiscal policy, click here.

If you want to know more about real democracy, click here.

If you want to know more about the Democratic Economy theory, click here.

Join, Volunteer, or Promote

If you want to promote these ideas you can join us full time on the Cooperative NGO or for one of the projects, you can volunteer par time for one of the projects or you can promote these ideas with friends or through any means you have at your disposal. Click here.

 

You can also donate to help us produce more and better didactical material and tools to spread this knowledge and to make the democratic process easy and time-efficient.

 

If you want to know more about the Democratic Economy theory, click here.