Tax the Rich. Here's How

These 7 ways of taxing the rich would generate more than $6 trillion over 10 years.

by

Robert Reich

 Published on Friday, April 02, 2021 

by

RobertReich.org

People participate in a "March on Billionaires" event on July 17, 2020 in New York City.

 (Photo: Spencer Platt/Getty Images)

Income and wealth are now more concentrated at the top than at any time over the last 80 years, and our unjust tax system is a big reason why. The tax code is rigged for the rich, enabling a handful of wealthy individuals to exert undue influence over our economy and democracy. 

Conservatives fret about budget deficits. Well, then, to pay for what the nation needs—ending poverty, universal health care, infrastructure, reversing climate change, investing in communities, and so much more—the super-wealthy have to pay their fair share.

Here are seven necessary ways to tax the rich.

First: Repeal the Trump tax cuts.

It’s no secret Trump’s giant tax cut was a giant giveaway to the rich. 65 percent of its benefits go to the richest fifth, 83 percent to the richest 1 percent over a decade. In 2018, for the first time on record, the 400 richest Americans paid a lower effective tax rate than the bottom half. Repealing the Trump tax cut’s benefits to the wealthy and big corporations, as Joe Biden has proposed, will raise an estimated $500 billion over a decade.

Second: Raise the tax rate on those at the top. 

In the 1950s, the highest tax rate on the richest Americans was over 90 percent. Even after tax deductions and credits, they still paid over 40 percent. But since then, tax rates have dropped dramatically. Today, after Trump’s tax cut, the richest Americans pay less than 26 percent, including deductions and credits. And this rate applies only to dollars earned in excess of $523,601. Raising the marginal tax rate by just one percent on the richest Americans would bring in an estimated $123 billion over 10 years. 

Third: A wealth tax on the super-wealthy.

Wealth is even more unequal than income. The richest 0.1% of Americans have almost as much wealth as the bottom 90 percent put together. Just during the pandemic, America’s billionaires added $1.3 trillion to their collective wealth. Elizabeth Warren’s proposed wealth tax would charge 2 percent on wealth over $50 million and 3 percent on wealth over $1 billion. It would only apply to about 75,000 U.S. households, fewer than 0.1% of taxpayers. Under it, Jeff Bezos would owe $5.7 billion out of his $185 billion fortune—less than half what he made in one day last year. The wealth tax would raise $2.75 trillion over a decade, enough to pay for universal childcare and free public college with plenty left over.

Fourth: A transactions tax on trades of stock.

The richest 1 percent owns 50 percent of the stock market. A tiny 0.1 percent tax on financial transactions—just $1 per $1,000 traded—would raise $777 billion over a decade. That’s enough to provide housing vouchers to all homeless people in America more than 12 times over.

Fifth: End the “stepped-up cost basis” loophole.

The heirs of the super-rich pay zero capital gains taxes on huge increases in the value of what they inherit because of a loophole called the stepped-up basis. At the time of death, the value of assets is “stepped up” to their current market value—so a stock that was originally valued at, say, one dollar when purchased but that’s worth $1,000 when heirs receive it, escapes $999 of capital gains taxes. This loophole enables huge and growing concentrations of wealth to be passed from generation to generation without ever being taxed. Eliminating this loophole would raise $105 billion over a decade.

Six: Close other loopholes for the super-rich.

For example, one way the managers of real estate, venture capital, private equity and hedge funds reduce their taxes is the carried interest loophole, which allows them to treat their income as capital gains rather than ordinary wage income. That means they get taxed at the lower capital gains rate rather than the higher tax rate on incomes. Closing this loophole is estimated to raise $14 billion over a decade.

Seven: Increase the IRS’s funding so it can audit rich taxpayers.

Because the IRS has been so underfunded, millionaires are far less likely to be audited than they used to be. As a result, the IRS fails to collect a huge amount of taxes from wealthy taxpayers. Collecting all unpaid federal income taxes from the richest 1 percent would generate at least $1.75 trillion over the decade. So fully fund the IRS.

Together, these 7 ways of taxing the rich would generate more than $6 trillion over 10 years—enough to tackle the great needs of the nation. As inequality has exploded, our unjust tax system has allowed the richest Americans to cheat their way out of paying their fair share. 

It’s not radical to rein in this irresponsibility. It’s radical to let it continue.

Watch:

Robert Reich, is the Chancellor’s Professor of Public Policy at the University of California, Berkeley, and a senior fellow at the Blum Center for Developing Economies. He served as secretary of labor in the Clinton administration, for which Time magazine named him one of the 10 most effective cabinet secretaries of the twentieth century. His book include:  "Aftershock" (2011), "The Work of Nations" (1992), "Beyond Outrage" (2012) and, "Saving Capitalism" (2016). He is also a founding editor of The American Prospect magazine, former chairman of Common Cause, a member of the American Academy of Arts and Sciences, and co-creator of the award-winning documentary, "Inequality For All." Reich's newest book is "The Common Good" (2019). He's co-creator of the Netflix original documentary "Saving Capitalism," which is streaming now.

This work is licensed under a Creative Commons Attribution-Share Alike 3.0 License.

America's Military-Industrial Complex Squanders $1.7 Trillion on a Lame Fighter Jet While the President Begs for Infrastructure Cash

Isn’t there a better way?

by

Will Bunch

published on

Thursday, April 01, 2021 

by

The Philadelphia Inquirer

 

U.S. Air Force Lockheed Martin F-35 Lightning stealth fighter flies over the

 San Francisco Bay in San Francisco, California on October 13, 2019.

 (Photo: Yichuan Cao/NurPhoto via Getty Images)

A Ferrari is surely a wonderful sports car, but let's be honest: Most of us couldn't afford the day-to-day maintenance, let alone the sticker price, and these beautiful creatures are hard to drive on America's pothole-plagued streets, and a massive pain in the butt to repair when they break down. So you can imagine the raised eyebrows earlier this year when a top U.S. Air Force general compared the F-35 Lightning II stealth fighter jet—decades and hundreds of billions of dollars into a lifetime that will cost taxpayers $1.7 trillion—to that Italian dream machine.

"I want to moderate how much we're using those aircraft," Gen. Charles Q. Brown, the Air Force chief of staff, told Pentagon reporters about the Lockheed Martin-built fighter in February. "You don't drive your Ferrari to work every day, you only drive it on Sundays. This is our high end, we want to make sure we don't use it all for the low-end fight … We don't want to burn up capability now and wish we had it later."

Experts have found that massive military spending—although it does create jobs at defense plants, so often located in the districts of key House members—is actually a drain on a nation's economy, because it diverts dollars from much more productive uses such as education...or infrastructure.

In so many words, Brown was admitting that one of the most expensive weapons systems known to humankind is a failure—to be kept under a heavy tarp in a padlocked garage six days a week. His words riled critics like William Astore, a retired Air Force lieutenant colonel who today writes frequently about Pentagon waste. That's because the F-35 was sold to the public in the early 1990s not as a luxury item but as a lower-cost, everyday workhorse fighter jet. He said the flaws now deeply embedded in America's military-industrial complex—the Pentagon's demands for the newest gadgets and a defense contractor's skill at upping the ante—"is how you end up with a Ferrari instead of a Camry ... or even an Audi."

The massive swing-and-a-miss that is the F-35—which already has the Pentagon dreaming of a new, new next-gen fighter that might actually be cheaper and easier to use—is just one symptom of a much greater problem: In spending more on war-related costs than the world's next 10 nations combined, the U.S. wastes billions on weapon systems that are ineffective and often not even needed. This dollar drain hasn't let up even as America's highways fill up with those Ferrari-foiling potholes and bridges collapse, while the world's richest nation falls behind on everything from high-speed rail to solar energy to teaching our kids.

another great day for the $1.7 trillion airplane that can't fly in the rain and also sometimes shoots itselfhttps://t.co/FcIrczMEBH

— Doug (@averyvery) March 26, 2021

But the obscene failures of the military-industrial complex that Dwight Eisenhower tried to warn us about way back in 1961 seem particularly frustrating this spring, as President Biden begs Congress to help him pay for the $2 trillion infrastructure plan he unveiled Wednesday in Pittsburgh. His scheme aims to not only address those decades of shameful neglect of highways but also stop poisoning kids with lead in drinking water, as happened in Flint, and tackle 21st century problems like climate change—but the fight will be over how to pay for it.

There's nothing fundamentally wrong with Biden's idea, which is to raise corporate taxes back to 2017 levels, before Donald Trump's irresponsible tax cut that—studies have shown—may have helped slightly fatten the bottom line for Big Business but did little for the everyday worker. But the Chamber of Commerce crowd and their GOP handmaidens on Capitol Hill will fight this with every fiber of their being, and even with Democrats using the 51-vote reconciliation tool there is no guarantee the badly needed plan will pass.

Meanwhile, the money blown on that sleek fighter jet behind the padlock on America's garage could have—OK, with help from a good accountant, perhaps—painlessly paid for 85% of what the Biden administration is seeking to do here. Or, what if we went crazy and tackled senseless Pentagon waste and raised taxes on corporations AND on billionaires like Jeff Bezos and used the savings for our other massive needs, like making community college and public universities free to attend? But here's the deal, folks—Uncle Joe isn't going there, not yet.

The new administration has already signaled to Capitol Hill that its next Defense Department spending plan slated for later this spring will be essentially "flat"—if that word can be used to describe a bloated Pentagon budget of about $704 to $708 billion. The Biden plan would ignore a letter from 50 House progressives pleading for real cuts to instead invest "in diplomacy, humanitarian aid, global public health, sustainability initiatives, and basic research." But of course there's also pressure from congressional conservatives who want to spend even more on weapons, to accelerate a new cold war with Russia but especially with China.

The latter idea is not only the morally wrong choice, but ignores how much money we throw away on the barely usable weapons we have now. The F-35 Lightning II—with its premature cracks in its initial testing, inevitable and frequent software glitches, "sluggish" performance in test battles against the older model F-16, and with demands from Pentagon bosses that made it under-perform earlier-generation jets but also more costly to maintain—is obviously Exhibit A. Some of the fighter jet's defects are comically ironic—including the fact that a plane that was named Lightning II has problems in flying through lightning.

But critics such as Astore point to other Defense Department boondoggles that could be killed or scaled back. His list includes the Gerald R. Ford-class aircraft carriers ($14 billion a pop) which the retired colonel joked is more like Chevy Chase's Saturday Night Live impersonation of a stumbling Ford, with elevators that don't work and airplane catapults that don't catapult, or the Boeing K-46 tanker which—again, ironically—leaks fuel, or the Navy's Littoral Combat Ships that one defense journalist called "floating garbage piles" (at a price of $5 billion for every 10). There's more, but you probably get the drift by now.

A practical, real world solution here isn't rocket science, or even aircraft-carrier elevator science. The Biden administration could find hundreds of billions of dollars to deal with America's more pressing needs at home, as critics like Astore have noted, with simple moves like a) ending its sudden skittishness on carrying out the president's 2020 campaign promise to end the war in Afghanistan as soon as humanly possible and b) trimming the Pentagon's annual budget back down to the roughly $600 billion level it was at before its massive boost under President Trump, who was so eager to please the generals, no questions asked. On the F-35, it's too late to kill the project (for one thing, we've already sold it to our so-called allies like the United Arab Emirates) but we could save hundreds of billions by building fewer.

Bill Astore @TomDispatch : How about it, America? Why not cancel those wasteful, ineffective weapons and build back better at home? https://t.co/85WSABsP7S

— Responsible Statecraft (@RStatecraft) March 14, 2021

Experts have found that massive military spending—although it does create jobs at defense plants, so often located in the districts of key House members—is actually a drain on a nation's economy, because it diverts dollars from much more productive uses such as education...or infrastructure. So cutting the Pentagon budget to pay for part of the Biden agenda seems like a no-brainer. But Democrats just can't quit their reflexive instincts from the Ronald Reagan era (Biden's heyday in the Senate) that the slightest hint of looking weak on defense will cause them to lose elections—even after the real Cold War ended in 1991.

Real courage and strength would be admitting that America can easily retain the world's strongest military while still reclaiming hundreds of billions of wasted dollars that could instead improve our schools—and maybe even better educate our kids to make smarter decisions about war and peace than my generation has. And how wonderful would it be to pay for the things that our middle class actually needs with a massive garage sale? We can start with the Ferrari.

© 2021 The Philadelphia Inquirer

Will Bunch is a columnist for the Philadelphia Daily News and author of its popular blog Attytood.

Disastrous US Drug War Is Key Driver of Displacement in Central America

Why are desperate refugees turning up on the U.S. border? Because we have offloaded the costs of the drug war on Latin America.

by

Inge Fryklund

 Published on Friday, April 02, 2021

by

Foreign Policy In Focus

Migrants flock to our borders seeking relief from the terror caused by ruthless narcotraffickers and governments corrupted by the drug trade. (Photo: Shutterstock)

We are torn by images of unaccompanied minors and overcrowded facilities at our southern border, but few in the United States are asking why so many Central American families are so desperate to escape their own countries that they are willing to risk everything—including family separation.

These migrants are not fleeing some Act of God—drought or hurricanes or the like—that could not be anticipated or prevented. Rather, they are fleeing cartel violence and governmental corruption.

As CNN recently noted, “poverty, crime, and corruption in Latin America have long been drivers of migration.” Indeed, many Central Americans have concluded that the risks of the journey, of the smugglers, and of the possibility of losing their children are outweighed by the near certainty of violence or death at home.

But what explains the cartels, the violence and the governmental corruption? Fundamentally, it all stems from the U.S. War on Drugs.

When something that people want is declared illegal, the inevitable and predictable consequence is violence. Our experiment with alcohol prohibition in the United States (1920-1933) led to violence and corruption in U.S. cities as the unabated demand for alcohol led traffickers to pay bribes to police and politicians. Criminal gangs (think Al Capone) slaughtered each other as well as bystanders while battling over control of the alcohol trade.

We have created the problems driving desperate people to our borders and we have the power to change the dynamic.

However, during Prohibition, we did not try to force the rest of the world to join in our crusade. All the costs in violence and corruption stayed home to roost, which is probably why it took us only 13 years to realize that the downsides of this experiment outweighed whatever benefits there might be. With repeal, violence and corruption in American cities declined dramatically.

President Nixon ignored these lessons of Prohibition when he doubled down on illegality for other drugs. U.S. demand did not decrease, and Latin American supply met the demand. We wrongly believed that supply-side interdiction would result in fewer drug imports, but it has only resulted in smarter and more violent traffickers.

Drug-related governmental violence and corruption within the U.S. is minimal. We have offloaded most of the costs of the drug war onto the producer and transit countries, especially Mexico, Honduras, Guatemala, and El Salvador. We have used foreign aid and military assistance as leverage to force them to man the front lines of our War on Drugs regardless of the resulting corruption of their own politicians, police, and military. (By contrast, Uruguay, which does not rely on U.S. foreign aid, could implement its own, more liberal drug policies.)

If decapitated bodies were found outside Washington, D.C. instead of Mexico City, we would have changed course a long time ago, but until migrants massed at our border, we didn’t really notice the collateral damage elsewhere. We complain about corruption and “failures of governance” in these countries, yet our policies have systematically undercut democracy and made dysfunction inevitable. Latin American governments can’t be accountable to their own citizens when they must respond to the financial threats and incentives from the United States.

Not surprisingly, migrants flock to our borders seeking relief from the terror caused by ruthless narcotraffickers and governments corrupted by the drug trade. Our “immigration crisis” is a problem of our own making.

So how to change the situation?

The Biden administration has recognized that there must be reasons behind migration, and has named Vice President Kamala Harris at the point person for deterring migration and looking for “root causes” of the influx. However, a focus limited to diplomatic efforts (strengthening local border police) and economic aid is likely to be less than successful. As the Brookings Institution has noted, foreign aid tends to vanish into the hands of corrupt government officials. More money allocated to these same corrupt government officials and police departments is unlikely to change migration pressures.

This focus on “fixing” the Central American countries is also treating the migration problem as somehow caused by them: If only they would be less corrupt and would grow their economies, the migrants would stay home. We are blaming the victim. This completely ignores our essential role in destabilizing governments and fostering cartel violence.

We have created the problems driving desperate people to our borders and we have the power to change the dynamic. We can end the drug war in the U.S. and instead safely regulate and control all illicit substances, as we have done with alcohol and tobacco and, more recently, cannabis. We can cease foisting a drug war upon vulnerable South and Central American countries. With drugs no longer illegal, cartels lose both market share and a reason to bribe government officials.

Obviously, ending the War on Drugs and its disastrous collateral consequences is not a quick fix for the border. However, border problems—which clearly require some short-term logistical fixes—are only a symptom of our failed drug policies and should not distract attention from our practical and moral obligation to fix the real root causes of migration.

It will take time for these countries to re-stabilize. Economic development, job creation, and poverty reduction require the rule of law—honest governmental regulation, enforceable property rights, honest and expeditious courts, and police who assist rather than prey upon the public.

With the War on Drugs a thing of the past, and rule of law reestablished, the dynamism and talent of the population can turn to creating, rather than survival or escape. This will be a tremendous gain for our entire hemisphere.

The asylum problem will take care of itself when countries south of our border, responsive to their own citizens, are again free to craft their own destinies, and staying home becomes a natural and attractive option for parents and their children.

Foreign Policy In Focus contributor Inge Fryklund was a Chicago prosecutor during the 1980s. From 2004 to 2012, she spent more than four years in Afghanistan, working with the legal system and with national, provincial, and municipal governments. She is recently returned from Helmand Province, the heart of opium poppy production

NGO'S ARE THE STATE

Oxfam workers suspended amid sexual exploitation claims

2 April 2021, 14:41

Two Oxfam aid workers in the Democratic Republic of Congo have been suspended as part of an investigation into allegations of bullying and sexual misconduct. Picture: PA
 

By Kate Buck@katebuck96

Two Oxfam aid workers in the Democratic Republic of Congo have been suspended as part of an investigation into allegations of bullying and sexual misconduct.

The inquiry comes just a few weeks after the charity's statutory supervision status was lifted, following reforms prompted by a 2019 report into conduct by its staff after the 2010 Haiti earthquake.

An Oxfam spokesperson said in a statement: "We can confirm we have suspended two members of Oxfam staff in the DRC as part of an ongoing external investigation, which we set up last November, into allegations of abuses of power, including bullying and sexual misconduct.

"The Charity Commission for England and Wales were notified at the start of the investigation and we have kept them informed about its progress.

"We are acutely aware of our duty to survivors, including in supporting them to speak out safely. We are working hard to conclude the investigation fairly, safely and effectively."

The inquiry comes just a few weeks after the charity's statutory supervision status was lifted, following reforms prompted by a 2019 report into conduct by its staff after the 2010 Haiti earthquake. Picture: PA

Oxfam has been active in the DRC since 1961, with its work focused primarily on humanitarian projects such as providing long-term access to clean drinking water.

The Times reports the allegations against Oxfam staff in the country are outlined in a 10-page letter sent to charity bosses in February.

The letter reportedly details allegations against 11 people and is signed by more than 20 current and former Oxfam staff, with claims ranging from sexual harassment and intimidation to systemic fraud and corruption.

Oxfam has been under the spotlight in recent years after the Charity Commission determined in 2019 it had not fully disclosed allegations staff working in disaster zones had sexually abused children. The watchdog also cited a "culture of poor behaviour" among Oxfam GB staff sent to help victims of the 2010 Haiti earthquake.

Allegations included that child prostitutes were used by staff, including at Oxfam premises on the crisis-hit Caribbean island, and that safeguarding measures to protect the vulnerable were inadequate.

Statutory supervision of the charity was lifted in February after it implemented a majority of the 100 recommendations prompted by the inquiry.

A spokeswoman for the Charity Commission told The Times: ""We have been actively liaising with the charity on its investigations into allegations of misconduct in the DRC and have been receiving regular updates and assurances on the steps it is taking to address the concerns."

Pentagon pal Microsoft to supply US Army with 120,000+ HoloLens units in contract somehow worth 'up to $22bn'

Gives Blue Screen of Death a whole new meaning

Chris Williams, Editor in Chief Wed 31 Mar 2021 // 

---

Microsoft has agreed to supply at least 120,000 production units of its HoloLens augmented-reality headsets to the US Army.

In 2018, the software giant signed a $480m contract to supply 100,000 prototypes of the techno-goggles to Uncle Sam. This first batch of hardware was intended to "increase lethality by enhancing the ability to detect, decide and engage before the enemy."

And now, the software giant has announced it's moving on from the prototype phase to a production run and field deployment of its headgear, dubbed the Integrated Visual Augmentation System (IVAS).

GI 3DO .. Microsoft's snap of a US soldier wearing its HoloLens-based headgear

Microsoft told the AP newswire the contract could be worth up to $21.9bn over the next decade; the deal is set at five years and can be extended another five. That dollar figure may be on the optimistic side given that the IVAS project was assigned $1.1bn in funding, and Congress cut that by 20 per cent.

The HoloLens 2 carries a $3,500 price tag at Microsoft's online store.

"The IVAS headset, based on HoloLens and augmented by Microsoft Azure cloud services, delivers a platform that will keep soldiers safer and make them more effective," said the Windows goliath's technical fellow Alex Kipman.

"The program delivers enhanced situational awareness, enabling information sharing and decision-making in a variety of scenarios."

US Department of Defense to fling $1.76bn at Microsoft

READ MORE

The US Army's statement goes into specifics: stating the equipment is made up of "high-resolution night, thermal, and soldier-borne sensors integrated into a unified heads-up display." The kit features "augmented reality and machine learning to enable a life-like mixed reality training environment" so that Close Combat Force personnel can also "rehearse before engaging any adversaries."

In short, the gear is supposed to help soldiers fight as well as train, we're told.

In 2019, Microsoft landed the Pentagon's $10bn decade-long, winner-takes-all JEDI cloud deal, a move that Amazon continues to protest.

And so today's news isn't out of the ordinary: Redmond provides all sorts of services to the US military.

While Big Tech workers wrestled with the morality of supplying powerful AI and data analytics systems to governments, Microsoft president Brad Smith argued succinctly at one point: "We believe in the strong defense of the United States and we want the people who defend it to have access to the nation’s best technology, including from Microsoft." ®

Sponsored: Protect and recover your NAS and unstructured data

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Deliveroo's IPO Slump Casts Doubt Over London's Post-Brexit Ambitions

Published on Apr 2 2021 5:50 AM in Technology tagged: Trending Posts / London / Deliveroo / SPACed

Deliveroo's share price plunge on its London stock market debut has put a question mark over Britain's ambitions to become a home for fast-growing tech companies following its departure from the European Union, investors and analysts say.

Shares in the food delivery company slumped as much as 30% on Wednesday in one of the biggest first day falls for a stock in London. They were down another 2.2% on Thursday.

Many of the reasons for the brutal decline are likely to be company-specific, according to a dozen interviews by Reuters of venture capital (VC) investors, bankers, analysts and tech executives.

But some said it also highlighted shortcomings in the London market and that - whatever the cause - it would deal a blow to Britain's efforts to attract more top tech companies.

"The volatility facing Deliveroo's share price is a setback for the UK's ambitions to convince more VC-backed tech businesses to list," said Nalin Patel, EMEA Private Capital Analyst at PitchBook.

"Deliveroo's decision to list on the LSE (London Stock Exchange) will come under scrutiny given its disappointing debut and the fact that Europe-based tech companies have predominantly listed in the U.S. in recent years."

'Should Have SPACed'

One source close to some Deliveroo board members said some directors felt the loss-making company should have merged with a special purpose acquisition vehicle (SPAC) in New York - an increasingly popular way for firms to go public without an initial public offering (IPO).

"It's not great for London, to be honest. The feeling is that Deliveroo should have SPACed to New York where investors understand and accept the risk associated with pre-revenue businesses," the source said.

A Deliveroo spokeswoman declined to comment.

'Strong Start'

The LSE declined to comment on Deliveroo, but said the exchange had had a strong start to the year for listings.

"The positive activity demonstrates the ability of UK capital markets to support dynamic companies across all sectors and from around the globe," said Murray Roos, head of capital markets at LSE Group.

Attracting European technology companies has long been an goal for the LSE. Those ambitions became more pressing after Brexit, with London wanting to retain its position as a major global financial hub without access to EU markets.

The LSE, British government officials and bankers all launched a charm offensive to persuade Deliveroo to list in Britain.

Traditionally, European tech companies, such as music streaming firm Spotify, have chosen a New York listing to access the world's biggest tech investment community and an entrepreneur-friendly listing regime.

Britain's finance ministry declined to comment on the Deliveroo IPO but said the country had "a long track record of attracting the best companies in the world".

'Unique Cocktail Of Factors'

Several VCs and entrepreneurs said Deliveroo's flop had more to do with company-specific factors than London.

Some questioned whether Deliveroo's recent growth could be sustained when coronavirus lockdowns are eased and worried its reliance on a gig-economy model might run into legal problems.

"There are specific issues for Deliveroo - workers rights, how much of the recent growth will unwind post-lockdown," said Rob Moffat, a partner at Balderton Capital.

"I wouldn't get too into a read across for upcoming IPOs."

Some bankers also said the deal had little relevance to the IPO pipeline.

"It's a sign that ESG (environmental, social and governance) concerns are very important to investors' minds," said Andreas Bernstorff, head of equity capital markets at BNP Paribas. "If you combine that with the expensive valuation and governance, there was a unique cocktail of factors at play on this deal."

Still, some investor objections to Deliveroo could be read as a lower tolerance among British fund managers to entrepreneur-led growth firms with weaker corporate governance.

Heavyweight investors Aberdeen Standard Life, Aviva, Legal & General Investment Management and M&G all publicly stated their intention to stay away from the IPO. Unequal voting rights enjoyed by Deliveroo founder Will Shu were one of the reasons.

The Hut Group opted for a similarly unequal, dual-class share structure last year, and other IPO candidates are reportedly considering the same.

A listing review commissioned by UK finance minister Rishi Sunak has recommended such structures be allowed in London without restriction, but some investors are opposed.

As a result, some equity capital bankers believe British companies will once again look at the New York option.

"There is no shortage of SPACs to choose from," one said, referring to the record number of SPACs raising money in the United States and looking for acquisitions, many in Europe.

UK online car seller Cazoo Holdings Limited said this week it was opting for a SPAC deal to list in New York.

Whether Deliveroo becomes a lesson on IPO execution or on venue, or just a natural unwinding of some of the froth around tech IPOs in recent years, remains unclear.

"It may be in part a reaction to the drumbeat of negativity around the first day IPO pop, which has led some issuers to demand overly aggressive IPO pricing," said Matt Harris, a U.S.-based partner at Bain Capital Ventures.

"While you could argue that the drop in price means that Deliveroo raised money at an admirably low cost of capital, I doubt they are rejoicing about it."

NFTs: Why digital art has such a massive carbon footprint

by Peter Howson, The Conversation

APRIL 2, 2021

Credit: George Chairborn/Shutterstock

How much would you be willing to pay for a one-of-a-kind work of art? For some collectors, the limit lies somewhere in the region of hundreds of millions of dollars. What about a work of art that has no tangible form, and exists only as a digital token that's no more "real" than a JPEG file? Welcome to the strange world of crypto art collectibles, also known as NFTs.

Like Bitcoin, NFTs (non-fungible tokens) are cryptocurrencies. But whereas individual bitcoins all have the same value, NFTs are more like baseball cards. Each token has a different value and they can't be used to buy things. They exist on your computer as digital representations of artworks, songs, films and games, among other things.

NFTs have been around since 2017, when the first mainstream experiment in crypto-collectibles emerged: CryptoKitties. The average price for one of these cat cards was about US$60 back then. But that's chicken feed compared to current takings. Rights to a single digital image recently sold at auction for US$69.3 million (£50.2 million). CryptoPunk 7804 (a crudely drawn alien with a pipe) sold for US$7.5 million. A house on Mars was purchased for US$500,000. A digital house that is, not one that you might live in. Twitter CEO, Jack Dorsey, recently sold his first ever tweet as an NFT for just under US$3 million.

"But how can someone buy a tweet?", you may ask. After all, anyone's free to click on, look at, print out and frame the tweet as many times as they like.

When you buy an NFT, you're buying a unique certificate of ownership, which is locked away on an immutable distributed database known as a blockchain. The creator of the artwork generally retains the copyright and in most cases, you own little more than bragging rights. Creators are also likely to pass the costs for creating your NFT files (or "minting" them) on to you (around US$100 as I write this).

Most of the time, what you'll also be responsible for is an enormous carbon footprint.


Counting the carbon cost of NFTs

Because they depend on a blockchain, NFTs use a lot of energy. Most creators still use Ethereum, a blockchain secured using a similar proof-of-work system to Bitcoin. This involves an energy-intensive computer function called mining. Specialist mining computers take turns guessing the combination to a digital lock (a long string of random digits). The computer that correctly guesses the combination wins a reward paid in a cryptocurrency called Ether. The digital lock resets roughly every 15 seconds, and the competition continues. Ethereum uses about 31 terawatt-hours (TWh) of electricity a year, about as much as the whole of Nigeria.

It's very difficult to calculate exactly how much responsibility the NFT industry should take for Ethereum's carbon emissions. Ethereum was going to run with or without NFTs. But with the growing demand for digital art, NFT buyers and sellers are becoming liable for an increasing share of Ethereum's total energy use, and some artists are starting to think twice.

The French digital artist, Joanie Lemercier, recently canceled the sale of six works after calculating the associated energy costs. The sale would use, in just ten seconds, enough electricity to power the artist's entire studio for two years.

ArtStation, a site for digital artists to showcase their portfolios, recently developed an NFT marketplace. But within hours of telling the world about the planned launch, widespread condemnation on social media forced ArtStation to scrap the project.

Alternative technologies exist that enable NFT markets without the carbon headache. Sidechains use negligible amounts of energy to process NFTs because these transactions occur on a more centralized platform where costs (and carbon footprints) are much lower.

Damien Hirst is due to release a collection of NFTs called The Currency Project using the Palm sidechain. Hirst will still be accepting payment in Bitcoin though, so his NFTs could still come with hefty carbon baggage.

Taking artistic license with climate solutions

NFT enthusiasts argue that the increasing popularity of blockchain technology, with its voracious appetite for energy, provides incentives for upgrading energy grids from fossil fuels to renewable sources. Similar arguments have been made by the airline industry: in order to fund the efficiency innovations that could make aviation greener, people should fly more, not less. For NFTs, evidence shows this approach is unlikely to work. Due to the competitive nature of proof-of-work mining, booming NFT markets are encouraging the construction of reliable coal-fired power stations, so that crypto miners don't have to suffer intermittent access to renewable generation.

Some NFT creators are trying to have their crypto-cake and eat it by using carbon offsets. Buying offsets funds conservation work, with each carbon credit purchased equivalent to one ton of carbon saved, which is either stored in a tree or theoretically prevented from escaping into the atmosphere through some sort of industrial innovation. The Offsetra company provides an emissions calculator and sells carbon credits to offset emissions caused by NFT transactions. The NFT marketplace Nifty Gateway recently auctioned eight carbon net-negative NFTs "inspired by Earth and the climate crisis". The artworks received 60 carbon credits. Each offset was itself an NFT.

NFT carbon credits (or any carbon credits for that matter) depend on clever accounting and a belief that carbon, like NFTs on a blockchain, can be immutably locked away in trees forever. It cannot. Nifty's website explains that offsets make sense for neutralizing our unavoidable emissions, "after we've done all attainable actions" to reduce our carbon footprint.

But does acquiring bragging rights to a digital image that anyone with an internet connection can enjoy constitute an unavoidable part of one's carbon footprint?


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