The Untaxing of the United States of America PDF Print E-mail
Written by Prof. Paul Douglas Katchings   
Saturday, 06 August 2011

The Untaxing of the United States of America

 

How taxing capital gains ends the taxation of wages, salaries and profits.

 

by Paul Douglas Katchings
Business Intelligence Officer, Business Engineer.
All Rights Reserved. May 2011 – February 29, 2012.

Abstract 

 

Acknowledgements
List of Figures
List of Tables
Rationale

 

I: Introduction
1. Equity
2. Risk
3. Why Not To Increase Interest Rates
4. The Reason for Not Taxing Corporate Profits
5. Understanding Exactly What Capitalism Is

 

II: Examining Modigliani-Miller’s Capital Structure Irrelevance Principle
6. Debt and Equity Financing Affect Market Value Differently
7. Lemma Proof Implications
8. The Same Equity vs. Debt Clarity Applies to Lost Tax Revenue

 

III: Examining Tax Policy Based On The Laffer Curve
9. A Clear Macro-Economic View of Capitalism
10. Why Not to Tax Corporate Profits
11. Why Penalize Market Values?
12. How Much Market Value Is Suppressed By Corporate Taxes?
13. CFOs Hoard Cash
14. Taxes And CFO Actions Suppress The GDP
15. Defending a $0 Corporate Tax Policy

 

IV: Katchings’ Two Laws of Capitalism Enlighten Ownership Structure
16. First Law of Capitalism
17. Second Law of Capitalism
18. Corporate Structures

 

V: The Customer Should Receive Ownership
19. Debt Is Outdated and Takes Value Away
20. Equity Adds Value
21. A New Ownership Structure
22. Implications

 

About the Author

 

Abstract

 

The revelation that $3.5 trillion in taxes is lost to the US Treasury due to an ill-defined corporate tax policy completely alters the current debate on various economic issues. These issues include unemployment, deficits, Medicare, Medicaid, Social Security, education, urban infrastructure and the concerns about the US debt ceiling.

 

In the months and years to come, the amount of lost taxes will exceed $10 trillion if the current tax policy remains in place.

 

US public companies make up less than 1% of all types of US businesses. Yet the US Treasury collects more tax revenue from the “predictable” capital gains (associated with the public companies) than from direct corporate taxes and all other forms of taxation.

 

So how could policy makers miss for so long the economic fact that a $0 tax on public company profits increases the public company market values and “predictable” capital gains so much that the huge increase in capital gains taxes permits the profits of companies and the salaries & wages of US citizens to be untaxed?

 

$300 billion in taxes on US corporate profits suppresses $10 trillion in equity value and costs the US Treasury $3.5 trillion in capital gains tax revenue. This is an absolutely astonishing revelation.

 

Please pay careful attention to these momentous tax facts. It is advised to drop everything and focus 100% of your attention on this white paper. For citizens and policy makers in particular, this comprehensive analysis explains exactly how the US Federal Government will collect more taxes by way of a simple change in taxing the public company.

 

Three economics concepts are presented. The first two require re-examination and the third one determines the optimized market value for the public company. This optimization requires a very clear understanding of capitalism and its vehicle the public company. Only then will the public companyʼs ability to produce taxable values be appreciated and applied.

 

The crux of all economic problems facing the US and every other country on the globe is the lack of definition and knowledge of exactly what capitalism and its vehicle (the public company) are. The reader must unequivocally understand the structure and nuclear fission-like power of the public company in order to see why and how the untaxing of the United States of America is accomplished.

 

Go to Table of Contents

 

Untaxing U.S.A.     Acknowledgements

 

abstract            [previous]            [next]            part I

 

The only way that the United States of America and Western nations saddled with spiraling debt will immediately get out of this death spiral is to bring the opposite of debt, which is equity, into play. The statement “without debt you will never have a financial crisis” by Bengt Holmstrom, Ph.D. (Department of Economics at Massachusetts Institute of Technology) is significant because a scientific solution, as presented in this white paper, is sorely needed for the economic problem of debt and taxes.

 

Timothy Geithner the United States Secretary of the Treasury and Ben Bernanke the Chairman of the Board of Governors of the Federal Reserve System are subtle geniuses in pledging to keep interest rates low and, in consequence, a lower dividend rate.

 

The lower the interest rates the lower the dividend rate, and the lower the tax rate the more equity value is produced in the general economy of the US and the world. The higher the interest rate the higher the dividend rate, and the higher the tax rate the lower the equity value that is produced. These rates’ effects on equity value or market value are illustrated by the Katchings Curves.

 

Thanks to Colleen J. Hannigan, Lowthers College, to Marcus B. Farrow, Occidental College B.A., University of Southern California M.B.A., and to Isaac Rosier, United States Air Force Academy, University of Southern California M.B.A. for their tireless work over the years.

 

Special thanks to Ananda Glover-Akpey, Dartmouth College A.B., Thayer School of Engineering B.E., and to Dru Farnham, University of Southern California B.A., California State University Los Angeles, M.A. for a super job of patience in editing this much-needed white paper!

 

When academics, politicians, corporate leaders and the American People read and understand how all Americans are an integral component of true capitalism, America will have acknowledged her destiny of debt-free economics.

 

This is the purpose of The Untaxing of the United States of America.

 

Paul Douglas Katchings
February 29, 2012

 

Go to List of Figures & Tables

 

Untaxing U.S.A.     List of Figures & Tables

 

acknowledgements            [previous]            [next]            part I

 

List of Figures

Figure 1. Laffer Curve  Source: Investopedia.com (2003)  (part III)

Figure 2a. Katchings Curves for $300 billion of corporate earnings. (ch. 22)

Figure 2b. Katchings Curves for $857 billion of corporate earnings. (ch. 22)

 

List of Tables

Table 1. Comparing the Economic Value of Debt with the Economic Value of Equity.   (ch. 1)

Table 2. The Negative Effect of Rising Interest Rates on Market Value.   (ch. 3)

Table 3a. Comparing Net Tax Revenue when 10% of shares are sold and Corporate Profits Are Taxed or Untaxed  (ch. 4)

Table 3b. Comparing Net Tax Revenue when 50% of shares are sold and Corporate Profits Are Taxed or Untaxed  (ch. 4)

Table 4. The Consequences of Not Taxing Corporate Profits.   (ch. 4)

Table 5. Tax Revenue Losses from a 35% Corporate Tax Rate.  (ch. 11)

Table 6. Tax Revenue Gain from a 0% Corporate Tax Rate. (ch. 15)

Table 7. Comparing Capital Gains Tax Revenue when 9%, 18% and 27% of Increases in Market Value are sold. (ch. 15)

Table 8. Projection of New Jobs and Tax Revenue in the 50 United States by 4,004 LLPCs and PCs.  (ch. 22)

Table 9a. The Effect of Different Rates on Total Market Value [$billions] with Earnings of $300 billion before taxes. (ch. 22)

Table 9b. The Effect of Different Rates on Total Market Value [$billions] with Earnings of $857 billion before taxes. (ch. 22)

 

Go to Rationale

 

Untaxing U.S.A.     Rationale

 

acknowledgements            [previous]            [next]            part I

 

A $300 billion tax on the profits of US public companies suppresses their market values by $10 trillion (causing the US Treasury to lose $3.5 trillion in tax revenue) and triggers a chain of clearly discernible events resulting in more suppression of market values and a potential $10 trillion loss in tax revenue to the US Treasury.

______________

 

Go to Part I: Introduction

 

Untaxing   Part I: Introduction

 

acknowledgements            [previous]            [next]            part II

 

Debt should never be confused with capitalism. Without debt you will never have inflation, deflation, unemployment or bankruptcy filings!

 

Pure capitalism rests on the two pillars of risk and equity. Take away either one of these pillars and the concept of pure capitalism ceases to exist. Debt is a fallacious pillar.

______________

 

To understand the how and why this $3.5 to $10 trillion colossal tax loss has been overlooked, it is imperative to recognize the root cause. Most law makers and financial people are not consciously aware that without the public company there is no concept called capitalism.

 

The capital structure, tax policy, and ownership structure of the public company are analyzed from a perspective of several decades of exhaustive inspection. There is no standard definition of capitalism. The lack of a definition is evidenced in the undervaluing of public companies all over the world. Market capitalizations of public companies in the US and 265 other countries (if they have public companies) are shown in this white paper to be less than maximized.

 

Fundamentally we need to know today what the exact foundation of capitalism is. When capitalism is reduced to a scientific formula in the spirit of physics (e.g. Newton’s Force=ma and Einstein’s Energy=mc2) then we can determine the maximum value of the public company for tax policy and shareholders.

 

The delivery vehicle of capitalism is the public company. We need to be clear about this fact to understand how and why we have, for the first time, a five-variable formula defining capitalism. These five variables, when related to the public company, rest on two pillars of Risk and Equity.

 

Take away either one of these two pillars and the concept of pure capitalism ceases to exist and the five-variable formula given later in this white paper cannot be produced. Earnings declared as dividends is the basis for the market value of the public company.

 

Until the release of this white paper, we have only scratched the surface of capitalism’s ability to produce untold economic power. Let’s not confuse debt with capitalism, as do most economists and accountants. This confusion has brought the US and the world to an unmanageable but reversible debt mess.

 

Go to (part I) chapter 1: Equity

 

Untaxing-I (Introduction) ch 1:     Equity

 

part I            [previous]            [next]            part II

 

Earnings categorized as dividends is the basis for the public company’s market value or market capitalization. When debt or taxes attack the earnings of a public company, they attack the public company’s ability to produce equity values that can be taxed.

 

Let’s make no mistake about the following fact: Debt is a tax on capitalism. Debt reduces corporate earnings, decreasing the amount of dividends that should be paid to the shareholders and therefore suppressing the market value of the public company.

 

Before we begin to examine tax policy, let’s compare Debt and Equity. Table 1 below compares what happens when a $1,000 is loaned to a borrower to what happens when a $1,000 dividend is received or earned from an equity investment. A $1,000 savings deposit is actually a $1,000 loan to the bank receiving the deposit.


A lender receives $7.70 in interest on the $1,000 loan (disguised as a savings deposit) to the bank. On the other hand, the asset yielding the $1,000 dividend (to an investor) is valued at $38,168 (= $1,000 ÷ 0.0262).

 

Clearly, the economic value involved in the case of Equity is much bigger than its equivalent in the case of Debt. In comparing $7.70 of interest (created by a savings deposit) with $38,167.94 of equity value, we see a higher return in the case of Equity. Comparing a $37,168 return ($38,168 minus $1,000) with a $7.70 return gives us a 482,601% difference. Equity’s larger economic value is the reason for using the nuclear power analogy to describe the power of true capitalism.

 

Note that the case of Equity (2nd line of Table 1) can also describe a $1,000 investment to own an asset worth $38,168. In both situations — receiving a dividend from an asset or making an equity investment for asset ownership — Equity is more powerful than Debt.

 

The results of this simple Debt-Equity comparison should shock anyone who thought they understood economics, capitalism and finance. This is just the beginning of exposing the equity-producing power of the public company for tax purposes.

________________

Dividend Yield Rates are tracked at Barron’s (online.barrons.com)

 

Go to (part I) chapter 2: Risk

 

Untaxing-I (Introduction) ch 2:     Risk

 

part I            [previous]            [next]            part II

 

We need for the United States of America, in particular, to stop being inconsistent about Capitalism. Any time that debt is used, the negative consequences of value-suppression is being surreptitiously introduced and economic slavery is being imposed on current and future generations of Americans.

 

As to the Debt-Equity comparison in Table 1 (chapter one, page 3), no liberty is taken when attaching or associating the economic system of socialism with Debt. Credit, Debt and Interest are suppressive and they do not and cannot produce equity values as does Capitalism (Equity and Risk).

 

The apparent security of a savings deposit is deceptive. Someone, somewhere along the chain of value creation, takes a risk for the generation of returns from which a $7.70 savings interest is given to the $1,000 depositor at the end of the chain.  If there are no risk-takers and everyone just lends their money (through savings deposits) to banks, returns would grind to a halt with negative consequences. Capitalism rewards the risk-takers, the entrepreneurs, the inventors, the innovators and all shareholders with equity value.

 

Let’s be clear of exactly what we are looking at in this Debt-Equity comparison. Equity is more powerful than Debt. An uncommonly-high 90% savings interest rate and 20% dividend yield rate for the public company cannot upset the balance of power between Equity ($1,000 ÷ 20% = $5,000) and Debt ($1,000 * 90% = $900). Even in this extreme case, Equity is 456% more powerful than Debt. The economic value of Equity outperforms the economic value of Debt.

 

No collateral is needed to pay back an equity investment. No collateral means more risk for the investor, but the net effect of risk and equity is positive.

 

Collateral is needed to pay back a debt loan. Collateral means less risk for the lender, but the net effect of less risk and debt is negative. Less economic value is produced and the process of manifesting new ideas must carry the extra weight of debt-servicing.

 

It is clear from the Debt-Equity comparison and the shocking 482,601% example (see Table 1 in chapter one) that a Debt-Equity study has not been made public before this white paper. This Debt-Equity study reveals the tremendous power of capitalism (and the public company) that produces hundreds and many thousands of times more economic value than Debt to support an economic system.

 

This white paper shows how to harness the 482,601% economic superiority of Equity over Debt in order to get more tax revenue for the US Treasury while eliminating the taxes on corporate profits and individual salaries and wages.

 

Go to (part I) chapter 3: Why Not To Increase Interest Rates

 

 Untaxing-I (Introduction) ch 3:     Why Not To Increase Interest Rates

 

part I            [previous]            [next]            part II

 

In general, the market value of public companies goes up if the dividend yield rate (and the linked savings interest rate) goes down. Market values fall if the dividend yield rate (and savings rate) is higher.

 

Let’s say the savings interest rate increases from 0.77% to 1.0639% and the dividend yield increases from 2.62% to 3.62%. The interest created by a $1,000 savings deposit is now $10.64.

 

The asset yielding the $1,000 dividend is now valued at $27,624.31 (= $1,000 ÷ 0.0362).

Adding just 1% to the dividend yield reduces the public company’s market value by 27.6%. The market value dropped from $38,168 to $27,624.

 

The economic value of a higher savings rate has increased at the expense of equity. An equity value of $27,624 still carries greater economic significance than the increase in annual interest from $7.70 to $10.64.

 

But the $10,544 loss of equity value is unacceptable, especially within the new context of the untaxing of America as presented in this white paper. If more equity value is produced instead of getting lost, then there is an increase in capital gains which (when taxed) produces more tax revenue for the US Treasury.

 

Table 2 shows a $3.16 trillion loss in Corporate Market Value when the Dividend Yield Rate goes up by 1%. This loss of market value is simply unacceptable because it eliminates an increase in capital gains, resulting in less tax revenue for the US Treasury.

Mathematical proof is presented in chapter four to show why it is prudent not to tax corporate profits. Why corporations should return more dividends to their shareholders will also be explained in later parts of this white paper. It becomes vital for experts in economic, corporate, academic and policy-making circles to understand the economic harm done by the direct tax on public company profits and individual wages and salaries.

 

Go to (part I) chapter 4: The Reason For Not Taxing Corporate Profits

 

Untaxing-I (Introduction) ch 4:     The Reason For Not Taxing Corporate Profits

 

part I            [previous]            [next]            part II

 

The effect of taxing not company profits but capital gains only, yields much higher total tax revenue. As a result, there will be no need to tax individual wages and salaries. With more people becoming shareholders in public companies, the increase in tax revenue from short and long-term capital gains becomes significant.

 

Let’s examine some mathematical proof from Tables 3a and 3b below, based on a public company with $100 million of annual revenue and $75 million of expenses. The average earnings for 2,000 of the top US public companies is 16% of their revenue. In these tables, Earnings After Taxes is $16.25 million (or $25 million with a $0 corporate tax).

To explain what the Capital Gains Tax is based on, we first apply the 2.62% dividend yield to the Earnings After Taxes giving us a Market Value of $620,229,008 (= $16.25 million ÷ 0.0262). Then we apply the 35% capital gains tax rate to 10% of the Market Value for the shares sold to get a Capital Gains Tax of $21,708,015 (= $620,229,008 * 0.1 * 0.35). Net Tax Revenue is the sum of Corporate Tax and Capital Gains Tax. Note the 10% increase in Net Tax Revenue (from $30,458,015 to $33,396,946) when Corporate Tax is $0.

The Capital Gains Tax collected is higher in Table 3b than Table 3a because 50% of shares are sold instead of 10% of shares sold. Both Tables 3a and 3b show that Net Tax Revenue is greater when the direct Corporate Tax is $0.

 

When 10% of shares are sold and corporate tax is $0, Net Tax Revenue increases by 10%. When 50% of shares are sold and corporate tax is $0, Net Tax Revenue increases by 42%. These statements are proved in Tables 3a and 3b. If another Table is prepared for a scenario where 90% of shares are sold, the Net Tax Revenue would increase by 47% with no corporate tax.

 

When the profits of 20,000 or so US public companies are taxed, their total market value (or market capitalization) is $17.14 trillion. The US Gross Domestic Product (GDP) is $14.66 trillion.

But when the company profits are not taxed, the new numbers for total market capitalization and US GDP become $54.63 trillion and $40.15 trillion respectively.

The proof tables (Tables 3a, 3b and 4) present, for the first time, the effects of no direct taxes on company profits. The increase in tax revenue is significant enough that there is no need for individual taxes. Thus everyone in the US benefits when there are no direct taxes on company profits. Furthermore, this data suggests access for everyone to participate in pure capitalism, as explained later in this white paper.

 

Go to (part I) chapter 5: Understanding Exactly What Capitalism Is

 

Untaxing-I (Introduction) ch 5:     Understanding Exactly What Capitalism Is

 

part I            [previous]            [next]            part II

 

Capitalism has nothing to do with the goods or services provided by the public company. Virtually any product or service can be placed inside a public company to produce equity value for the shareholders. The primary function of the public company is the production of equity value.

The stock or ownership interest in a public company carries equity value. The equity value is a  portion (or fraction) of the public company’s entire market value.

 

Shareholders exchange one form of value for another form of value, i.e. the shares or units of stock or ownership interest in the public company. Generally, the form of value exchanged for ownership interest is some unit of currency.

 

This value exchange can take the form of any number of hybrids from debt to cash. For instance, a debt-loan can be taken from a bank where the shares (or other things) are pledged as collateral.  In another instance, cash can be exchanged for ownership interest in a public company.

 

This exchange of value involves risk on the part of the shareholder because the equity value of the ownership interest is not guaranteed. The inherent risk of the exchange of equity value is one of the pillars of true capitalism.

 

A simple description of Capitalism is the act of taking a risk with a public company with the goal of increasing the value of one’s ownership interest in the public company. Such activity should be accessible not only to investors, but also employees, innovators, business people and customers.

The only product of Capitalism is Equity Value which is produced after taking a risk.

 

It’s now time to examine three economic thoughts, presented in Parts II, III and IV. The first two — The Modigliani-Miller Theorem also known as the Capital Structure Irrelevance Principle (1958) and The Laffer Curve (1974) for a tax policy on everything — are current contributions to the economic literature. The last one is the Katchings’ Two Laws (or Theorems) of Capitalism and 22 Variables of the Public Company.

 

It is from these Two Laws (or Theorems) and 22 variables that the scientific formula for capitalism and its vehicle (the public company) is established. The discipline of the scientific method enables us to optimize the taxable market value structure of the public company. Once optimized, 100% of US citizens are finally direct participants in American Capitalism and Democracy.

 

Go to part II: Examining Modigliani-Miller’s Capital Structure Irrelevance Principle

 

Untaxing   Part II: Examining Modigliani-Miller’s Capital Structure Irrelevance Principle

 

part I            [previous]            [next]            part III

 

Trillions of dollars in lost tax revenue is too much money not to be clear on the comparison between debt and equity.

 

Debt actually suppresses the equity-producing power of the public company.

______________

 

First, we examine the capital structure using the Modigliani-Miller Theorem (1958).

 

The Modigliani-Miller theorem (of Franco Modigliani and Merton Miller) forms the basis for modern thinking on the capital structure of the public company. This theorem also known as the Capital Structure Irrelevance Principle states that debt and equity can be used interchangeably to finance the public company.

 

The main problem with the Modigliani-Miller theorem is that it permits the assumption that debt is a fundamental component of capitalism.

 

Let’s be clear. It is not the intention here to debate the merits of the excellent Modigliani-Miller Theorem which contributes to the focus on the public company capital structure. However, since debt is one of the pillars of this Theorem, students of economics and finance are left with the false belief that debt is part of the concept of capitalism and that they are supported in this belief by two Nobel Prize winners (Modigliani, 1985; Miller, 1990).

 

We need now to correct this false belief and reliance on debt.

 

Go to (part II) chapter 6: Debt and Equity Financing Affect Market Value Differently

 

Untaxing-II (Modigliani-Miller) ch 6:     Debt and Equity Financing Affect Market Value Differently

 

part II            [previous]            [next]            part III

 

It is necessary to do a lemma proof and invalidate the Capital Structure Irrelevance Principle. Let’s examine the Modigliani-Miller theorem rationale using a “thought experiment” (popularized by Albert Einstein) to support the conclusion of the Debt-Equity comparison illustrated in Table 1 of chapter one.

 

We have three entities: an investor, a bank and a public company. The investor has $1 million. The bank wants the investor to deposit this $1 million at the bank for 5% interest. The new public company has a hot product and desperately needs a $1 million cash infusion.

 

If the investor deposits the $1 million in the bank for one year at 5%, he or she will have made $50,000 ($1 million times 0.05) at the end of the year. If, instead, the investor decides to purchase 5% of this hot new public company for $1 million, merely by taking the risk of buying 5% of this hot new public company, this new public company’s valuation is $20 million (= $1 million ÷ 0.05).

 

(Now some of the readers will not believe this instant $20 million valuation fact due to their having been negatively influenced daily by credit-interest-debt. But let me bring the doubting reader’s attention to a real life example: Microsoft purchased a piece of FaceBook long before FaceBook was known by the general public. Using a simple valuation standard, Microsoft bought 1.6% of FaceBook for $240 million. This simple transaction made FaceBook instantly worth $15 billion (= $240,000,000 ÷ 0.016).

 

Our public company now has a $20 million valuation and $1 million cash to pay for its operations. Note that the $1 million need not be paid back. This is the first result of a “positive-equity” investment.

 

Now suppose this new public company works hard in the first year using the $1 million investment and makes $2 million. The $2 million is declared as dividends when the dividend yield is 3%.

 

This $2 million in dividends is now divided by the 3% dividend yield, making this public company worth $66.66 million and increasing the investor’s net-worth by $3.33 million (the $1M investment got the investor a 5% ownership interest in the company or 5% of $66.66 million). This is the second result of using “positive-equity” to finance the public company. The return on investment is ($66.66M – $1M) ÷ $1M which is 6,566%.

 

OK, now suppose that instead of investing the $1 million, our “investor safely and fearfully deposits this money in an interest-bearing savings account and the hot new company borrows the $1 million it needs from this bank at a 5% rate of interest. This is a “negative-debt” loan.

 

Why is taking a bank loan characterized as being negative? The numbers answer this question. The principal amount of the loan plus interest accrued must be subtracted from the company’s $2 million revenue. Taking the $1 million principal and $50,000 in interest from the revenue leaves the company with $950,000 which is declared as dividends when the dividend yield is 3%.

 

Instead of $66.66 million, the hot public company’s market value is $31.67 million, the result of using “negative debt” to finance the company’s operations. This huge difference of $35 million illustrates the suppression of the company’s market value when a bank loan instead of an investment is used to finance operations.

 

Lemma Proof Conclusion.

 

What can we conclude by comparing debt and equity financing of the public company? The one qualified conclusion is the Modigliani–Miller theorem, which states that it makes no difference if (negative) debt or (positive) equity is used to finance the public company, is flawed.

 

There is a profound positive multi-million dollar difference in market value if the public company uses equity instead of debt to finance its operations. It’s clear that a risk-equity investment would produce a market value of $66.66 million and a credit-debt loan would make the company worth $31.66 million. Here are a few more observations:

 

  • The $1 million debt loan does not produce an immediate $20 million valuation because the funds are borrowed and must be paid back.

  • In contrast, the $1 million equity investment produces an immediate $20 million valuation because the funds from the “risky” investment need not be paid back. Furthermore, the investment helps the company generate $2 million in revenue to produce $66.66 million in equity. Risk is associated with gain.

  • Debt is associated with loss. In using “fearful” debt to safeguard $1 million, the investor missed an opportunity to participate in the equity growth of the company via a 5% ownership interest.

Go to (part II) chapter 7: Lemma Proof Implications

 

Untaxing-II (Modigliani-Miller) ch 7:     Lemma Proof Implications

 

part II            [previous]            [next]            part III

 

The Modigliani-Miller theorem states that it makes no difference if the public company uses debt or equity to finance itself. But it is crystal clear that an equity investment produces a $66.66 million market value and a debt loan produces a $31.66 million market value which is a suppression of $35 million in market value.

 

Fortunately we may now use this lemma proof by way of a thought experiment to counter-argue with economists and CFOs who rely on the Modigliani–Miller theorem to justify using debt. It proves there is absolutely nothing irrelevant about a public company naively taking on debt (to finance operations), and, in fact, debt is an attack on current and future earnings and a suppression of the public company’s market value.

 

The reason that the public company in the above thought experiment is only worth $31.66 million instead of $66.66 million is because the $1 million in debt was paid back out of the $2 million in revenue, leaving $950,000 for earnings to be divided by 0.03 instead of $2 million in earnings being divided by 0.03.

 

Notice the power of equity over debt when the $35 million in lost market value (caused by reducing profits) is related to the $1 million debt loan decision!

 

Note the investor’s lost opportunity by comparing the $50,000 of interest created from a $1 million deposit with a 5% ownership interest worth $3.33 million in the public company. The comparison here is similar to the one in chapter one when debt was compared with equity. In this case, equity is 46.6 times more powerful than debt. The return to the investor is $3.33 million in equity value minus the $1 million investment. The $2.33 return is 4,560% greater than the $50,000 interest created from the investor’s bank deposit. It’s a big loss for the investor.

 

The essence of this white paper is that anything that attacks a public company’s profits — be it a debt-loan or taxing the public companies profits instead of taxing equity — does more harm than good to the United States of America. This will be demonstrated next.

 

Go to (part II) chapter 8: The Same Equity vs. Debt Clarity Applies To Lost Tax Revenue

 

 

Untaxing-II (Modigliani-Miller) ch 8:     The Same Equity vs. Debt Clarity Applies to Lost Tax Revenue

 

part II            [previous]            [next]            part III

 

The US Treasury loses $3.5 trillion this year because the wrong entities are being taxed. There will be up to $14.7 trillion more in similar losses in the coming months and years. This is simply too much money not to be clear on the purpose and power of capitalism once and for all. The nuclear analogy of true capitalism’s power cannot be taken lightly. This understanding is crucial for academics, policy-makers and public company executives.

 

Loss of tax revenue.

 

Now, let’s clarify the figure of $3.5 trillion in lost taxes. By taxing the profits of public companies the US Treasury earned $300 billion. If the same profits were not taxed, $300 billion could have been declared as dividends and released to shareholders and the total market value of US public companies would increase by $10 trillion. This $10 trillion production of equity is calculated by applying a 3% dividend yield to the declared dividends of $300 billion. $300 billion divided by 3% equals $10 trillion. Then apply a 35% tax rate on this capital gains of $10 trillion. Thirty-five percent of ten trillion dollars is $3.5 trillion.

 

Should the US Treasury continue to collect $300 billion in corporate taxes or should it change tax policy to collect $3.5 trillion in capital gains taxes?

 

For background reading on the origin of debt, the reader is asked to look at another white paper entitled The Capitalistic Renaissance: Where we went wrong with creating debt and what the solution is. This paper suggests that mixing debt with capitalism is dangerous because debt actually suppresses the equity-producing power of the public company.

 

For now, however, we must be clear that the suppressive nature of credit-debt-interest and that taxation of public company profits are not part of the pure concept of capitalism. In the next part (Part III: Examining Tax Policy Based On The Laffer Curve) we will examine taxable equity value. But it’s important not to sour this examination by inserting the lemons of debt. In no form does the debt instrument define the concept of capitalism.

 

Yes, we understand that there are operational costs to get the goods and services to the consumers. Yes, we understand that some forms of taxes are necessary for the common good. When CFOs do not understand the vehicle they are driving, they recklessly opt to use debt. Yes, we understand that such decisions by CFOs are, at times, based on unsubstantiated assumptions.

 

These assumptions are now replaced by capitalistic public company tax facts.  Each new discussion about capitalism should include in its definitions section that Risk and Equity are understood as the foundations of capitalism for academic integrity.

 

With the Modigliani–Miller theorem modified with a correct definition of capitalism, i.e. Risk and Equity, students of the subject of economics and capitalism won’t have the misunderstanding that debt is just as good as equity for financing the public company as per the Modigliani–Miller’s Capital Structure Irrelevance Principle.

 

Go to part III: Examining Tax Policy Based On The Laffer Curve

 

Untaxing   Part III: Examining Tax Policy Based On The Laffer Curve

 

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The assumptive error in the thinking behind the Laffer Curve is that the US Treasury will not receive any tax revenue when the corporate tax rate for US public companies is zero.

 

The loss of equity value, the loss of jobs and even the loss of tax revenue are the primary negative consequences of taxing corporate profits.

______________

 

Let’s now examine the tax policy based on the Laffer curve (1974).

 

In economics, the Laffer curve is a theoretical representation of the relationship between government revenue raised by taxation and all possible rates of taxation. The Laffer Curve is used to illustrate the concept of taxable income elasticity (that taxable income will change in response to changes in the rate of taxation).

 

The so called Laffer curve is a serious addition to economic and tax policy thinking.

 

However the application of the Laffer curve narrowly focuses on the maximum percentage of tax that a government can extract from its citizens. This narrow focus gives students of economics the incorrect belief that governments have a right to continuously extract uneven payments from its citizens. Any government that professes to be capitalistic and democratic uses uniformed taxation as a necessary expedience that should be monitored as close to $0 as possible.

 

Nevertheless the Laffer curve is a start to bringing some sanity to an otherwise erratic tax policy, which was made that way because the overwhelming power of capitalism has not been correctly defined and therefore not understood or maximized.

 

We need a clear macro-view of capitalistic economics to achieve the desired goals of government to benefit its citizens by using public companies correctly.

 

This goal is achieved through the optimized operations of public companies and ownership opportunities for the citizens. In the case of the US, there is no room for any doubt, errors or procrastination because $3.5 to $14.7 trillion of lost tax revenue is at stake. Various negative consequences of a flawed tax policy are addressed here in Part III. This information is only presented to help understand the problem before some practical solutions are discussed in chapter 15 of Part III and in the next Part IV.

 

Go to (part III) chapter 9: A Clear Macro-Economic View of Capitalism

 

Untaxing-III (Laffer Curve) ch 9:     A Clear Macro-Economic View Of Capitalism

 

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Taxing begins with a clear macro-economic view of the US economy. The Gross Domestic Product (GDP) of the US is $14.72 trillion (CIA Fact Book, 2011).

 

“US multinationals represent less than 1 percent of all US companies, yet they contribute disproportionately to the US economy’s growth and health in many ways.”
(Mckinsey, 2010).

 

The US has 155 million labor units available for employment by 29.6 million businesses (Score, 2009). 19,893 of these 29.6 million businesses are public companies with current market values totaling $17.14 trillion.

 

Please pay close attention to what is being emphasized, perhaps for the first time. This means that 19,893 US public companies are worth more than the US GDP for one year and are worth more than the remaining 29.6 million businesses.

 

It is good to have the Laffer curve adding to economic tax policy thinking. But the thinking (or lack of) prompted by the Laffer curve focuses the policy makers negatively on how much tax can be extracted from individual wages and corporate profits. Their focus should rather be on what taxes are necessary to run an efficient government when the private sector is the more efficient producer of value. Within the private sector is a minority of public companies that produces the majority of economic wealth.

 

The taxation of public company profits is a startling example of the short-sightedness of the Laffer curve. This Laffer curve fails to take into consideration the foundational roles played by capitalism and its delivery vehicle — the public company — in national economies. The equity value produced by public companies presents multiple taxation opportunities for governments. Without the quest for profits in the form of equity and dividends, there would be no equity produced or jobs created.

Ill-conceived tax policy suppresses jobs and the market value of the public company by taxing its profits. The negative consequence of taxing corporate profits is to suppress the short-long term capital gains taxes that can be paid by shareholders as a consequence of continuous successful operations.

 

Go to (part III) chapter 10: Why Not To Tax Corporate Profits

 

Untaxing-III (Laffer Curve) ch 10:     Why Not To Tax Corporate Profits

 

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Loss of equity value.

 

Let’s take the 2011 US corporate tax rate of 35% and apply this rate to a public company paying $30,000 in federal taxes. If the $30,000 is declared as dividends for shareholders with a 3% dividend yield (see Barron’s for the 2011 public company’s dividend yield), the company’s market value increases by $1,000,000 (= $30,000 ÷ 3%).

 

Since the current tax policy claims the $30,000 in direct taxes, the company’s market value is suppressed by $1 million. Look at this calculation again so as not to miss the suppression of equity value that would have been produced if the $30K were released as dividends.

 

What does this mean? For each $1 paid in federal taxes today instead of as dividends, $33.33 in equity value is suppressed today and $11.67 cannot be collected as capital gains tax tomorrow. $33 of equity value and a potential $11 in tax revenue is lost just to collect a $1 tax!

 

Loss of jobs.

 

Without the debate on the reason for the concentration of public company value into the hands of a few institutions, let’s look at market value and jobs. The ratio of company market value to number of jobs helps us understand the impact of a flawed tax policy on jobs.

 

Now we are dealing with statistics here. So please let’s be careful about the point that is being made. A $30,000 tax on corporate profits suppresses $1 million in market value. If US per capita income is $47,200, then 21 US jobs are potentially lost for each $30,000 of corporate taxes. This number of potentially lost jobs is calculated by dividing the lost market value by per capita income ($1 million divided by $47,200).


NOTE: Per capita income is calculated by dividing the US GDP by the US population size.

 

Do these numbers make sense?

 

Let’s assume that 20% of the $47,200 (per capita income) goes to pay federal taxes on salaries and wages. 20% of $47,200 is $9,440. Since 21 labor units are impacted by the $1 million loss in market value (because of $30,000 of corporate taxes), we multiply $9,440 of individual taxes by 21 to calculate the amount of individual taxes that will not go to the US Treasury. $198,240 in individual taxes from 21 US workers is lost to the US Treasury just to collect $30,000 in corporate taxes from the public companies.

 

Is a $30,000 gain in tax revenue from a direct tax on corporate profits worth $198,240 in lost taxes from 21 jobs? The net loss in tax revenue is $168,240, exceeding initial gains by 461%. The existence of such net losses just doesn’t make sense.

 

Cumulative Negative Effects of taxing corporate profits.

 

It gets worse. The current tax policy (of taxing public company profits) prevents the US Treasury from collecting more taxes from jobs created and from a short term 35% capital gains tax.

 

The worst negative impact comes from denying the US Treasury up to $350,000 in tax revenue from a 35% capital gains tax applied to $1 million in market value that would have been produced if the public company’s profits were not taxed by $30,000 but declared as dividends for company shareholders. A $350,000 loss for a $30,000 gain is a negative impact of 1,067%.

 

The net loss in tax revenue is $198,240 from 21 jobs and a $350,000 loss ($30,000 tax divided by 3% dividend rate multiplied by a 35% capital gains) in short-long term capital gains for a combined loss of $548,240!

 

Let’s follow the money

 

If a $30,000 tax suppresses $1 million in market value when this $30,000 is paid as 3% dividends, then $300 billion in corporate taxes suppresses $10 trillion in market value ($300 billion divided by $30,000 times $1 million).

 

This $10 trillion in market value is subjected to the 35% capital gains tax. Up to $3.5 trillion in federal taxes is lost because the market value is suppressed.

 

The cumulative effect is more sinister when the impact on jobs is examined. For each $30,000 collected in corporate taxes, there is a potential loss of 21 jobs in the economy and $198,240 of lost tax revenue to the US Treasury.

 

Now be watchful here because the numbers do not lie for the student of economics and the student of banking, both of whom are familiar with the economic multiplier effect and fractional reserve banking which have the effect of producing more economic value and more money.

 

It should be clear that $30,000 in taxes reduces the amount that a public company can declare as dividends. We see that $30,000 suppresses $1,000,000 in market value when the dividend yield is 3% and the tax rate is 35%, potentially decreasing 21 jobs that can be produced.

 

OK, now let’s look at $300 billion divided by $30,000 times 21 jobs.

 

$300 billion ÷ $30,000 * 21 equals 210 million. Do you see this number of 210 million potential jobs being impacted because of a $300 billion tax on corporate profits?

 

What this 210 million potential jobs means is that the multiplier effect of a $300 billion tax on public company profits can cause $9.912 trillion in wages and salaries not produced when the US per capita income is $47,200.

 

Take the 25 million US unemployed workers. Multiplying 25 million by $47,200 per capita income results in $1.18 trillion that could have been producing $236 billion in individual taxes when the individual tax rate is 20%.

 

Clearly, the $300 billion tax on corporate profits is partly to blame for 25 million unemployed US workers.

 

What is potentially being said?

 

We cannot say for certain what investors will do with their $10 trillion of new-found market value. But we do know that this new market value is subject to a 35% capital gains tax when cashed in.

 

We also know at this point that 19,983 US public companies are worth $17.14 trillion and the US GDP is $14.72 trillion. It is an economic fact that 16% of the 155 million labor units are unemployed.

 

It doesn’t matter how the number of unemployed is calculated.

 

Multiply the government figures of 8% by the US population or calculate 16% of the number of people available for work (155 million labor units). Either calculation gives us about 25 million.

 

Now when $10 trillion ($300 billion tax on corporate profits divided by 3%) is added to the total market value of 19,983 US public companies, this $10 trillion is also added to the US GDP. Instead of $14.72 trillion, US GDP would be $24.72 trillion.

 

When the US public companies are worth $17.14 trillion and the US GDP is $14.72 trillion, then 130.2 million Americans are employed (155 million labor units minus 16% unemployed workers).

When US GDP is $24.72 trillion, then 218.65 million Americans are required to produce this GDP.

 

Simply dividing the projected GDP ($24.72 trillion) by the current GDP ($14.72 trillion) and multiplying by the currently employed American workforce (130.2 million) gives us 218.65 million Americans.

 

This is a labor shortage of 63.65 million (218.65 million minus 155 million). In other words, a 68% increase in employed workers (from 130.2 to 218.65 million) overruns the 16% unemployment rate.

 

Go to (part III) chapter 11: Why Penalize Market Values?

 

Untaxing-III (Laffer Curve) ch 11:     Why Penalize Market Values?

 

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Misguided tax policy that penalizes the profit engine of 19,893 US public companies (arguably the most powerful engine on the globe) with a high 35% direct tax on corporate profit and a 35% delayed short-long term capital gains (for 2012) is a 70% tax swing. Without new capitalist facts that optimize tax revenue, this giant slice tax policy is unwise.

 

According to The Tax Policy Center the US treasury collected $2.5 trillion in taxes in 2008 where 12% was collected as corporate taxes.

 

Without separating the corporations into public and non-public companies, let’s assume that all corporations are subjected to their market values being suppressed by the 35% tax on their profits. Our assumption means $300 billion was collected in corporate taxes from corporate profits of $857.14 billion.

 

With a dividend yield of 3%, $300 billion in federal taxes paid by US corporations suppressed $10 trillion in market values ($300 billion divided 3% dividend rate) when we assume that this $300 billion is returned to the shareholders as annual dividends.

Reducing the corporate tax rate from 35% to 12%

 

Although no presidential candidate receives an endorsement, it is worth noting that Speaker Newt Gingrich has said that one of the pillars of his 2012 Presidential Election campaign is a 12% corporate tax. What the Speaker is saying from a Laffer curve perspective is that the profits of US corporations should be taxed at 12% rather than the current rate of 35%. US companies would pay $102.86 billion instead of $300 billion.

 

The US Treasury would collect $102.86 billion in annual corporate taxes plus 35% of the remaining $197.14 billion in short term capital gains taxes. The total collected would be $171.85 billion (the sum of $102.68 billion and $68.99 billion). Gingrich’s plan would cause the US Treasury to lose $1.2 trillion in tax revenue, an improvement over the current loss of $3.5 trillion but not the optimum case.

 

Why deny the US treasury tax revenue?

 

It is not the point of this paper to grant or deny revenue to the US Treasury but to give policy makers various versions of the math-facts they need to write a tax policy that’s more efficient and actually produces more tax revenue. So let’s use the math correctly here and further analyze the Speaker’s 12% tax initiative.

 

This logical analogy of $102.86 billion (12%) subtracted from $300 billion does not recognize how much tax potential is left on the table. What is left on the table is the difference between $300 billion and $102.86 billion leaving $197.14 billion to be declared as dividends. When these dividends are divided by a current 3% dividend yield, the market values for US public companies are increased by $6.57 trillion.

 

This $6.57 trillion tax base omission is astonishing — an omission not just by the Speaker who is not an economist, but by all contributors to economic and financial thought to date. Since most of the policy makers are not students of finance they fail to realize that as long as this $197.14 billion is paid as dividends when the dividend yield is 3%, the $6.57 trillion equity value is stable and is immediately subjected to predictable short-long term capital gains tax.

 

This $6.57 trillion is subjected to a current 35% short term capital gains tax, potentially giving the US Treasury up to $2.3 trillion in a continuous stream of capital gains taxes over a few months and years from this change in tax policy to a 12% corporate tax. Look at the Tax Loss Table  (Table 5) above, compare and observe carefully what is being said here.

 

A 12% (Gingrich) tax rate for the US public companies would give the US treasury $102.85 billion in taxes now and $2.3 trillion (= $197.15 billion ÷ 0.03 * 0.35) in 35% capital gains over time.

The US government and shareholders are the two substantial beneficiaries of this 12% tax.

 

This 667% increase in tax revenue ($300 billion to $2.3 trillion) comes from a simple 12% tax rate on corporate profits. This 12% tax on corporate profits potentially gives corporate shareholders $6.57 trillion more in market value when the dividend yield is 3%.

 

The conclusion thus far is that the current ill-conceived US tax policy suppresses the US GDP by $6.57 trillion with a naive “get-it-now” $300 billion tax policy on profits of corporate and public companies.

 

Go to (part III) chapter 12: How Much Market Value is Suppressed by Corporate Taxes?

 

Untaxing-III (Laffer Curve) ch 12:     How Much Market Value Is Suppressed by Corporate Taxes?

 

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A $300 billion corporate tax is not suppressing $6.57 trillion or even $10 trillion. Much more value is suppressed.

 

Let’s continue to use the numbers to find the exact amount that $300 billion in public company taxes is suppressing. We have a 2011 3% dividends rate. We have a 2011 35% corporate tax rate. We have a 2011 35% short term US capital gains rate. These are the facts.

 

The Speaker’s 12% tax suggestion appears to be arbitrary if one doesn’t calculate the full suppressive effect of his tax reduction proposal. It is clear that $0 corporate taxes releases $300 billion to the corporations to add to their dividends. When this $300 billion is declared as dividends we must divide this $300 billion by the current 2011 dividend yield of 3% to see the equity value produced.

 

Currently the $300 billion in US corporate taxes is collected by applying 35% to a profit base of $857.142 billion. We can reasonably assume that with a current dividend yield of less than 3%, 53% or $452.4 billion of these profits declared as dividends give the US public companies their current $17.14 trillion in market value (CIA Fact book, 2011).

 

If corporate and US public company profits are $857.142 billion and these profits are declared as dividends when the corporate profit tax is $0 and the dividend yield is 3%, then the total market value would be $28.57 trillion (= $857.142 billion ÷ 0.03) instead of the current, underperforming $17.14 trillion market value total.

 

This underperformance — directly caused by an illogical tax on public company profits — is less damaging than another corporate practice. The policy of CFOs to hoard cash is more damaging to public company market values than governments taxing corporate profits is the policy of CFO’s to hoard cash. This is an additional tax on corporate earnings, thus reducing public company market values!

 

Go to (part III) chapter 13: CFOs Hoard Cash

 

Untaxing-III (Laffer Curve) ch 13:     CFOs Hoard Cash

 

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There are two culpable parties to this corporate tax mess. Aside from the ill-advised tax policy makers, there are the public company CFOs for not paying 100% of $857.142 billion (the 2008 total of US public company profits) as dividends to their shareholders. Let’s be extremely cognizant and respectful as to what the math and forensic accounting is saying:

 

  • A tax of $197.1 billion suppresses a $6.57 trillion increase in shareholder equity value;
  • A tax of $300 billion suppresses $10 trillion increase in shareholder equity value; and
  • The failure of CFOs to return $857.142 billion as dividends is suppressing a $11.43 trillion increase in shareholder equity value ($11.43 trillion = $28.57 trillion minus $17.14 trillion).

 

A New York Times article (dated August 16, 2011) titled “Tax Policy Change Would Bring Cash Piles Abroad Back Home” cites $1.375 trillion kept outside the US by “519 American multinational corporations.” If this amount is divided by 10 years and escrowed for dividends when the dividend yield rate is 3%, a $4.583 trillion increase in market value would be instantly produced!

 

Let’s be clear. The CFOs’ failure to return $857.142 billion in profits is a suppression-tax on public company market values, causing the market value to be $17.14 trillion instead of $28.57 trillion.

 

When we add the realistic assumption of escrowing repatriated cash for 10 years as dividends causing a $4.583 trillion increase in market value, this amount added to the $28.57 trillion makes a whopping $33.15 trillion added to the US GDP!

 

Instead of $33.15 trillion added to the US GDP, we have $17.14 trillion. The difference of $16.01 trillion is very significant.

 

This means that the public company CFOs’ policies are over 2 times ($16.01 trillion divided by $6.57 trillion) more dangerous to the public companies and America’s social good than the government’s $300 billion tax on corporate profits!

 

No one is better equipped than CEOs and CFOs to give the statistical facts to challenged politicians that a $0 tax on corporate profits presents $33.15 trillion in market values subjected to a 35% capital gains tax. But they don’t because they are risk averse.

 

Because it lacks a clear definition of and appreciation for Risk as a necessary component of true capitalism and innovation, the USA stands as a misguided example to the emerging world due to its tax and regulatory policies that are antithetical to capitalism and democracy. It is no wonder that some of the USA’s most productive engines are moving to foreign shores where capitalism is favorably treated (Fleeing to Foreign Shores New York Times June 7, 2011).

 

Go to (part III) chapter 14: Taxes and CFO Actions Suppress The GDP

 

Untaxing-III (Laffer Curve) ch 14:     Taxes and CFO Actions Suppress the GDP

 

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Uninformed tax policy and CFO actions suppress the US GDP by at least $13.49 trillion. Let’s look at the difference between the current total market value of US public companies and what this total should be with a $0 corporate tax.

 

The current total market value is $17.14 trillion. When $857.142 billion in corporate profits is declared as dividends (with a 3% dividend yield), the total market value becomes $28.57 trillion. The difference between these total market value numbers is $11.43 trillion.

 

The suppression of GDP is actually more than $11.43 trillion. Remember the realistic assumption of escrowing repatriated cash for 10 years as dividends causing a $4.583 trillion increase in market value? Adding $4.583 trillion to $11.43 trillion gives us $16 trillion in US GDP suppression!

 

$18 trillion Reverse Chain Reaction

 

Now we find that $300 billion collected in US corporate taxes is the “negative trigger” causing a reverse chain reaction that suppresses the market value of the US public companies by $10 trillion.

 

We also see how the failure of public company CFOs to declare more company profits as dividends suppresses market values, in some cases even more than current tax policy. The sum effect of these two policies — tax policy and CEO/CFO policy — is the suppression of total market value and US GDP by $18 trillion. Through a misunderstanding of what true capitalism is, various actions within government and corporations are killing the golden goose of capitalism which produces equity value designed for all US Citizens. Equity value leads to innovation and invention because it lifts the barrier of poverty.

 

Carlson’s Law” posited by Curtis Carlson, the C.E.O. of SRI International, in Silicon Valley, states that: “In a world where so many people now have access to education and cheap tools of innovation, innovation that happens from the bottom up tends to be chaotic but smart. Innovation that happens from the top down tends to be orderly but dumb.” As a result, says Carlson, the sweet spot for innovation today is “moving down,” closer to the people, not up, because all the people together are smarter than anyone alone and all the people now have the tools to invent and collaborate.

 

Academics, government legislators, and corporate executives need to upgrade their knowledge and understanding about the purpose and horsepower of the public company — the vehicle of capitalism — when its profits are not taxed.

 

Go to (part III) chapter 15: Defending a $0 Corporate Tax Policy

 

Untaxing-III (Laffer Curve) ch 15:     Defending a $0 Corporate Tax Policy

 

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When $0 corporate tax is a defensible option, should we continue a 35% corporate tax rate that causes 25 million people to be unemployed, lost customer purchasing power and a $13.49 trillion loss in US GDP? When the corporate tax savings are released as dividends yielding more market value, why not adopt a 12% corporate tax? Preposterous. It’s got to be $0 in corporate taxes.

 

It is clear in Table 6 below that a $0 tax on corporate profits and a realistic 35% short-long term capital gains tax will produce the most equity value for shareholders and the most tax revenue for the government ($3.5 trillion per the last row in the Future Tax Gain column).

A realistic public company tax policy on corporate profits of $0 corporate taxes and a 35% capital gains tax will give the US Treasury a capital gains tax base of $10 trillion instead of the 2008 profit tax base of $857.142 billion. The consequence is a predictable short-long term capital gains tax revenue of $3.5 trillion.

 

This $3.5 trillion (see last row of Future Tax Gain column in Table 6) exceeds the entire federal taxes collected in 2008 by a whopping $1 trillion!

 

This $3.5 trillion in a short-long term capital gains tax stream is also 1,167% more than the $300 billion that the US Treasury collects now from both public and non-public corporations.
Please understand what is said. A $0 tax on corporations of all types will cause the US Treasury to collect all of the taxes that it requires from capital gains without taxing corporate profits or taxing individual wages and salaries!

 

In Table 7 below, you find a prediction based on time and percentage. A predictable $315 billion is collected in 6 months, $630 billion collected in 12 months, and $945 billion collected in 18 months as tax revenue from short-term capital gains on just 9%, 18%, and 27% of the increase in market values of 19,893 US public companies. The prediction relies on a release of corporate tax savings as dividends and for some of the resulting increase in market value to be sold.

 

The clear assumptive error in the Laffer curve assumes that the US treasury will not receive any tax revenue when the corporate tax rate is $0 for the public company.

 

 Go to part IV: Katchings’ Two Laws of Capitalism Enlighten Ownership Structure

 

 

Untaxing   Part IV: Katchings’ Two Laws of Capitalism Enlighten Ownership Structure

 

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A scientific formula enables a more effective management of public companies and clearer definitions for effective tax policy.

 

The election of a corporate structure that maximizes shareholder value is intractably tied to the country’s tax policy.

______________

 

Now we examine Katchings’ Two Laws of Capitalism (2011).

 

Katchings’ Two Laws (or Theorems) of Capitalism (which include the unpublished 22 Variables of the Public Company) form the structure and the basis for modern thinking on the ownership structure of the public company as a standard social good where all consumers, as producers of equity value for public companies, are automatically included in the ownership of the public company.

 

This white paper states in Part I that we need a hard scientific formula in the spirit of physics (e.g. Newton’s Force=ma and Einstein’s Energy=mc2)so that the students of capitalism can define a clear tax policy and executives can manage their public companies more effectively.

 

Knowing the exact Force and Energy parameters of the public company vehicle, executives can gauge the optimum management and operation of their companies (that they are stewards of) for the first time.

 

The Katchings’ Two Laws of Capitalism provide, for the first time in Capitalistism History, this formula (codified with 22 variables that consist of 4 exact sections) for the blueprint on how to set up and run the modern public company in the face of any tax policy.

 

The Katchings’ Two Laws of Capitalism come from an exhaustive study of the public company by the capitalistic formula:

 

X=(A*B/Y)/C

where

X is Stock Price (or Equity produced per share),
A is Revenue,
B is Earnings Rate (expressed as a percentage of revenue),
Y is Shares Outstanding, and
C is Dividend Yield Rate or Rate of Return.

 

When A is $1 for Revenue, B is 1.00 for a 100% Earnings Rate, Y is 1 for 1 Share Outstanding, and C is 0.01 for a 1% Dividend Yield Rate, then the Stock Price X (or Equity produced per share) is $100. The calculation is ($1 * 1.00 ÷ 1) ÷ 0.01 = $100.

 

In this basic example, the return on taking a $1 Risk that produces $100 of Equity is 9,900%. †

 

The X=(A*B/Y)/C capitalistic formula represents a reality that causes entrepreneurs to elect the public company structure over the private company. Entrepreneurs share risk and equity with investors. Equity is produced from sharing the Risk of starting an enterprise with anyone from the public.

 

These two pillars of capitalism drive the vehicle of capitalism (the public company). Equity is in the equation of a clear formula for the standard of capitalism in the public company and Risk influences its ultimate market value and equity.

________________

 

†  Return on Investment (ROI) is the ratio of Return to Investment.  In this fundamental case, Investment = Risk = $1 and Return = Equity – Risk = $100 – $1 = $99.  The ratio of $99 to $1 is multiplied by 100 to express ROI as a percentage.

 

Go to (part IV) chapter 16: First Law of Capitalism

 

Untaxing-IV (Katchings’ Laws) ch 16:     First Law of Capitalism

 

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Katchings’ First Law (theorem) of Capitalism states that a public company’s revenue  should not be greater than the public company’s market value or capitalization.

 

Examples clearly demonstrate (perhaps for the first time) that equity can be 6,566%, 9,900%, or 482,601% more powerful than debt. So how can a public company have a market value that is less than its revenue? How can a public company produce equity that is less than its revenue?

 

The capitalistic formula supports the fact that $1 of revenue can produce $100 of equity. Multiply this fact by thousands or millions of customers and you get thousands or millions of equity values collectively known as the public company’s market value (or market capitalization). The sum of all the equity values produced equals the market value of the public company.

 

The lack of distinction between the Conservation of Energy formula and the capitalistic formula coming from Katchings’ Two Laws of Capitalism may be the reason why so few people actually know what capitalism is, and many people bastardize the term “capitalism” daily.

 

Even students of physics, when asked to apply their mathematical prowess in the validation of the capitalistic formula, will confuse economic thought with the Conservation of Energy formula. A thorough understanding of economics must be combined with the rigors of scientific training.

 

Let’s stop being confused about exactly what capitalism is and not confuse physics with capitalism. 1 unit of energy = 1 unit of energy.  X=(A*B/Y)/C. Both formulas are correct in their contexts.

 

According to an empirical examination at this moment in time, 38% of the top 2,000 global public companies have revenues that exceed their market values. Their Chairmen-CEO-CFOs don’t know that this delinquency isn’t supposed to happen; however, we know it through the science of the capitalistic formula.

 

We can reason from this empirical study that at least 38% of the 73,349 global public companies are not aware of the nuclear-like power of capitalism. Shareholders are penalized while excuses are made for low performances, and incorrect economic literature on capitalism supports the excuses.

20% of the Dow Jones Component 30 has revenues that exceed their market values, violating the Katchings’ First Law of Capitalism. But as soon as the taxes on these under-performers are eliminated, their market values increase by a whopping 370%, and the average market value for all components of the Dow Jones 30 increases by 170%!

 

We learned in the discussion on the Laffer curve how an ill defined tax policy on corporate profits suppresses the market value of the public company and hence suppresses the tax revenue for the countries that use capitalism and the public company market values for their GDPs.

 

Go to (part IV) chapter 17: Second Law of Capitalism

 

 

Untaxing-IV (Katchings’ Laws) ch 17:     Second Law of Capitalism

 

part IV            [previous]            [next]            part V

 

Katchings’ Second Law of Capitalism states that the GDP of a country should not be greater than the total market value of its public companies.

 

By definition when capitalism is ill-defined, a government’s tax policy is ill-defined. Not only is an ill-defined tax policy detrimental to a country’s citizens. But when entrepreneurs elect a corporate structure that penalizes the shareholders, then public company market values and the GDP of the country are also suppressed.

 

We see a crystal example in the $17.14 trillion market value for the 19,893 US public companies, which currently exceeds the $14.72 trillion US GDP. The total market value of US public companies exceeds the US GDP. This is the correct relationship. The US example serves as the standard for the globe’s other 265 entities-countries to correct their economies with the use of the public company tool and tax policies that efficiently produce the most value for their citizens.

 

We are in awe that 19,893 US public companies (just 0.0642% of the 29.6 million businesses in the US) produce $17.14 trillion in market value, exceeding the US GDP of $14.72 trillion, without a clear understanding of capitalism.

 

Let’s put this $14.72 trillion GDP and $17.14 trillion market value into perspective by dividing the US GDP and then the total market value of US public companies by 313,232,044 US Citizens.

 

Are you a statistician?

 

Notice the $2.42 trillion difference between the US GDP and the market value of the US Public Companies. This relationship demonstrates three startling facts:

 

  • The market value of the US public companies exceeds the US GDP by $2.42 trillion, conforming to The Katchings Second Law of Capitalism

  • The US GDP is intractably connected to the market value of the US public companies.
  • The US economy would collapse if just 0.0672% (19,893 ÷ 29.6 million) of all US businesses — the US public companies — were extracted from the US GDP.

What happens to the US economy and the globe’s economies when capitalism and the public company are understood correctly for the first time?

 

Go to (part IV) chapter 18: Corporate Structures

 

Untaxing-IV (Katchings’ Laws) ch 18:     Corporate Structures

 

part IV            [previous]            [next]            part V

 

The C-Corporation structure of the public company is not something that is etched in stone contrary to the sincere belief of CPAs and business lawyers who fail to investigate.

 

The accepted and here supported goal of the public company is to maximize the shareholder’s value. This means continuously returning profits to the owners as dividends, which produce the equity and market values.

 

The election of the corporate structure that best maximizes shareholder value is a fiduciary responsibility of the CPAs, lawyers, and the entrepreneurs so that lawmakers and managers do not reverse capitalism’s goal for their own high-salaried amusements or from arrogance, capriciousness or ignorance.

 

The election of the corporate structure is intractably tied to the tax policy of a country. The election of having a corporation domiciled in a tax haven country is one exercise in the chain of entrepreneurial responsibility.

 

When we examine corporations that elected to be US Real Estate Investment Trusts (REIT), US Limited Liability Companies (LLC), or to be domiciled in a Tax Haven country, we find that 99% of these public company structures have market values that are greater than their revenues (Katchings’ First Law of Capitalism), whereas 38% of the public companies without these public company taxing structures have market values that are less than their revenues.

 

Let’s be clear here. 99% of public companies are C-Corporations. The 62% with market values that exceed their revenues are the C-Corporations that use tax haven strategies to avoid excessive government taxes.

 

This tripartite REIT, LLC, Tax Haven comparison corroborates Katchings’ First Law of Capitalism that “revenue should not be greater than the public company’s market value.” A company may meet Katchings’ First Law of Capitalism, yet fail to maximize shareholder value.

 

Go to part V: The Customer Should Receive Ownership

 

Untaxing   Part V: The Customer Should Receive Ownership

 

Part IV            [previous]            [next]

 

The virus of poverty is dead in the face of the universal vaccine called pure capitalism.

 

The Limited Liability Public Company (LLPC) is designed from scratch to give an average of $9.66 of equity to the customer for each $1 spent by the customer for the LLPC’s product or service.

______________

 

The obvious question must be asked.

 

Exactly what causes the revenue for the public company, so that it can be taxed?

On the surface this seems to be a naive question. But many do not know the equally obvious answer. Consumers provide the revenue for the public company.

 

So why, if the consumers provide the revenue for the 19,893 public companies in the US and the 73,349 public companies across the globe, are 3.2 billion consumers left out of the public company ownership?

 

And why is the equity value in the public companies concentrated in the hands of a few old money people and, now, a new crop of super-powerful accredited bureaucrats?

 

Katchings’ Second Law of Capitalism ties the public company to the GDP of a country by law. All countries with public companies practice capitalism to the extent that the maximization of shareholder value is influenced by government tax policy and by the entrepreneur’s election of the best corporate structure (to maximize shareholder value).

 

If the maximization of shareholder value is the goal of the public company, and if the customers are the ones who provide the revenues for the public company, (after all, no customers equals no revenue), then the ONLY thing left for the enlightened entrepreneurs to do is to tie the customers to the ownership structure of the public company from its inception in a quid pro quo and symbiotic relationship.

 

So how do the entrepreneurs become clued in to the maximized corporate structure? First we look at what doesn’t work (chapter 19). Then we look at the capitalistic solution in chapters 20 and 21 where equity and a new ownership structure bring a new form of value to customers. Giving customers what they want is how the success of entrepreneurs is measured.

 

Go to (part V) chapter 19: Debt Is Outdated and Takes Value Away

 

Untaxing-V (Customer Ownership) ch 19:     Debt Is Outdated and Takes Value Away

 

Part V            [previous]            [next]

 

When Ernst Friedrich “Fritz” Schumacher wrote his collection of essays titled Small Is Beautiful: Economics As If People Mattered  his thinking went only so far, and we have picked up his thread and taken it further. His denouncing of capitalism is nothing short of naive when he advocates in slowly achieving the social good using this disastrous concept of micro-credit.

 

The virus of poverty is dead, dead and dead in the face of the universal vaccine called pure capitalism. There is absolutely no reason for the poor to sacrifice and wait for slow micro-economic change when the enlightened entrepreneurs understand, master and use the power produced by capitalism’s vehicle (the public company) universally.

 

We saw three concrete examples that equity can produce 6,566% (chapter 6, page 11), 9,900% (page 32 just before chapter 16) or 482,688% (chapter 1, page 3) more value than going down the dangerously slow and socialist paths of macro-debt or micro-debt. We are sensitive to the cases of extreme poverty, but Capitalism is the fastest proven way to solve the social good questions for all of the globe’s citizens. A perfect example is the impact of worldwide mobile phone use as the agent for access of remotely located people to the global communications grid.

 

An online resource for mobile marketers, mobiThinking, has published some detailed statistics about global mobile subscribers. The International Telecommunication Union (2011) estimates “6 billion mobile subscriptions” at the end of 2011. MobiThinking’s interprets this statistic as “equivalent to 87 percent of the world population” and “a huge increase from 5.4 billion in 2010 and 4.7 billion mobile subscription in 2009.”  Furthermore, mobiThinking makes the following points:

 

  • Mobile subscribers in the developing world has reached saturation point with at least one cell phone subscription per person. This means market growth is being driven by demand [in the] developing world, led by rapid mobile adoption in China and India. These two countries collectively added 300 million new mobile subscriptions in 2010 — more than the total mobile subscribers in the US.

  • At the end of 2011 there were 4.5 billion mobile subscription in the developing world (76% of global subscriptions). Mobile penetration in the deveoping world now is 79%, with Africa being the lowest region worldwide at 53%.

Evolution has proved that the dinosaurs were too large and too slow to sustain themselves in a rapidly changing environment. The nimble human body coming on the earth’s scene has a fixed number of bones and limbs supporting a superior brain to lower forms of animals. If the current crop of billionaires had human bodies in proportion to their wealth they would be as big as dinosaurs and just as slow to adapt to a changing environment. Let’s use our brains correctly!

 

The corporate tax policies in place in the US and in all countries are also dinosaurs.

 

Other dinosaurs include the unwieldy and aimless mega social media sites such as Face Book, MySpace, Google, LinkedIn, etc and will not sustain themselves in the face of 235 new types of nimble, organized and monetized social media that favor the individual units of society using ubiquitous capitalism. These 235 new types help people realize an average of $9.66 of equity for every $1 spent.

 

The ratio of 313,232,044 US citizens to the 19,893 US public companies is 15,745 to 1. We use this ratio because the US public companies produce $17.14 trillion in equity value, more than any single country, and more than any combinations of 29.6 million non-public business structures in the US (corporations, LLCs, etc.).

 

Many financially challenged academics, regulators and sycophants say that the multinationals are evil and ought to be done away with without realizing what they are wishing.

 

The USA is an economic powerhouse in spite of its imprecise definition and use of the public company (capitalism’s vehicle). Take its lifeblood — the 19,893 US public companies — out of the US and the US collapses into unsustainable socialism and its GDP shrinks to near nothing. Socialistic credit-debt does not and cannot produce multiple equity values as does capitalism and has been demonstrated in various sections of this white paper.

 

The next two chapters (20 and 21) discuss Product Equity Value© and a New Ownership Structure, both designed to endow the customer with more Equity.

 

Go to (part V) chapter 20: Equity Adds Value

 

Untaxing-V (Customer Ownership) ch 20:     Equity Adds Value

 

Part V            [previous]            [next]

 

Let’s say a customer pays $33 per month for a product or service from a public company and the cost of delivery (barring a tax rate) to the customer is 37%. With no more expenses, the public company’s earnings rate is 63%. With a 3% dividend yield rate, then clearly the annual revenue from the customer of $396 (= $33 * 12 months) adds $8,316 to the public company’s market value today.    $396 * 63% earnings rate ÷ 3% dividend yield = $396 * 0.63 ÷ 0.03 = $8,316.

 

This shows that the customer provides the same function as the investor. Money received by the customer minus expenses drives market value. Investor funds also drive market value. The customer takes no risk in purchasing a product or service. The investor takes a risk. They both bring revenue (for different reasons) that adds to the public company’s market value.

 

Bringing More Value to The Customer

 

Product Equity Value© was discovered after applying the Scientific Method and certain principles of Physics to the Public Company. The intent was to trace the origin and directions of the energy flow — also known as “revenue” — when 100% of the public company’s profits are returned to the public company’s shareholders as annual dividends.

 

What does the customer get? How many forms of value goes to the customer? Obviously the utility value from using products and services is one form of value. Another form of value benefiting the customer is Product Equity Value© (PEV©).

 

Using the $33-per-month example above, the obvious way for the customer to receive ownership is for the revenue-providing customer to share the equity produced with the risk-taking investor. If 46% of the equity produced goes to the customer, then the $33-per-month patronage from the customer also brings $3,825.36 of PEV© ownership interest in the public company to the customer. This is the second form of value benefiting the customer.

 

Dividing $3,825.36 by $33 and dividing the result by 12 months gives you $9.66 of equity. What does this mean?

 

An average of $9.66 of equity value goes to the customer for every $1 the customer spends on a product or service.

 

So how do we efficiently get this extra form of value — the $9.66 in Product Equity Value© for each $1 of spending — to the 155 million US labor units (and 3.2 billion global workers)?

 

Go to (part V) chapter 21: A New Ownership Structure

 

Untaxing-V (Customer Ownership) ch 21:     A New Ownership Structure

 

Part V            [previous]            [next]

 

It is proposed that customers receive ownership shares when they purchase goods and services from participating companies.

 

Only about half of 313 million US citizens are direct producers of value in the US. If 14 million of them (less than 10% of US labor units) enroll as members of a new ownership structure and buy from 364 new Limited Liability Public Companies where the members own 46% of free equity in exchange for their average annual cash purchases of $33, they receive $116,035.92 in direct equity value without using any credit or taking any risk.

 

The direct equity value received is calculated in two ways. In the first way, simply multiply the customer’s spending dollars by $9.66 per dollar spent. $33 * 364 companies * 9.66 = $116,035.92.

 

In the second way, multiply $33 of annual purchases by 364 companies to get $12,012 (which is about 25% of $47,200 per capita income in US). 37% of this revenue goes to operations and 63% goes to profits. The increase in market value is calculated by applying a 3% dividend yield rate to 63% of $12,012. So the Added Market Value equals $12,012 * 0.63 ÷ 0.03 = $252,252. The customer receives direct equity value equal to 46% of $252,252 = $116,035.92.

 

The Limited Liability Public Company (LLPC) is designed from scratch to give an average of $9.66 of equity for each $1 spent for the LLPC’s product or service. The ratio of member shareholders to 364 LLPCs is 14 million to 1, while the ratio of US citizens to public companies is 15,745 to 1.

 

These ratios show that more people (or more customers) are receiving ownership interests in the new LLPCs than the current ownership in public companies that’s concentrated in fewer hands. Product Equity Value© connects more people to LLPC ownership.

 

Credit-Debt takes.

 

Basically the US government doesn’t tax credit purchases. People are happy about deducting interest from their taxes. But the interest is actually punitive and deducting it is not going to relieve the financial pain. Paying less in taxes is a distraction from the root problem, which is debt!

 

Risk-Equity gives.

 

But the US government does tax capital gains. A 35% capital gains tax on 14 million recipients of $116,035.92 is $568.576 billion in long-term capital gains tax. The numbers are clearly saying:

  • $569 billion in capital gains tax on 14 million of 155 million labor units is almost double the $300 billion collected in corporate taxes.

  • If all 155 million labor units are connected in the unique LLPCs giving $9.66 equity per $1 spent, then $6.295 trillion in capital gains taxes goes to the US Treasury.
  • $6.295 trillion in capital gains taxes is $3.795 trillion more than the $2.5 trillion in taxes collected from all sources in 2008.

  • Even if you double the US per capita income of $47,400 (CIA Fact Book 2011), the result still falls short of $116,035.92 in direct individual Product Equity Value©.

  • Eleven “monetized social media” structures bring $116,035.92 to 155 million Americans.
  • Why wait to untax the wages and salaries of US citizens? Product Equity Value© wipes out 98% of the average US Family’s Debt!

  • It is clear by the 9.66-to-1 Product Equity Value© example that the negative consequences of credit-interest-debt are not components of capitalism.

  • When capitalism and its vehicle the public company are used correctly, the US and other governments do not have the “paper tiger” woes called Medicare, Medicaid, Social Security and the Debt Ceiling.

There are three preconditions before Product Equity Value© can appear:

 

  1. The LLC structure for the public company is elected so that the profits of new public companies are not taxed.
  2. Dividend yield rates of 3% (+/- 0.5%)
  3. An earnings rate of 63% (+/- 5%)

Wait!  Are we really projecting an earnings rate of 63% for 364 to 4,004 new LLPCs?

 

Yes. This 63% earnings rate is realistic, but it is threatened by the stratospheric US corporate tax rate of 35% in addition to the 35% tax on short/long-term capital gains. Realistic earnings are uncovered when the tax on public company profits is eliminated by the enlightened entrepreneurs who elect the LLPC form of public company structure.

 

With the election of the LLPC there is no reason for new US public companies to locate in so-called tax haven countries that encourage them to hide and hoard cash.

 

According to Eileen Appelbaum of Center for Economic and Policy Research “US corporations hold roughly $1.43 trillion overseas.” This amount is about $573 billion more than the estimated corporate profits of $857 billion in 2008.

 

From the same empirical study of the top 2,000 global public companies, we learn that the average declared after-tax profits is 16% where 99% of these 2000 companies are not LLC public company structures.

 

Without this LLC election the public company’s average earnings is (+ or –) 16%. When you do the math using the LLC public company structure, the average profits are 51% (16% + 35%).

What is being said here? When the enlightened entrepreneur elects the LLC type of structure for a public company, 35% in US earnings are added to dividends automatically.

 

Go to (part V) chapter 22: Implications

 

Untaxing-V (Customer Ownership) ch 22:     Implications

 

Part V            [previous]

 

We have revealed the following:

 

  • The inclusion of debt in Modigliani-Miller’s Theorem can negatively influence economic thought because the implications of using debt financing are not exposed by the Capital Structure Irrelevance Principle. We then say that Debt is not a component of Capitalism.

  • The Laffer curve fails to take into consideration that taxation suppresses the market value of public companies, which consequently suppresses the tax revenue. Jobs are lost in direct relationship to corporate taxation.

  • Katchings’ Two Laws of Capitalism exist to guide policymakers’ tax decisions and show the new class of entrepreneurs how to elect the best public company ownership structure for producing the most equity value for the shareholders and the most tax revenue.

  • 19,893 US and 73,349 global public companies are operating at about 40% of capacity by Katchings First Law of Capitalism, and this is supported by an empirical study.

We need to endorse the creation of eleven CSOP® monetized social media structures in the US.

 

Each will consist of 14 million members and 364 non-competing public companies. Many of these companies will be Limited Liability Public Companies (LLPCs). These 4,004 new public companies and LLPCs will be 46% owned by 155 million consumers. Many of the 4,004 companies will buy the 40% under-capacity of existing public and non-public companies at wholesale and sell products and services to the members at retail. This will produce the greatest exposition of “shared” capitalistic equity value that the USA has ever witnessed.

 

What about inflation with so much equity value being unleashed?

 

Look at what happens with 100% of the US labor units owning 46% of 4,004 new public companies. When prices rise so do the equity values (of their ownership interests) in 364 companies. The current false definition of inflation and the inefficient allocation of scarce resources speculations will die because personal net-worth rises if prices rise.

 

New Jobs and Tax Revenue 

 

Table 8 below projects the number of jobs created and the amount of tax revenue to each of the 50 United States, District of Columbia and Puerto Rico. This projection comes from 4,004 Limited Liability Public Companies (LLPCs) and Public Companies (PCs) connected with eleven CSOP® social media structures. Note the total number at the bottom of the New Jobs Gained column is 24,999,839 — about 25 million jobs.

The Katchings Curves show an increasing spread between the curves as dividend yield rates decrease. This means that the increase in market values from lower corporate tax rates becomes bigger as dividend yield rates decrease. Lower dividend yield and corporate tax rates increase market value and, hence, revenue from capital gains taxes.

 

The data from Table 9a is illustrated in Figure 2a to show the effect of tax rates and dividend yield rates on market value. $300 billion in corporate earnings is used in Table 9a.

 

The case of $857 billion of corporate profits before taxes in 2008 is illustrated in Table 9b and Figure 2b. The difference in market values at a 2.52% dividend yield rate is approximately $12 trillion ($34,008B minus $22,103B). This means about $4 trillion in lost revenue to the US Treasury.

 

A simple change in tax policy benefits shareholders with greater equity value and brings more potential capital gains taxes to the US Treasury.

 

 

The implications of the CSOP® (Customer Stock Ownership Plan)monetized social media structures are astonishing:

 
  • $38.84 trillion in equity value is produced by 4,004 new US public companies.
  • $17.87 trillion in Product Equity Value© is produced for 155 million Americans.
  • $20.97 trillion in equity value is produced for the current 29.6 million US businesses.
  • $13.59 trillion in short-long term capital gains as a permanent tax stream.
  • A permanent 100% employment is achieved for the US labor force.

  • If a $0 corporate tax policy is adopted, an extra $3.5 trillion is potentially added to the $13.59 trillion of capital gains to get $17.09 trillion in potential tax revenue.

The assumption is made that the US tax on the existing 19,893 public companies remains the same as 4,004 new LLC public companies are implemented.

 

Modern communications makes capitalism universally available to the US and global citizens for the first time in economic history.

 

Paul Douglas Katchings

 

2012 Copyright. All Rights Reserved.
February 29, 2012.

 

 

Last Updated ( Monday, 16 May 2016 )
 
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