Corporate Artful Dodgers

On July 27, 2014, Paul Krugman writes in The New York Times:

In recent decisions, the conservative majority on the Supreme Court has made clear its view that corporations are people, with all the attendant rights. They are entitled to free speech, which in their case means spending lots of money to bend the political process to their ends. They are entitled to religious beliefs, including those that mean denying benefits to their workers. Up next, the right to bear arms?

There is, however, one big difference between corporate persons and the likes of you and me: On current trends, we’re heading toward a world in which only the human people pay taxes.

We’re not quite there yet: The federal government still gets a tenth of its revenue from corporate profits taxation. But it used to get a lot more — a third of revenue came from profits taxes in the early 1950s, a quarter or more well into the 1960s. Part of the decline since then reflects a fall in the tax rate, but mainly it reflects ever-more-aggressive corporate tax avoidance — avoidance that politicians have done little to prevent.

Which brings us to the tax-avoidance strategy du jour: “inversion.” This refers to a legal maneuver in which a company declares that its U.S. operations are owned by its foreign subsidiary, not the other way around, and uses this role reversal to shift reported profits out of American jurisdiction to someplace with a lower tax rate.

The most important thing to understand about inversion is that it does not in any meaningful sense involve American business “moving overseas.” Consider the case of Walgreen, the giant drugstore chain that, according to multiple reports, is on the verge of making itself legally Swiss. If the plan goes through, nothing about the business will change; your local pharmacy won’t close and reopen in Zurich. It will be a purely paper transaction — but it will deprive the U.S. government of several billion dollars in revenue that you, the taxpayer, will have to make up one way or another.

Does this mean President Obama is wrong to describe companies engaging in inversion as “corporate deserters”? Not really — they’re shirking their civic duty, and it doesn’t matter whether they literally move abroad or not. But apologists for inversion, who tend to claim that high taxes are driving businesses out of America, are indeed talking nonsense. These businesses aren’t moving production or jobs overseas — and they’re still earning their profits right here in the U.S.A. All they’re doing is dodging taxes on those profits.

And Congress could crack down on this tax dodge — it’s already illegal for a company to claim that its legal domicile is someplace where it has little real business, and tightening the criteria for declaring a company non-American could block many of the inversions now taking place. So is there any reason not to stop this gratuitous loss of revenue? No.

Opponents of a crackdown on inversion typically argue that instead of closing loopholes we should reform the whole system by which we tax profits, and maybe stop taxing profits altogether. They also tend to argue that taxing corporate profits hurts investment and job creation. But these are very bad arguments against ending the practice of inversion.

First of all, there are some good reasons to tax profits. In general, U.S. taxes favor unearned income from capital over earned income from wages; the corporate tax helps redress this imbalance. We could, in principle, maintain taxes on unearned income if we offset cuts in corporate taxes with substantially higher tax rates on income from capital gains and dividends — but this would be an imperfect fix, and in any case, given the state of our politics, this just isn’t going to happen.

Furthermore, ending profits taxation would greatly increase the power of corporate executives. Is this really something we want to do?

As for reforming the system: Yes, that would be a good idea. But the case for eventual reform basically has nothing to do with the case for closing the inversion loophole right now. After all, there are big debates about the shape of reform, debates that would take years to resolve even if we didn’t have a Republican Party that reliably opposes anything the president proposes, even if it was something Republicans were for just a few years ago. Why let corporations avoid paying their fair share for years, while we wait for the logjam to break?

Finally, none of this has anything to do with investment and job creation. If and when Walgreen changes its “citizenship,” it will get to keep more of its profits — but it will have no incentive to invest those extra profits in its U.S. operations.

So this should be easy. By all means let’s have a debate about how and how much to tax profits. Meanwhile, however, let’s close this outrageous loophole.

Paul Krugman has always failed to address the MOST significant problem facing Americans and other citizens of the world. That is the system in place assures that the wealthy ownership class will continue to concentrate ownership of wealth-creating, income-producing capital assets in perpetuity. None of the solutions proposed solve the problem of Monopoly Capitalism.

Capitalism, a term cleverly invented by Marxists and promoters of collective and State ownership, is a system that Ayn Rand and Milton Friedman also attempted to promote based on their glorification of “greed” and “selfishness” as moral virtues. The fact that the wealthiest 88 people in the world own more income-producing wealth than the bottom 350 billion members of world society does not trigger the moral sensitivities of these plutocrats. The top 1 percent of Americans own more productive wealth than the bottom 95 percent combined.

Paul Krugman appears to be  either unaware or indifferent to the unjust exclusionary barriers in the world’s monetary, tax and other institutional barriers to enabling every human being to enjoy an equal opportunity (not necessarily equal results) to acquire personally or share with others private property rights in new capital formation and voluntary transfers of existing income-producing capital assets, without violating private property rights of existing owners over the capital assets they now own. There solutions are socialistic redistributive in scope, rather than empowering each citizen to contribute productivity and build personal financial security.

At the heart of the obstacle to broadened personal ownership of wealth-creating and income-producing capital assets are the state statutes that create corporations but fail to specify how they must operate. At present corporations are permitted to retain earnings and debt finance, neither of which creates any new owners. Thus, the rich continuously get richer. What the statutes should dictate is that any form of incorporated group association should be encouraged through taxation or effectively required to pay out fully the earnings of the corporation to their stock owners, who would be taxed at personal tax rates, thus eliminating the corporate tax and double taxation. To satisfy further growth of the corporation new shares of stock should be issue and sold to both employees of the corporation and to other citizens. Such new shares should be purchased using “pure credit,” such as insured capital credit loans repayable out of the FUTURE earnings of the investments. Thus, employees would not have to reduce their wage earnings or benefits and other citizens would not have to deny themselves consumption in order to pledge and risk their personal “savings” and “equities”  to secure loans to invest.

This proposal is globally feasible because future increases in productive wealth are not dependent on existing wealth but have been historically increased by technological and system improvements and “customers with money” to buy the products and services produced by increased levels of production. To illustrate, America last experienced double digit rates of growth and full employment from 1940-1945, when the government supplied the money and customer power to encourage the private sector to grow faster to produce advanced weaponry needed to win World War II. Money and capital credit are “social tools” that can be used to finance equally fast rates of peacetime growth and broad-based citizen ownership and increased customer power. Newly added money and capital credit are based on promises that are expected to be repaid by future profits as projected by feasibility studies of projected sales and future costs of production that can only be realized in the future, not the past. In the world of commercial banking, capital credit for new capital formation is also backed by newly acquired productive assets, new rentable space and even improved infrastructure that sound feasibility studies have concluded will “pay for themselves” for new owners out of anticipated future profits.

Both newly added money in an economy and capital credit are expected to be backed by real assets, the very opposite of how the Federal Reserve now creates new inflationary money to cover mounting Federal debt and budget deficits of the Federal Government under Section 13(3) of the Federal Reserve Act. Compare that inherently inflationary monetary policy with the Federal Reserve’s unused potential power under Section 13(2) of the Federal Reserve Act to back commercial bank loans for supporting new capital credit for non-inflationary growth of any market economy.

“Pure credit” and capital credit insurance are the financial tools that can universalize access to asset-backed new money to be allocated to every citizen as the key for shifting economic power from government to all citizens by lifting artificial monetary and tax barriers to non-inflationary, balanced and faster rates of inclusionary market-based growth.

Americans must recognize the necessity to impose stipulations on corporations who benefit from government research and other contracts that they demonstrate that their ownership structure is inclusive of ALL employees and other citizens to qualify for consideration of the contract award. We  need to condition awarding ALL taxpayer-supported federal contracts (corporate welfare) on the basis that EVERY company vying for a government contract demonstrate that they are broadly owned including ownership by their employees. We need to ensure that if a corporation wants the advantages of being an American company then they should not be able run away from America to avoid paying taxes. Either American corporations pay a stiff corporate tax and remain narrowly owned or they pay no corporate tax but are structured such that they are owned broadly and by their employees. Such policies will stimulate a new era in American technological innovation.

This is the pathway to creating new owners and broadening wealth-creating, income-producing capital ownership to EVERY child, woman and man. EVERY citizen should be empowered equally to have access to insured, interest-free capital credit loans issued by local banks backed by the Federal Reserve to acquire new stock issues in qualified corporations with the principal and insurance fee repayable out of the FUTURE earnings of the investment. This would provide American corporations with all the monies they would need to grow, which in turn would substantially accelerate the growth of the economy, create new capital owners who would benefit from a new income source, and create new job opportunities as the economy revs up to produce general affluence for EVERY citizen. These policies would create a nation of “customers with money,” who overtime can build substantial financial security and eliminate reliance on taxpayer-supported government.

If we further lower or eliminate corporate income tax rates we eliminate our ability to incentivize corporations to finance new growth by creating new owners, without taking away ownership from those who are already owners. We need to close ALL loopholes and subsidies, which would substantially eliminate tax deductions.

We need to define a foreign corporation with at least better than 50 percent ownership vested with foreign nationals and an American corporation with at least 50 percent American citizen ownership. This definition get to the heart of the ownership; it should not be about how many American or foreign workers employed. We also need to look at tariffs on non-American corporations who would have tax advantages over American corporations or who want to participate in the American economy but are narrowly owned.

The bottom line is we  need  open-minded people from across the political spectrum to wake up and organize to lift the barriers to a more just market system for every country.

Support the Capital Homestead Act at http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/.

Support the Unite America Party Platform, published by The Huffington Post at http://www.huffingtonpost.com/gary-reber/platform-of-the-unite-ame_b_5474077.html as well as Nation Of Change athttp://www.nationofchange.org/platform-unite-america-party-1402409962and OpEd News at http://www.opednews.com/articles/Platform-of-the-Unite-Amer-by-Gary-Reber-Party-Leadership_Party-Platforms-DNC_Party-Platforms-GOP-RNC_Party-Politics-Democratic-140630-60.html.

http://www.nytimes.com/2014/07/28/opinion/paul-krugman-tax-avoidance-du-jour-inversion.html?_r=2

What Is An American Corporation And Does It Matter?

On July 29, 2014, Scott Baker writes on Op-Ed News.

Robert Reich published the following article in today’s Huffington Post.
Before I get into what I think is good and bad, I’d like to show the whole article, which is fairly short:

“You shouldn’t get to call yourself an American company only when you want a handout from the American taxpayers,” President Obama said Thursday.

He was referring to American corporations now busily acquiring foreign companies in order to become non-American, thereby reducing their U.S. tax bill.

But the president might as well have been talking about all large American multinationals.

Only about a fifth of IBM’s worldwide employees are American, for example, and only 40percent of GE’s. Most of Caterpillar’s recent hires and investments have been made outside the U.S.

In fact, since 2000, almost every big American multinational corporation has created more jobs outside the United States than inside. If you add in their foreign sub-contractors, the foreign total is even higher.

At the same time, though, many foreign-based companies have been creating jobs in the United States. They now employ around 6 million Americans, and account for almost 20 percent of U.S. exports. Even a household brand like Anheuser-Busch, the nation’s best-selling beer maker, employing thousands of Americans, is foreign (part of Belgian-based beer giant InBev).

Meanwhile, foreign investors are buying an increasing number of shares in American corporations, and American investors are buying up foreign stocks.

Who’s us? Who’s them?

Increasingly, corporate nationality is whatever a corporation decides it is.

So instead of worrying about who’s American and who’s not, here’s a better idea: Create incentives for any global company to do what we’d like it to do in the United States.

For example, “American” corporations get generous tax credits and subsidies for research and development, courtesy of American taxpayers.

But in reducing these corporations’ costs of R&D in the United States, those tax credits and subsidies can end up providing extra money for them to do more R&D abroad.

3M is building research centers overseas at a faster clip than it’s expanding them in America. Its CEO explained this was “in preparation for a world where the West is no longer the dominant manufacturing power.”

3M is hardly alone. Since the early 2000s, most of the growth in the number of R&D workers employed by U.S.-based multinational companies have been in their foreign operations, according to the National Science Board, the policy-making arm of the National Science Foundation.

It would make more sense to limit R&D tax credits and subsidies to additional R&D done in the U.S. over and above current levels — and give them to any global corporation increasing its R&D in America, regardless of the company’s nationality.

Or consider Ex-Im Bank subsidies — a topic of hot debate in Washington these days. These subsidies are intended to boost exports of American corporations from the United States.

Tea Party Republicans call them “corporate welfare,” and Chamber-of-Commerce Republicans call them sensible investments. But regardless, they’re going to “American” multinationals that are making things all over the world.

That means any subsidy that boosts their export earnings in the United States indirectly subsidizes their investments abroad — including, very possibly, their exports from foreign nations.

GE, a major Ex-Im Bank beneficiary, has been teaming up with China to produce a new jetliner there that will compete with Boeing for global business. (Boeing, not incidentally, is another Ex-Im beneficiary). In fact, GE is giving its Chinese partner the same leading-edge avionics technologies operating Boeing’s 787 Dreamliner.

Caterpillar, another Ex-Im Bank beneficiary, is providing engine funnels and hydraulics toChinese firms that eventually will be exporting large moving equipment from China. Presumably they’ll be competing in global markets with Caterpillar itself.

Rather than subsidize “American” exporters, it makes more sense to subsidize any global company — to the extent it’s adding to its exports from the United States.

Which brings us back to American companies that are morphing into foreign companies in order to lower their U.S. tax bill.

“I don’t care if it’s legal,” said the president. “It’s wrong.”

It’s just as wrong for American corporations to hide their profits abroad — which many are doing simply by setting up foreign subsidiaries in low-tax jurisdictions, and then making it seem as if the foreign subsidiary is earning the money.

Caterpillar, for example, saved $2.4 billion between 2000 and 2012 by funneling its global parts business through a Swiss subsidiary (a ruse so audacious that one of its tax consultants warned Caterpillar executives to “get ready to do some dancing” when called before Congress to justify it).

And what about American corporations that avoid U.S. taxes by never bringing home what they legitimately earn abroad — a sum now estimated to be in the order of $1.6 trillion?

Rather than focus on the newly-fashionable tax-avoidance strategy of changing corporate nationality, it makes more sense to tax any global corporation on all income earned in the United States (with high penalties for shifting that income abroad), and no longer tax “American” corporations on revenues earned outside America. Most other nations already follow this principle.

In other words, let’s stop worrying about whether big global corporations are “American.” We can’t win that game. Focus instead on what we want global corporations of whatever nationality to do in America, and on how we can get them to do it.

I congratulate Reich for thinking outside the “American Company vs. Foreign Company” box. He’s absolutely right in that national incorporation means very little in today’s globalized world, and will mean even less in the future. Some commentators have said even nation-states are fading in importance as well, but I believe the case for that is not nearly as strong; for one thing, we are seeing a proliferation of nations (currently 193), over a double since WWII, not a reduction. Despite Obama’s contradictory impulse to “level the playing field” to the lowest common denominator through the TPP and TTIP agreements, there are still many reasons to retain the nation-state, monetary sovereignty among the highest, but also worker rights, good middle class jobs, environmental protections etc.
It’s clear that these features do not exist to the same degree in countries that are taking our jobs and are asking corporations to pay so little in taxes that the inversion Reich speaks of, has become a major corporate trend.

However, tax subsidies are expensive and, as Reich points out, can be gamed into being applied abroad instead. Who is going to monitor this, and how? This will add another layer of bureaucracy to an over-burdened, under-funded government tax department.
The Export-Import bank should probably stay, for now, since getting rid of it would only put us at a disadvantage to other countries who have departments to do the same thing, but this is, at best, and almost by definition, a holding action, not one that can give any country a permanent advantage. Indeed, for all the subsidies Boeing is getting this way, it looks as though GE will undercut it, and maybe even itself, by helping China to create a competitive airplane industry, says Reich, and others.

But, there is another way to get the revenues government needs to function, and to make sure businesses in this country pay their fair share.
First, let’s review the Cannons of Taxation, going back to Adam Smith. The canons or principles of taxation are:
1. Economic (cost effective, meaning it should cost less to collect the taxes than the tax revenue)
2. Equity (fair taxation in terms of horizontal and vertical equity)
3. Certainty (people should know how and when to pay)
4. Convenience (simplicity or ease)
More details: click here
*Canon of certainty says that tax policies should not alter regularly and there are some more canons. Such as,
5. Canon of Neutrality (tax policy should not make abnormality in Market)
6. Canon of Incentives (a tax should not harm the factors which motivate economical sectors)

Our current tax system is largely none of these to any great degree. It is enormously complex, expensive to administer and to comply with, counter-productive, inconvenient, and non-neutral.

A much better system would tax those things that cannot be moved offshore, like Land (including location), pollution and resource use. It would also be more “fee-based” so that resource use/abuse would be fully charged for, especially externalities, which are barely taxed at all, relative to their harm.

Some examples of things that are under-taxed for their use now include:
A. Roads. Congress just barely prevented 700,000 jobs from being lost due to suspended highway and infrastructure projects, by funding a stopgap measure in the Highway bill just passed. However, the cost was in allowing corporations to under-fund pensions (yet another giveaway to corporations that will ultimately do nothing to stop their net exodus). The Senate has yet to pass it, however, and if, as expected, they tinker with it, it will have to return to the House, where it may face opposition from the anti-Obama Republicans. We have only until August to rectify this, and Congress will go on vacation around then too. Both sides agree that the gas tax is insufficient to meet the needs of our nation’s highways.
However, we could do something else. We could charge a tax by the mile instead of by the gallon (electric cars will also eventually put a dent in this revenue source). But, an even larger source of revenue would be to tax those locations that benefit from having a road run to or near them, through a Land Value Tax – basically collecting the rent on location.
A Land Value Tax would meet all the cannons of taxation, even number 6, since it is money that is now just going into private hands for doing nothing but being in the right place when a road goes through or is improved.
Corporations and people should pay for what they use.

B. Ports. For those companies that do import goods, whether they are “American” or foreign, there ought to be a full charge for entering our country, including security checks, which are currently inadequate, says Representative Jerry Nadler and others. This will indeed add costs to importers of foreign made goods, but it is a price we are currently paying, either currently, or in possible future terrorist attacks that could have been prevented with proper screening. It is certainly a cost that ought to be borne by companies who import goods that could have been made here in America instead. Paying for corporate import “externalities” is not Free Trade, it is corporate socialism.

C. Virtual locations. Increasingly, business is conducted online, with the only physical location being a server farm in some distant area. Of course, we need to charge for the full cost of these highly energy-intensive farms, including pollution costs at the source, and water usage – a particular problem in the parched American West. But, we need to rethink how virtuallocational advantage benefits corporations too. Facebook, for example, has a good product that people want to use. But, how many people use it largely because other people arealready using it? With its rapid growth rate, it’s hard to pin down, but there are currently over a billion users. Surely, most of those people were strongly encouraged to sign up because so many others were already there.
If Facebook is profiting from the size of its virtual community, shouldn’t it pay rent just as it would have to in a physical community? Clearly, Facebook realizes it is in their interest not to charge users for using its product, but to pass those costs onto advertisers, but we ought to go further and charge rent on the commons, even if those commons are virtual. This goes for other social media giants and software producers, like Microsoft, who gain advantage because of the large community of users, even if they do nothing more to improve their product. As J.S. Mill said of actual Landlords, “They grow richer, as it were in their sleep, without working, risking, or economizing.

There are more things to collect the “rent” upon, and Georgist economists like Mason Gaffney, Nic Tideman etc. tell us the rent may be as high as 1/3 of the GDP, or even more, certainly, as Henry George said “Enough and to spare” to run a decent sized government.

At the same time, we ought to untax labor so they can more easily compete with workers abroad. Without the deadweight loss of taxes, workers can accept less money overall, while keeping more of what they earn. We ought to untax sales to encourage commerce, particularly local commerce – which would pay less for road use, ports, and other distribution costs that are hidden by road, rail, air, and freight subsidies now.

A broadened Land Value Tax to include virtual locations and externalities would acknowledge the value of the commons and that things “rented” from the commons ought to result in rent returned to the commons (i.e. the People) as a dividend.

It would be easy to comply with and without loopholes. It is not so much the rate that counts (ours is technically 35%, but corporations, through gimmicks like offshoring and inversion, often pay less than half that), but how hard it is to evade, and who is doing the evading (only Big Corporations who can afford to go through the steps to reincorporate elsewhere).

Until Obama mentions specifics like this, I can’t take him seriously. In fact, he may be deliberately or accidentally enabling this because he spouts useless nonsense about patriotism and fairness (neither of which are incentivized under corporate structures), while offering no real solutions, as if there aren’t any (see above). This just feeds despair and hopelessness, and leaves corporations free to continue doing what they are doing.

These proposals, while thought provoking, do not address the MOST significant problem facing Americans and other citizens of the world. That is the system in place assures that the wealthy ownership class will continue to concentrate ownership of wealth-creating, income-producing capital assets in perpetuity. None of the solutions proposed solve the problem of Monopoly Capitalism.

Capitalism, a term cleverly invented by Marxists and promoters of collective and State ownership, is a system that Ayn Rand and Milton Friedman also attempted to promote based on their glorification of “greed” and “selfishness” as moral virtues. The fact that the wealthiest 88 people in the world own more income-producing wealth than the bottom 350 billion members of world society does not trigger the moral sensitivities of these plutocrats. The top 1 percent of Americans own more productive wealth than the bottom 95 percent combined.

Both Robert Reich and Scott Baker appear to be  either unaware or indifferent to the unjust exclusionary barriers in the world’s monetary, tax and other institutional barriers to enabling every human being to enjoy an equal opportunity (not necessarily equal results) to acquire personally or share with others private property rights in new capital formation and voluntary transfers of existing income-producing capital assets, without violating private property rights of existing owners over the capital assets they now own. There solutions are socialistic redistributive in scope, rather than empowering each citizen to contribute productivity and build personal financial security.

At the heart of the obstacle to broadened personal ownership of wealth-creating and income-producing capital assets are the state statutes that create corporations but fail to specify how they must operate. At present corporations are permitted to retain earnings and debt finance, neither of which creates any new owners. Thus, the rich continuously get richer. What the statutes should dictate is that any form of incorporated group association should be encouraged through taxation or effectively required to pay out fully the earnings of the corporation to their stock owners, who would be taxed at personal tax rates, thus eliminating the corporate tax and double taxation. To satisfy further growth of the corporation new shares of stock should be issue and sold to both employees of the corporation and to other citizens. Such new shares should be purchased using “pure credit,” such as insured capital credit loans repayable out of the FUTURE earnings of the investments. Thus, employees would not have to reduce their wage earnings or benefits and other citizens would not have to deny themselves consumption in order to pledge and risk their personal “savings” and “equities”  to secure loans to invest.

This proposal is globally feasible because future increases in productive wealth are not dependent on existing wealth but have been historically increased by technological and system improvements and “customers with money” to buy the products and services produced by increased levels of production. To illustrate, America last experienced double digit rates of growth and full employment from 1940-1945, when the government supplied the money and customer power to encourage the private sector to grow faster to produce advanced weaponry needed to win World War II. Money and capital credit are “social tools” that can be used to finance equally fast rates of peacetime growth and broad-based citizen ownership and increased customer power. Newly added money and capital credit are based on promises that are expected to be repaid by future profits as projected by feasibility studies of projected sales and future costs of production that can only be realized in the future, not the past. In the world of commercial banking, capital credit for new capital formation is also backed by newly acquired productive assets, new rentable space and even improved infrastructure that sound feasibility studies have concluded will “pay for themselves” for new owners out of anticipated future profits.

Both newly added money in an economy and capital credit are expected to be backed by real assets, the very opposite of how the Federal Reserve now creates new inflationary money to cover mounting Federal debt and budget deficits of the Federal Government under Section 13(3) of the Federal Reserve Act. Compare that inherently inflationary monetary policy with the Federal Reserve’s unused potential power under Section 13(2) of the Federal Reserve Act to back commercial bank loans for supporting new capital credit for non-inflationary growth of any market economy.

“Pure credit” and capital credit insurance are the financial tools that can universalize access to asset-backed new money to be allocated to every citizen as the key for shifting economic power from government to all citizens by lifting artificial monetary and tax barriers to non-inflationary, balanced and faster rates of inclusionary market-based growth.

Americans must recognize the necessity to impose stipulations on corporations who benefit from government research and other contracts that they demonstrate that their ownership structure is inclusive of ALL employees and other citizens to qualify for consideration of the contract award. We  need to condition awarding ALL taxpayer-supported federal contracts (corporate welfare) on the basis that EVERY company vying for a government contract demonstrate that they are broadly owned including ownership by their employees. We need to ensure that if a corporation wants the advantages of being an American company then they should not be able run away from America to avoid paying taxes. Either American corporations pay a stiff corporate tax and remain narrowly owned or they pay no corporate tax but are structured such that they are owned broadly and by their employees. Such policies will stimulate a new era in American technological innovation.

This is the pathway to creating new owners and broadening wealth-creating, income-producing capital ownership to EVERY child, woman and man. EVERY citizen should be empowered equally to have access to insured, interest-free capital credit loans issued by local banks backed by the Federal Reserve to acquire new stock issues in qualified corporations with the principal and insurance fee repayable out of the FUTURE earnings of the investment. This would provide American corporations with all the monies they would need to grow, which in turn would substantially accelerate the growth of the economy, create new capital owners who would benefit from a new income source, and create new job opportunities as the economy revs up to produce general affluence for EVERY citizen. These policies would create a nation of “customers with money,” who overtime can build substantial financial security and eliminate reliance on taxpayer-supported government.

If we further lower or eliminate corporate income tax rates we eliminate our ability to incentivize corporations to finance new growth by creating new owners, without taking away ownership from those who are already owners. We need to close ALL loopholes and subsidies, which would substantially eliminate tax deductions.

We need to define a foreign corporation with at least better than 50 percent ownership vested with foreign nationals and an American corporation with at least 50 percent American citizen ownership. This definition get to the heart of the ownership; it should not be about how many American or foreign workers employed. We also need to look at tariffs on non-American corporations who would have tax advantages over American corporations or who want to participate in the American economy but are narrowly owned.

The bottom line is we  need  open-minded people from across the political spectrum to wake up and organize to lift the barriers to a more just market system for every country.

Support the Capital Homestead Act at http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/.

Support the Unite America Party Platform, published by The Huffington Post at http://www.huffingtonpost.com/gary-reber/platform-of-the-unite-ame_b_5474077.html as well as Nation Of Change athttp://www.nationofchange.org/platform-unite-america-party-1402409962and OpEd News at http://www.opednews.com/articles/Platform-of-the-Unite-Amer-by-Gary-Reber-Party-Leadership_Party-Platforms-DNC_Party-Platforms-GOP-RNC_Party-Politics-Democratic-140630-60.html.

http://www.opednews.com/articles/1/What-is-an-American-Corpor-by-Scott-Baker-Corporate_Corporations_Corporations-Transnational_Credit-140729-469.html

A Bill To Get the Labor Movement Back On Offense

workerunion73014

On July 30, 2014, George Zornick wites on Nation Of Change:

For years, the American labor movement has been on the defensive as it has become harder and harder for workers to join or maintain a union. But some House Democrats are planning a dramatic counter-offensive: a bill that would make union organizing a civil right.

Representatives Keith Ellison and John Lewisplan to introduce a bill Wednesday that would make labor organizing a basic freedom no different than freedom from racial discrimination.

Representatives Keith Ellison and John Lewis plan to introduce a bill Wednesday that would make labor organizing a basic freedom no different than freedom from racial discrimination. That sounds like a nice talking point — but this isn’t just another messaging bill.

The Ellison-Lewis legislation would amend the National Labor Relations Act to include protections found under Title VII of the Civil Rights Act to include labor organizing as a fundamental right. That would give workers a broader range of legal options if they feel discriminated against for trying to form a union.

Currently, their only redress is through a grievance with the National Labor Relations Board — an important process, but one that workers and labor analysts frequently criticize as both too slow and often too lenient on offending employers.

 

If the NLRA were amended, however, after 180 days a worker could take his or her labor complaint from the NLRB to a federal court. This is how the law works now for civil rights complaints, which gives workers the option, after 180 days, to step outside the Equal Employment Opportunity Commission process.

Then, workers would have sole discretion on whether to push a complaint, as opposed to relying on a decision by the NLRB on whether to forge ahead. Workers could also move the process along much faster than the NLRB handles complaints, which can often take years.

Is Labor a Lost Cause?

Ellison told The Nation that the legislation would also help workers recover more money — the NLRB will award back pay to a grieved worker minus whatever they earned while awaiting a decision, which can often amount to basically nothing. “[The NLRB] remedy, though useful and very important, and nothing in our legislation changes that, that remedy is considered slow and somewhat inadequate. For some of these union-busting law firms, [they] will say ‘so do it and we’ll just pay.’”

Ellison said he believes the labor movement needs to get back on the offensive. “With the Supreme Court in here, and what they just did in Harris v. Quinn and all the things they wrote about Abood, it’s insane to hope for the best,” he said, referring to the recent decision involving non-union public workers and their fee arrangements with unions. “I mean this Supreme Court is openly hostile to racial justice and worker justice simultaneously. So we better be moving out on both fronts.”

Ellison told MSNBC, which first reported the bill, that he got the idea from a book by Century Foundation fellows Richard Kahlenberg and Moshe Marvit, titled Why Union Organizing Should Be a Civil RightThey argue that the First Amendment’s right to free association should clearly include one of the most crucial forms of association — banding together to push back against unfair treatment from employers.

Marvit told The Nation he thinks treating labor organizing as a civil right is not only constitutionally appropriate but also much more appealing to the general public. “Civil rights is something that Americans really understand, and has a legitimacy that is sort of beyond reproach,” he said. “So when you put it in civil rights terms, it’s something that really speaks to people.” (In the interest of full disclosure, Marvit has written for The Nation in the past.)

Both the AFL-CIO and the Change to Win coalition will back the bill, along with The United Food and Commercial Workers and the American Federation of State, County and Municipal Employees.

“Frankly, I think Republicans have been saying it on the other side. That’s been the message of the National Right to Work Committee for sixty years, that workers have a civil right not to join a union,” Marvit continued. “And I think that’s been a successful argument for them. It taps into this notion of your freedom to choose.”

The Nation has learned that when Ellison and Lewis introduce the bill on Wednesday morning, they will boast eleven other original co-sponsors: Representatives Jerrold Nadler, John Conyers,Marcia Fudge, Barbara Lee, Mark Takano, Rush Holt, Eleanor Holmes Norton, Karen Bass, Danny Davis, Albio Sires and Janice Hahn. All of the co-sponsors are Democrats.

Major unions will also be on board. Both the AFL-CIO and the Change to Win coalition will back the bill, along with The United Food and Commercial Workers and the American Federation of State, County and Municipal Employees.

Joseph Geevarghese, deputy director of Change to Win, told The Nation that his union was joining the push “because union organizing has been maligned. Unions have been maligned in our society. There is a value in re-defining what all of these tens of thousands of brave workers are doing as, “We have a fundamental right to stand up and speak out about injustice in this country.’”

This post originally appeared at The Nation.

 

If the workers and their representatives were smart, they would organize as a Producers’ Ownership Union and demand not increased wages and benefits but employee ownership participation with full-dividend payout and full voting-rights.

Unfortunately, at the present time the movement is built on one-factor economics––the labor worker. The insufficiency of labor worker earnings to purchase increasingly capital-produced products and services gave rise to labor laws and labor unions designed to coerce higher and higher prices for the same or reduced labor input. With government assistance, unions have gradually converted productive enterprises in the private and public sectors into welfare institutions. Binary economist Louis Kelso stated: “The myth of the ‘rising productivity’ of labor is used to conceal the increasing productiveness of capital and the decreasing productiveness of labor, and to disguise income redistribution by making it seem morally acceptable.”

Kelso argued that unions “must adopt a sound strategy that conforms to the economic facts of life. If under free-market conditions, 90 percent of the goods and services are produced by capital input, then 90 percent of the earnings of working people must flow to them as wages of their capital and the remainder as wages of their labor work…If there are in reality two ways for people to participate in production and earn income, then tomorrow’s producers’ union must take cognizance of both…The question is only whether the labor union will help lead this movement or, refusing to learn, to change, and to innovate, become irrelevant.”

Kelso also was quoted as saying, “Conventional wisdom says there is only one way to earn a living, and that’s to work. Conventional wisdom effectively treats capital (land, structures, machines, and the like) as though it were a kind of holy water that, sprinkled on or about labor, makes it more productive. Thus, if you have a thousand people working in a factory and you increase the design and power of the machinery so that one hundred men can now do what a thousand did before, conventional wisdom says, ‘Voila! The productivity of the labor has gone up 900 percent!’ I say ‘hogwash.’ All you’ve done is wipe out 90 percent of the jobs, and even the remaining ten percent are probably sitting around pushing buttons. What the economy needs is a way of legitimately getting capital ownership into the hands of the people who now don’t have it.”

Unions are the only group of people in the whole world who can demand a real, justice-based Kelso-designed Employee Stock Ownership Plan (ESOP) (http://www.cesj.org/learn/capital-homesteading/ch-vehicles/employee-stock-ownership-plans-esops/), who can demand the right to participate in the expansion of their employer by asserting their constitutional preferential rights to become capital owners, be productive, and succeed. The ESOP can give employees access to capital credit so that they can purchase the employer’s stock with the earnings of capital, pay for it in pre-tax dollars out of the assets that underlie that stock, and after the stock is paid for earn and collect the capital worker (owner) income from it, and accumulate it in a tax haven until they retire, whereby they continue to be capital workers receiving income from their capital ownership stakes. This is a viable route to individual self-sufficiency needing significantly less or no government redistributive assistance.

The unions should reassess their role of bargaining for more and more income for the same work or less and less work, and embrace a cooperative approach to survival, whereby they redefine “more” income for their workers in terms of the combined wages of labor and capital on the part of the workforce. They should continue to represent the workers as labor workers in all the aspects that are represented today––wages, hours, and working conditions––and, in addition, represent workers as full voting stockowners as capital ownership is built into the workforce. What is needed is leadership to define “more” as two ways to earn income.

If we continue with the past’s unworkable trickle-down economic policies, governments will have to continue to use the coercive power of taxation to redistribute income that is made by people who earn it and give it to those who need it. This results in ever deepening massive debt on local, state, and national government levels, which leads to the citizenry becoming parasites instead of enabling people to become productive in the way that products and services are actually produced.

When labor unions transform to Producers’ Ownership Unions, opportunity will be created for the unions to reach out to all shareholders (stock owners) who are not adequately represented on corporate boards, and eventually all labor workers will want to join an ownership union in order to be effectively represented as an aspiring capital owner. The overall strategy should assure that the labor compensation of the union’s members does not exceed the labor costs of the employer’s competitors, and that capital earnings of its members are built up to a level that optimizes their combined labor-capital worker earnings. A Producers’ Ownership Union would work collaboratively with management to secure financing of advanced technologies and other new capital investments and broaden ownership. This will enable American companies to become more cost-competitive in global markets and to reduce the outsourcing of jobs to workers willing or forced to take lower wages.

Kelso stated, “Working conditions for the labor force have, of course, improved over the years. But the economic quality of life for the majority of Americans has trailed far behind the technical capabilities of the economy to produce creature comforts, and even further behind the desires of consumers to live economically better lives. The missing link is that most of those unproduced goods and services can be produced only through capital, and the people who need them have no opportunity to earn income from capital ownership.”

Walter Reuther, President of the United Auto Workers, expressed his open-mindedness to the goal of democratic worker ownership in his 1967 testimony to the Joint Economic Committee of Congress as a strategy for saving manufacturing jobs in America from being outcompeted by Japan and eventual outsourcing to other Asian countries with far lower wage costs: “Profit sharing in the form of stock distributions to workers would help to democratize the ownership of America’s vast corporate wealth, which is today appallingly undemocratic and unhealthy.

“If workers had definite assurance of equitable shares in the profits of the corporations that employ them, they would see less need to seek an equitable balance between their gains and soaring profits through augmented increases in basic wage rates. This would be a desirable result from the standpoint of stabilization policy because profit sharing does not increase costs. Since profits are a residual, after all costs have been met, and since their size is not determinable until after customers have paid the prices charged for the firm’s products, profit sharing [through wider share ownership] cannot be said to have any inflationary impact on costs and prices.”

Unfortunately for democratic unionism, the United Auto Workers, American manufacturing workers, and American citizens generally, Reuther was killed in an airplane crash in 1970 before his idea was implemented. Leonard Woodcock, his successor, never followed through, nor has any other labor leader since, including Richard Trumka, President of the AFL-CIO.

http://www.nationofchange.org/bill-get-labor-movement-back-offense-1406729458

85 Super Wealthy People Have More Money Than The Poorest 3.5 Billion Combined

On July 27. 2014, Michael Snyder writes on The Economic Collapse:

The global economy is structured to systematically funnel wealth to the very top of the pyramid, and this centralization of global wealth is accelerating with each passing year.  According tothe United Nations, 85 super wealthy people have more money than the poorest 3.5 billion people on the planet combined.  And 1.2 billion of those poor people live on less than $1.25 a day.  There is something deeply, deeply broken about a system that produces these kinds of results.  Seven out of every ten people on the planet live in countries where the gap between the wealthy and the poor has increased in the last 30 years.  Despite our technological advances, somewhere around a billion people go to bed hungry every single night.  And when our fundamentally flawed financial system finally does collapse, it will be the poor that will suffer the worst.

Now, let me make one thing clear at the outset.

Big government and more socialism are not the answer to anything.  Big government and more socialism almost always result in increased oppression and increased poverty.  If you want to see where that road ultimately leads to, just look at North Korea.

What we need is a system that empowers individuals and families to work hard, be creative, build businesses and to take care of themselves.

But instead, we have a system where all power and all wealth are increasingly controlled by giant banks and giant corporations that are in turn controlled by the global elite.  The “financialization” of the global economy has turned almost everyone on the planet into “deft serfs”, and the compound interest on all of that debt enables the global elite to constantly increase their giant piles of money.

As I have written about previously, the total amount of government debt in the world has increased by about 40 percent since the last recession.

And when you consider all forms of debt, the grand total for the planet is now up to a whopping 223 trillion dollars.

This enables the super wealthy to constantly become even wealthier.  It is like a giant vacuum cleaner that sucks wealth out of all of our pockets and transfers it to them.

It has been reported that the global elite have approximately 32 trillion dollars stashed in offshore banks around the globe.

But that is only what we know about.

What we don’t know about is probably far greater.

Just like most people don’t realize that men like Bill Gates and Carlos Slim are not the wealthiest men on the planet.

The people that are really at the top of the food chain are masters at hiding wealth and they absolutely do not want their names being thrown around in the media.

Meanwhile, those at the bottom of the pyramid continue to suffer.

For example, it was been widely reported that there are more people in slavery today than ever before in human history.

That is an absolutely amazing statistic.  It is hard to comprehend how that could be possible, and yet it is.  A new UN report says that there are 21 million slaves around the globe right now

Nearly 21 million people are working as modern day slaves, falling victim to trafficking, forced labor and sexual exploitation, a new UN report finds. The illicit market in exploited people generates billions of dollars in profit worldwide.

The report by the International Labour Organization (ILO), which draws on information gathered in a 2012 survey, also found that annual profits stemming from forced labor are three times higher than previous estimates.

“Put into perspective, the 21 million victims in forced labor and the more than US$150 billion in illegal profits generated by their work exceeds the population and GDP of many countries or territories around the world,” the ILO says.

This is an utter abomination, but this is actually happening all over the planet.  The following is one story that I recently came across out of India

Dialu Nial’s life changed forever when he was held down by his neck in a forest and one of his kidnappers raised an axe to strike.

He was asked if he wanted to lose his life, a leg or a hand.

Six days earlier, Nial had been among 12 young men being taken against their will to make bricks on the outskirts of one of India’s biggest cities, Hyderabad.

During the journey, they got a chance to escape and ran for it – but Nial and a friend were caught and this was their punishment.

And yes, he did end up losing his hand.

Fortunately, most of us are not facing that kind of oppression.

But that doesn’t mean that we aren’t slaves.  The borrower is the servant of the lender, and over the past four decades the total amount of debt in America has gone from about 2.2 trillion dollars to nearly 60 trillion dollars.  Many of us work as “debt serfs” our entire lives, and we never even know the names or the faces of those that we are making rich as we slowly pay off our debts.

And all of this debt is one of the primary factors destroying the middle class in America.  Just this past week, the New York Times reported that the wealth of “the typical household” in the United States has declined by 36 percent over the past decade…

The inflation-adjusted net worth for the typical household was $87,992 in 2003. Ten years later, it was only $56,335, or a 36 percent decline, according to a study financed by the Russell Sage Foundation. Those are the figures for a household at the median point in the wealth distribution — the level at which there are an equal number of households whose worth is higher and lower. But during the same period, the net worth of wealthy households increased substantially.

The Russell Sage study also examined net worth at the 95th percentile. (For households at that level, 94 percent of the population had less wealth and 4 percent had more.) It found that for this well-do-do slice of the population, household net worth increased14 percent over the same 10 years. Other research, by economists like Edward Wolff at New York University, has shown even greater gains in wealth for the richest 1 percent of households.

Does that upset you when you read that?

It should.

And the outlook for the next generation is even worse.  Most of our young adults are absolutely drowning in student loan debt and other forms of debt, and wages for new college graduates are terrible.

Sadly, most people don’t even realize how the global financial system works or why the gap between the super wealthy and the rest of us continues to grow so rapidly.

It has been estimated that the wealthiest one percent currently have 110 trillion dollars.

That is 65 times more wealth than the bottom half of the global population combined.

They are hoarding wealth as we approach some of the most unstable days in all of human history.

Both the cause and the solution is our technological advances.

Why are technological advances the cause? Because tectonic shifts in the technologies of production are displacing the need for human labor and at the same time devaluing the worth of labor. Yet labor is the ONLY means to an earned income that the vast majority of people have.

The role of physical productive capital is to do ever more of the work, which produces income. Full employment is not an objective of businesses. Companies strive to keep labor input and other costs at a minimum in order to maximize profits for the owners. They strive to minimize marginal cost, the cost of producing an additional unit of a good, product or service once a business has its fixed costs in place. Reducing marginal costs enables businesses to increase profits, offer goods, products and services at a lower price, or both. Increasingly, new technologies are enabling companies to achieve near-zero cost growth without having to hire people. Thus, private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role.

Over the past century there has been an ever-accelerating shift to productive capital––which reflects tectonic shifts in the technologies of production. The mixture of labor worker input and capital worker input has been rapidly changing at an exponential rate of increase for over 235 years in step with the Industrial Revolution (starting in 1776) and had even been changing long before that with man’s discovery of the first tools, but at a much slower rate. Up until the close of the nineteenth century, the United States remained a working democracy, with the production of products and services dependent on labor worker input. When the American Industrial Revolution began and subsequent technological advance amplified the productive power of non-human capital, plutocratic finance channeled its ownership into fewer and fewer hands, as we continue to witness today with government by the wealthy evidenced at all levels. People invented tools to reduce toil, enable otherwise impossible production, create new highly automated industries, and significantly change the way in which products and services are produced from labor intensive to capital intensive––the core function of technological invention.

Most changes in the productive capacity of the world since the beginning of the Industrial Revolution can be attributed to technological improvements in our capital assets, and a relatively diminishing proportion to human labor. Capital does not “enhance” labor productivity (labor’s ability to produce economic goods). In fact, the opposite is true. It makes many forms of labor unnecessary.

Why are technological advances the solution? Because productive capital is increasingly the source of the world’s economic growth. Therefore, productive capital should become the source of added property ownership incomes for all. Simply put, if both labor and capital are independent factors of production, and if capital’s proportionate contributions are increasing relative to that of labor, then equality of opportunity and economic justice demands that the right to property (and access to the means of acquiring and possessing property) must in justice be extended to all.

The system of big government and socialistic programs funded by tax extraction and non-asset-based national debt  are not the answer to anything.  The socialistic system almost always results in increased oppression, increased poverty or sameness as EVERY citizen becomes dependent on the State.

As Michael Snyder states, “What we need is a system that empowers individuals and families to work hard, be creative, build businesses and to take care of themselves.” Yes, but he leaves out the MOST IMPORTANT need, which is to extend equal opportunity to EVERY child, woman, and man to  share individually in the FUTURE wealth-creating, income-producing capital assets of corprations whereby financing new capital formation and transfers of existing assets is accomplished from the bottom-up and without redistributing property rights of the rich and super-rich with regard to their existing assets

Snyder states, “But instead, we have a system where all power and all wealth are increasingly controlled by giant banks and giant corporations that are in turn controlled by the global elite.  The ‘financialization’ of the global economy has turned almost everyone on the planet into ‘deft serfs,’ and the compound interest on all of that debt enables the global elite to constantly increase their giant piles of money.”

Not only has EVERY person become a debt slave, but also a wage slave, and increasingly a welfare and charity slave.  Over the past four decades the total amount of consumer debt in America has gone from about 2.2 trillion dollars to nearly 60 trillion dollars.  As Snyder notes, “many of us work as ‘debt serfs’ our entire lives, and we never even know the names or the faces of those that we are making rich as we slowly pay off our debts.”

Most thinking people should realize that never-ending consumer is not a wise situation to put one into. Such consumer debt requires a source of income that is promised to be paid to the owners of the note, credit card, or mortgage.

But there is a good form of debt, which is constantly used by the rich and the super-rich to make themselves richer. It is capital credit, a loan specifically tailored to finance FUTURE investment, repayable out of FUTURE earnings, without the need for “past savings” or the reduction in one’s personal consumption needs and wants. In the business world, physical capital is expected to go on producing income indefinitely with proper maintenance and with restoration in the technical sense through research and development. This is how technological advances occur and develop over time.

What is needed is to reform the system to simultaneously create new wealth-creating, income-producing capital asset formation and broaden its ownership so that increasingly over time more and more citizens will derive financial benefit and second incomes from their expanding diversified wealth-creating, income-producing capital asset portfolios. In this way, we can balance production with consumption––the purpose of production.
This can be achieved with insured, no-interest capital credit loans provided by local banks to EVERY child, woman and man, repayable out of FUTURE earnings generated from new capital asset projects, without the need to pledge “past savings” or equities, or reduce one’s consumption level.
The necessary insurance can either be facilitated with private capital credit insurance or a government reinsurance agency (ala the Federal Housing Administration concept).

While other forms of non-asset-based debt is inflationary, commercial capital credit relies on non-inflationary capital asset creation, unlike government expenditures which rely on tax extraction or non-asset-backed debt to redistribute or inject inflationary money into the system.

The socialism practiced today relies on tax extraction and non-asset-based national debt to firstly redistribute monies collected into social welfare programs and second to finance public infrastructure and the military, etc. To the extent that modern “capitalistic” economies redistribute they are practicing socialism. 

For those who are interested in the specifics of the solution see the Just Third Way and the Capital Homestead Act––the purpose of which is to eliminate privilege and provide EQUAL OPPORTUNITY for EVERY child, woman and man to build independent, sustainable financial security and incomes through acquiring ownership in FUTURE wealth-creating, income-producing capital assets financed without the necessity of pledging “past savings” or a reduction in consumption.

The solution eliminates the barriers to ordinary people forming capital themselves in association with others without the necessity for “past savings” or the pledging of equities which only the wealthy ownership class has.

The JUST Third Way is a radical overhaul of the economic system (i.e., the Federal tax system, Federal Reserve policy, inheritance law, welfare and entitlement system, etc.) that will achieve genuine economic democracy, based on the Platform of the Unite America Party and its links and the proposed Capital Homestead Act. Our Platform is a call for a vision of political economy that can unite the left and the right, based on binary economist Louis Kelso’s ownership-based paradigm. Now is the time to cure America’s political cancer (Crony Capitalism) and restore America to again becoming a model for global citizens in all countries.

For a new vision see http://www.foreconomicjustice.org/?p=12331 andwww.facebook.com/uniteamericaparty. Support the Unite America Party Platform, published by The Huffington Post at http://www.huffingtonpost.com/gary-reber/platform-of-the-unite-ame_b_5474077.html as well as Nation Of Change at http://www.nationofchange.org/platform-unite-america-party-1402409962 and OpEd News at http://www.opednews.com/articles/Platform-of-the-Unite-Amer-by-Gary-Reber-Party-Leadership_Party-Platforms-DNC_Party-Platforms-GOP-RNC_Party-Politics-Democratic-140630-60.html.

Support the Capital Homestead Act at http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/.

http://theeconomiccollapseblog.com/archives/85-super-wealthy-people-have-more-money-than-the-poorest-3-5-billion-combined

 

The Rise Of The Non-Working Rich

AP751391981983-benjamins-300x168

On July 27, 2014, Robert Reich writes on RobertReich.org:

In a new Pew poll, more than three quarters of self-described conservatives believe “poor people have it easy because they can get government benefits without doing anything.”

In reality, most of America’s poor work hard, often in two or more jobs.

The real non-workers are the wealthy who inherit their fortunes. And their ranks are growing.

Most of America’s poor work hard, often in two or more jobs. The real non-workers are the wealthy who inherit their fortunes. And their ranks are growing.

In fact, we’re on the cusp of the largest inter-generational wealth transfer in history.

The wealth is coming from those who over the last three decades earned huge amounts on Wall Street, in corporate boardrooms, or as high-tech entrepreneurs.

It’s going to their children, who did nothing except be born into the right family.

The “self-made” man or woman, the symbol of American meritocracy, is disappearing. Six of today’s 10 wealthiest Americans are heirs to prominent fortunes. Just six Walmart heirs have more wealth than the bottom 42 percent of Americans combined (up from 30 percent in 2007).

The US Trust bank just released a poll of Americans with more than $3 million of investable assets.

Nearly three-quarters of those over age 69 and 61 per cent of boomers (between the ages of 50 and 68), were the first in their generation to accumulate significant wealth.

But the bank found inherited wealth far more common among rich millennials under age 35.

This is the dynastic form of wealth French economist Thomas Piketty warns about. It’s been the major source of wealth in Europe for centuries. It’s about to become the major source in America – unless, that is, we do something about it.

As income from work has become more concentrated in America, the super rich have invested in businesses, real estate, art and other assets. The income from these assets is now concentrating even faster than income from work.

As income from work has become more concentrated in America, the super rich have invested in businesses, real estate, art and other assets. The income from these assets is now concentrating even faster than income from work.

In 1979, the richest one percent of households accounted for 17 percent of business income. By 2007 they were getting 43 percent. They were also taking in 75 percent of capital gains. Today, with the stock market significantly higher than where it was before the crash, the top is raking even more from their investments.

Both political parties have encouraged this great wealth transfer, as beneficiaries provide a growing share of campaign contributions.

But Republicans have been even more ardent than Democrats.

For example, family trusts used to be limited to about 90 years. Legal changes implemented under Ronald Reagan extended them in perpetuity. So-called “dynasty trusts” now allow super-rich families to pass on to their heirs money and property largely free from taxes, and to do so for generations.

George W. Bush’s biggest tax breaks helped high earners but they provided even more help to people living off accumulated wealth. While the top tax rate on income from work dropped from 39.6 percent to 35 percent, the top rate on dividends went from 39.6 percent (taxed as ordinary income) to 15 percent and the estate tax was completely eliminated. (Conservatives called it the “death tax” even though it only applied to the richest two-tenths of one percent.)

Barack Obama rolled back some of these cuts, but many remain.

Before George W. Bush, the estate tax kicked in at $2 million of assets per couple, and then applied a 55 percent rate. Now it kicks in at $10 million per couple, with a 40 percent rate.

House Republicans want to go even further than Bush did.

The specter of an entire generation who do nothing for their money other than speed-dial their wealth management advisors isn’t particularly attractive.

Rep. Paul Ryan’s “road map,” which continues to be the bible of Republican economic policy, eliminates all taxes on interest, dividends, capital gains and estates.

Yet the specter of an entire generation who do nothing for their money other than speed-dial their wealth management advisors isn’t particularly attractive.

It’s also dangerous to our democracy, as dynastic wealth inevitably accumulates political influence.

What to do? First, restore the estate tax in full.

Second, eliminate the “stepped-up-basis on death” rule. This obscure tax provision allows heirs to avoid paying capital gains taxes on the increased value of assets accumulated during the life of the deceased. Such untaxed gains account for more than half of the value of estates worth more than $100 million, according to the Center on Budget and Policy Priorities.

Paul Krugman on Gordon Gekko’s Daughter and America’s Inherited Wealth Problem

Third, institute a wealth tax. We already have an annual wealth tax on homes, the major asset of the middle class. It’s called the property tax. Why not a small annual tax on the value of stocks and bonds, the major assets of the wealthy?

We don’t have to sit by and watch our meritocracy be replaced by a permanent aristocracy, and our democracy be undermined by dynastic wealth. We can and must take action — before it’s too late.

The reason the rich do not have to work is the very reason they are rich––because they own wealth-creating, income-producing capital assets––the non-human factor that produces wealth. Therefore, we should set as a goal to universally broaden ownership of FUTURE capital assets among EVERY child, woman, and man, without taking anything away from those who already own. And have them spread out their inherited and earned monopoly-sized estates at death to all members of their family, friends, servants and workers who helped create their fortunes, teachers, health workers, police, other public servants, military veterans, artists, the poor and the disabled.

As a substitute for inheritance and gift taxes, a transfer tax would be imposed on the recipients whose holdings exceeded $1 million, thus encouraging the super-rich to do the right thing.

Support the Capital Homestead Act at http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/.

http://billmoyers.com/2014/07/27/the-rise-of-the-non-working-rich/

Corporate ‘Inversions’ Are The Latest Ploy To Upend The US Tax Code

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Esteban Felix | AP Photo
Chiquita Brands is one of the companies that did a corporate “inversion” deal this year

On July 24, 2014, John W. Schoen writes on CNBC:

A once-obscure tax dodge known as a corporate “inversion” is turning the debate over U.S. tax reform upside down.

In an inversion, a U.S. company sets up or buys another company in a country with a lower corporate tax rate and then calls the new country home—thereby dodging U.S. taxes it would otherwise have had to pay.

The trick is more than three decades old, but a wave of inversions this year has prompted the Obama administration to call on Congress to slam the loophole shut.

Read MoreObama presses to close corporate tax loophole ‘inversions’

How does it work?

When a company undertakes an inversion, it’s basically just moving its legal address outside the country for tax purposes. That lets companies move some of their profits to their new homeland and pay less in taxes to the U.S. Treasury. Nothing else moves; it’s business as usual for their American operations, employees and customers.

The White House estimates the Treasury could lose out on as much as much as $20 billion over the next decade. So the administration wants to require companies that claim they’re no longer American to be more than 50 percent owned by foreigners. That would make new inversions much more difficult to pull off.

Read MoreUS could lose $20B from corporate tax inversions

But aren’t corporate taxes higher in the U.S than most developed countries?

It’s true that the statutory tax rate—including state and local taxes—is close to 40 percent, the highest among the developed world. But U.S. companies apply a long list of tax credits, subsidies, loopholes and other giveaways, so most of them pay much less than the top rate. Some, according to an analysis by Citizens for Tax Justice, have figured out how to pay no tax at all.

Total corporate federal taxes fell to about 12 percent of profits from U.S.-based activity in 2011, according to a Congressional Budget Office report. In a separate study, the CBO found that the average tax rate in 2011 among developed countries was 3 percent of gross domestic product—compared with 2.3 percent of GDP in the U.S.

So how much money is Uncle Sam losing from these corporate tax dodgers?

So far this year, only nine companies have flipped their corporate tax base upside down, including banana distributor Chiquita Brands International and drug maker AbbVie. But those moves have drawn lots of attention—and prompted other U.S. multinationals with large overseas holdings to consider heading for the corporate tax exit.

Some companies have already stashed assets and accumulated earnings outside the country—hoping that Congress will eventually lower the tax rate and allow them to pay less when they bring that money home. By some estimates, as much as $2 trillion in corporate cash is sitting outside the U.S.—money that could otherwise be reinvested at home to expand domestic operations and create more jobs.

Why doesn’t Congress just clean up the corporate tax code?

Corporations have been lobbying Congress for years to lower the corporate tax rate—which would mean paring back a thicket of tax credits, subsidies and complex rules that everyone agrees needs an overhaul. But each of those loopholes has a company or industry lobbying to protect it.

A wave of inversions could make it even harder for Congress to pull off a “revenue neutral” tax reform package. To offset the money lost by lowering the top rate, Congress would have to close loopholes and subsidies. But if more companies dodge the American tax code altogether, those added revenues will be harder to find. The more companies shrink the overall pipe of corporate tax revenues, the harder it will be to make tax reform “pay for itself.”

Read MoreCEOs to Obama: Tax reform, not an inversion Band-Aid

In any case, the tax reform debate has become mired in the ongoing political dysfunction that has already pushed the country near a debt default, temporarily shut down the government and, most recently, exhausted the highway fund that’s needed to fix a national pothole epidemic.

Given that track record, it’s hard to see how Congress will ever be able to tackle an issue as complex and divisive as tax reform. So some companies aren’t waiting.

This is a “big picture” problem that our nation and other nations face. Because the system facilitates non-human capital asset wealth being constantly monopolized by the wealthy ownership class, which is often referred to as “the 1 percent,” who are the primary owners of American corporations, without a stiff corporate income tax it will be virtually impossible to incentivize corporations to pay out fully their earnings to their stockholders, who would be ALL taxed at the personal tax rate. We should want to eliminate double taxation (at the corporate and personal levels) to incentivize corporations to issue and sell new stock to raise monies to invest in new plant and machinery capital assets  to create economic growth. This is the pathway to creating new owners and broadening wealth-creating, income-producing capital ownership to EVERY child, woman and man. EVERY citizen should be empowered equally to have access to insured, interest-free capital credit loans issued by local banks backed by the Federal Reserve to acquire new stock issues in qualified corporations with the principal and insurance fee repayable out of the FUTURE earnings of the investment. This would provide American corporations with all the monies they would need to grow, which in turn would substantially accelerate the growth of the economy, create new capital owners who would benefit from a new income source, and create new job opportunities as the economy revs up to produce general affluence for EVERY citizen. These policies would create a nation of “customers with money,” who overtime can build substantial financial security and eliminate reliance on taxpayer-supported government.

If we further lower or eliminate corporate income tax rates we eliminate our ability to incentivize corporations to finance new growth by creating new owners, without taking away ownership from those who are already owners.

We need to define a foreign corporation with at least better than 50 percent ownership vested with foreign nationals and an American corporation with at least 50 percent American citizen ownership. We also need to  look at tariffs on non-American corporations who would have tax advantages over American corporations.

We also need to condition awarding ALL taxpayer-supported federal contracts (corporate welfare) on the basis that EVERY company vying for a government contract demonstrate that they are broadly owned including ownership by their employees. We need to ensure  that if a corporation wants the advantages of being an American company then they should not be able run away from America to avoid paying taxes.  Either American corporations pay a stiff corporate tax and remain narrowly owned or they pay no corporate tax but are structured such that they are owned broadly and by their employees. Such policies will stimulate a new era in American technological innovation.

Support the Capital Homestead Act at http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/.

Support the Unite America Party Platform, published by The Huffington Post at http://www.huffingtonpost.com/gary-reber/platform-of-the-unite-ame_b_5474077.html as well as Nation Of Change at http://www.nationofchange.org/platform-unite-america-party-1402409962 and OpEd News at http://www.opednews.com/articles/Platform-of-the-Unite-Amer-by-Gary-Reber-Party-Leadership_Party-Platforms-DNC_Party-Platforms-GOP-RNC_Party-Politics-Democratic-140630-60.html.

The Nick Hanauer Debate: Trickledown, Trickle Dee, And Trickle Dumb

On July 23, 2014, Richard Levick writes in Forbes Magazine:

As professionals whose work includes a fair amount of crisis management, we’re often asked to articulate the best practices of what has for obvious reasons become a discipline of increased interest to the public. Inevitably, we include, as a fundamental point, the need to anticipate the future: the changing social and business forces that expose our clients to risk and exacerbate their liabilities.

Typically, such crystal-balling occurs within well-defined boundaries. What new regulations threaten new problems? How will a change in some overseas government put the company in harm’s way? Where are plaintiffs’ lawyers choosing to focus their energies?

Yet, for both private and public sector interests, there is also the abiding need for something more – for a discussion of the macro forces that will, for better or worse, transform the entire environment in which businesses and countries operate.

A very public dialogue of this type is occurring this summer, and it’s a dilly. NickHanauer, a successful entrepreneur who co-founded the Second Avenue Partnersventure capital firm in Seattle, delivered a forceful warning in Politico about the dire impact of wealth disparity in the U.S. It was the most widely shared article in that publication’s history – and Politico isn’t exactly Mother Jones. The alarm has apparently struck a chord with all sorts of people.

Hanauer – who, among other marketplace triumphs, was one of the first non-family investors in Amazon – is a confirmed capitalist and true believer in the potential power of capitalism to grow prosperity at every level. But the key word is “potential” as Hanauer’s message is all about how, with the massive disparities that divide the very rich from the rest of us, we’ve only been squandering the power of capitalism since 1980 when those disparities accelerated. According to Hanauer, such wastefulness has perilous consequences in terms of civil unrest, further political polarization, and the speedy isolation of those who are supposed to lead from those who desperately crave leadership.

Hanauer’s stern prognostications for the future are all the more vivid in light of the recent past. In 1980, the top 1% of Americans controlled about 8% of the national income. The bottom 50% shared about 18 percent. “By 2030, at current course and speed, the top 1% will share about 35% and the bottom 50% will share just 6%,” advises Hanauer. “Any capitalist who does not find this trend worrisome is either stupid or a sociopath.”

Hanauer urges the full panoply of corrective measures to reverse what he describes as a “death spiral of falling demand.” These measures include higher minimum wages, progressive taxation, aggressive antitrust enforcement, and more. Such discussions naturally resonate for crisis and risk managers as they ponder the varied alternatives ahead. How should companies and institutions respond if some combination of these policy adjustments is adapted? How, say, might a groundswell of support for skyrocketing minimum wage increases affect you as a retailer or manufacturer?

Conversely, what if no palliatives interpose? Well, in that instance, the risk strategy would likely hinge on worst-case scenarios, from anti-corporate demagogues in Washington to social media attacks randomly targeting industry leaders in diverse sectors, likely combined with on-the-street tactics.

In the context of increasingly foreseeable worst-case scenarios, Hanauer’s detractors have largely missed the point. Their rebukes were widespread and extensive, including a discourse on taxation and labor supply here in Forbes, a publication that Hanauer affectionately dubs “The Trickle-Down Gazette.” Yet these critics have yet to grapple with the intensity of public support that Hanauer has received. At the very least, such support confirms a pandemic anxiety about the future – a future that will be driven as much by perception and symbolism as by substantive argument.

There is no reason to expect that the passions informing the discussion will abate, and every reason to expect sustained media attention. Wealth disparity is not a one-day story. To the contrary, the topic will remain a fixture on the American scene for years to come: in fact, a prolonged battle, a sophisticated and Internet-based confrontation that will define who and what we are as a 21st century society.

As a new leader in this battle, Hanauer is no mere gadfly or self-designated prophet of doom. As we learned during an extended conversation, his vision is multifaceted and, at least to some extent, practicable. As he noted in Politico, Henry Ford’s proverbial imperative, to pay workers more so they can buy more cars, is a reliable if unscientific place to start.

Yet Henry Ford never had any intention to close the gap between rich and not-so-rich. (If you don’t believe me, ask Walter Reuther.) Hanauer certainly understands that and, in fact, harbors no illusion or even desire to close the gaps inherent in capitalist activity. “It’s therunaway gap that I foresee will lead to disruptions right and left, from the Tea Party to Occupy Wall Street.”

Perhaps the most important point omitted from the public debate over Hanauer’s article is his own definition of what real capitalist growth means. “The orthodox definition of capitalism as efficient is wrong,” he says. “Capitalism doesn’t increase prosperity byefficiently allocating resources. It creates prosperity by effectively creating solutions to human problems. The genius of capitalism is that it provides incentives for people to solve other people’s problems. And growth is the rate at which we solve those problems and disseminate the solutions.”

From a strictly financial perspective, any corrective measure, including those espoused by “progressives” like Hanauer, cannot just be sops to an increasingly alienated populace. They must be based on some force of sound business judgment. Hanauer, for instance, is widely associated with the unprecedented $15 per hour minimum wage now in force in Seattle.

“But that’s $15, not $30,” advises Hanauer. “Just because you believe that increasing the minimum wage will be good for the economy, doesn’t mean you think the higher it goes, the better. $15 is half way between where the minimum wage would be if it had tracked inflation and where it would be if it had tracked productivity gains. When you also take into account the overall affluence of our city, $15 is defensible and, in fact, conservative.”

Meanwhile, current Department of Labor numbers directly link minimum wage increases to strong overall growth.

History provides cautionary lessons with respect to other oft-cited solutions. Remember the 1950s? It was a period of unprecedented growth girded by a progressive tax regime that significantly levelled the playing field. People got rich, but not so rich as to tear the very fabric of national unity. And their businesses just kept growing.

The culture of the 1950s encouraged the belief that money was indeed being adequately reinvested in business and growth. By contrast, in this age of disparity, the executive compensation issue has equal but inverse symbolic importance as an ominous sign (whether true or not in terms of actual numbers) that money is being taken out of business and, instead of reinvested for growth, wasted on those who really don’t need it.

The fly in the progressives’ ointment is that no amount of well-intentioned policy can close the wealth gap; that, no matter what combination of “solutions” are implemented, $100 million will always grow exponentially faster than $1 million. It’s the Iron Law of Affluence.

Yet that law does not necessarily compel our retreat from democracy to feudalism. Shared wealth does not mandate equal wealth, and competition can never be a zero sum game. If history teaches anything, it’s that the more of us who succeed, the more we all succeed.

I reckon that’s what Henry Ford was really talking about.

Entrepreneur and venture capitalist Nick Hanauer has written and talked about income inequality and warned rich Americans that “pitchforks are coming” if inequality continued to rise. Yet Hanauer never uses the term “OWNERSHIP,” that is wealth-creating, income-producing capital asset ownership, to explain why the rich are rich.

Here is my comment on the piece that appeared in Politico:

Norman Kurland and  my colleagues and I at the Center for Economic and Social Justice (www.cesj.org) as well as the Unite America Party see Nick Hanauer’s solution (raising the minimum wage) to closing the income gap would necessarily add to the costs of food and other necessities for poor and middle income Americans and would increase the outsourcing of jobs when higher labor cost are added to U.S.-produced goods and services.  The Capital Homestead Act ( http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ ) would grow the U.S. economy faster in a non-inflationary way, create new private sector jobs, finance new productive capital and provide capital incomes for all Americans from the bottom-up by enabling them to own trillions annually in new capital formation and transfers in current assets . . . without taking private property rights away from billionaires such as Nick Hanauer over their existing assets.  Remember the wage system is the cancer.  The ownership system is the answer to address the problem Hanauer wants to solve.

If you want to change this gross economic inequality support the Platform of the Unite America Party.

What Hanauer, other billioinaries, the Democrats and Republicans and all third party leaders need to advocate is their ability to lead America on a path based on a paradigm shift to an equal opportunity economic democracy.

The JUST Third Way is a radical overhaul of the economic system (i.e., the Federal tax system, Federal Reserve policy, inheritance law, welfare and entitlement system, etc.) that will achieve genuine economic democracy, based on the Platform of the Unite America Party and its links and the proposed Capital Homestead Act. Our Platform is a call for a vision of political economy that can unite the left and the right, based on Louis Kelso’s ownership-based paradigm. Now is the time to cure America’s political cancer (Crony Capitalism) and restore America to again becoming a model for global citizens in all countries.

For a new vision see http://www.foreconomicjustice.org/?p=12331 andwww.facebook.com/uniteamericaparty. Support the Unite America Party Platform, published by The Huffington Post at http://www.huffingtonpost.com/gary-reber/platform-of-the-unite-ame_b_5474077.html as well as Nation Of Change at http://www.nationofchange.org/platform-unite-america-party-1402409962 and OpEd News at http://www.opednews.com/articles/Platform-of-the-Unite-Amer-by-Gary-Reber-Party-Leadership_Party-Platforms-DNC_Party-Platforms-GOP-RNC_Party-Politics-Democratic-140630-60.html.

Congress Must Put The Interest Of The American People First

On July 24, 2014, Philip G. Cohen writes on The Hill Congress Blog:

There have been in the last few months a plethora of U.S. companies that have announced plans to engage in an inversion transaction. Probably the most famous one involved Pfizer Inc.’s attempt to acquire AstraZeneca PLC with the merged parent company to be incorporated outside the U.S. While AstraZeneca rebuffed Pfizer, other transactions are being undertaken or being actively considered.

On July 18, AbbVie Inc. announced it had agreed to buy Irish pharmaceutical company Shire PLC in a $54 billion deal that would result in the parent company incorporated in the U.K. dependency of Jersey, a small island and tax haven in the English Channel. The combined company would be one of the 50 largest companies in the world. Medtronic Inc., a $60 billion medical device company, announced last month its plan to relocate its place of incorporation outside the United States in conjunction with its acquisition of Coviden PLC. Walgreen Co., the giant U.S. drug retailer, is also reported to be considering an inversion in conjunction with exercising its option to acquire the 55 percent of a Swiss entity Alliance Boots GmbH that it doesn’t currently own.

An inversion transaction involves a U.S. incorporated company becoming a foreign incorporated company that is generally continued to be managed in the United States. It’s undertaken to address a provision in the Internal Revenue Code that determines whether a company will be considered to be domestic by virtue of the entity’s place of incorporation.

U.S. incorporated companies are subject to tax on income earned anywhere in the world although active non-U.S. earnings of foreign subsidiaries are generally not taxed until repatriated back to the U.S. parent company. If the parent company is considered foreign for U.S. income tax purposes, it will still pay U.S. income tax on earnings from its U.S. activities but will be able to avoid tax on foreign earnings. Furthermore, the inverted companies will also have available techniques to reduce tax on its U.S. operations by, e.g., paying interest and royalties to its new foreign parent company or other low taxed foreign group members. These techniques are presently available to traditional foreign companies with U.S. operations.

Internal Revenue Code section 7874 currently provides that in general if at least 80 percent of the stock of a former U.S. company is owned by the former shareholders of the inverted company, the company is treated as a U.S. corporation for U.S. income tax purposes. To avoid this provision, inversion transactions are currently being structured so that shareholders of the foreign target company hold more than 20 percent of the merged company.

Inversion transactions are legal, and CEOs have a primary responsibility to act in the best interest of their shareholders. Since inversion transactions can be structured legally under current law and may substantially increase after-tax earnings, they need to be considered by corporate management.

Some members of Congress, especially Republicans, have argued that the answer to inversion transactions is to undertake as part of fundamental tax reform, territorial taxation pursuant to which active foreign earnings become exempt from U.S. taxation. Some refer to inversions as self-help territorial taxation. While adopting territorial taxation would do away with the need to undertake the transaction, it could also lead to further increased migration of good jobs, facilities and taxable income from the U.S.

In a July 15, 2014 letter to House Ways and Means Committee Chairman David Camp (R.-Mich.), Secretary of Treasury Jacob Lew urged Congress to immediately enact anti-inversion legislation. Senator Ron Wyden (D-Ore.), chairman of the Senate Finance Committee responded to Secretary Lew’s request by stating that “[t]his inversion loophole must be plugged.”  Democratic members in both houses of Congress have proposed legislation to halt inversion activity with a retroactive effective date.

Under the proposals, the 80 percent threshold under current law would drop to 50 percent and regardless of the degree of legacy shareholder continuity, the company would be treated as domestic if both management and control of the group remains in the U.S. and the company has significant business activities in the U.S. The legislation is a sensible response to a real problem that can exacerbate the nation’s budget deficit unless addressed.

There are legitimate problems with the current U.S. corporate tax system. The statutory corporate tax rate is the highest in the world. Foreign earnings are trapped overseas, known as the lockout effect, because U.S. companies don’t want to pay tax on these earnings. Our corporate tax base needs to be broadened. These should be addressed in the near term, but they shouldn’t serve as an excuse for members of Congress doing nothing about inversions.

While the CEO’s chief responsibility is to his shareholders, Congress’ obligation is to the best interests of the American people. Inaction or flawed legislation may be welcome by many U.S. multinational companies, but it is the duty of Congress to balance the legitimate needs of U.S. multinationals to compete with foreign rivals headquartered in countries utilizing territorial taxation, with other objectives of our tax system including expanding businesses in the U.S. and meeting the need for tax revenue. While the goals for our tax system by U.S. multinationals and those that are in the best interest of the American people may in many instances overlap, they are not concurrent.

This is a “big picture” problem that our nation and other nations face. Because the system facilitates non-human capital asset wealth being constantly monopolized by the wealthy ownership class, which is often referred to as “the 1 percent,” who are the primary owners of American corporations, without a stiff corporate income tax it will be virtually impossible to incentivize corporations to pay out fully their earnings to their stockholders, who would be ALL taxed at the personal tax rate. We should want to eliminate double taxation (at the corporate and personal levels) to incentivize corporations to issue and sell new stock to raise monies to invest in new plant and machinery capital assets  to create economic growth. This is the pathway to creating new owners and broadening wealth-creating, income-producing capital ownership to EVERY child, woman and man. EVERY citizen should be empowered equally to have access to insured, interest-free capital credit loans issued by local banks backed by the Federal Reserve to acquire new stock issues in qualified corporations with the principal and insurance fee repayable out of the FUTURE earnings of the investment. This would provide American corporations with all the monies they would need to grow, which in turn would substantially accelerate the growth of the economy, create new capital owners who would benefit from a new income source, and create new job opportunities as the economy revs up to produce general affluence for EVERY citizen. These policies would create a nation of “customers with money,” who overtime can build substantial financial security and eliminate reliance on taxpayer-supported government.

If we further lower or eliminate corporate income tax rates we eliminate our ability to incentivize corporations to finance new growth by creating new owners, without taking away ownership from those who are already owners.

We need to define an American corporation with at least better than 60 percent ownership vested with American citizens. We also need to  look at tariffs on non-American corporations who would have tax advantages over American corporations.

We also need to condition awarding ALL taxpayer-supported federal contracts (corporate welfare) on the basis that EVERY company vying for a government contract demonstrate that they are broadly owned including ownership by their employees. We need to ensure  that if a corporation wants the advantages of being an American company then they should not be able run away from America to avoid paying taxes.  Either American corporations pay a stiff corporate tax and remain narrowly owned or they pay no corporate tax but are structured such that they are owned broadly and by their employees. Such policies will stimulate a new era in American technological innovation.

Support the Capital Homestead Act at http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/.

Support the Unite America Party Platform, published by The Huffington Post at http://www.huffingtonpost.com/gary-reber/platform-of-the-unite-ame_b_5474077.html as well as Nation Of Change at http://www.nationofchange.org/platform-unite-america-party-1402409962 and OpEd News at http://www.opednews.com/articles/Platform-of-the-Unite-Amer-by-Gary-Reber-Party-Leadership_Party-Platforms-DNC_Party-Platforms-GOP-RNC_Party-Politics-Democratic-140630-60.html.

http://thehill.com/blogs/congress-blog/economy-budget/213152-congress-must-put-the-interest-of-the-american-people

What Does the Minimum Wage Do? An Interview With Author/Economist Paul Wolfson

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On July 24, 2014, Jared Bernstein writes on The Huffington Post:

To celebrate the fifth anniversary of the last increase in the federal minimum wage and to call attention to the fact that the federal wage floor has not risen in five years, the US Department of Labor has declared July 24th to be a “Day of Action.”

Coincidentally, a new book surveying the scholarly literature on the effects of the minimum wage, What Does the Minimum Wage Do? came out earlier this month, written by Dale Belman and Paul Wolfson. Below, I interview Mr. Wolfson (who’s an old friend, btw).

JB: What does your work suggest about the Fair Minimum Wage Act (FMWA): the proposal to raise the federal minimum wage from its current value of $7.25 to $10.10 in three annual steps and then index it to inflation?

PW: First, our work: in our book, we surveyed more than 70 analyses of the effect of the minimum wage on employment. By and large, the strongest studies in terms of statistical rigor reported an effect on employment that ranged between negligible and none. In addition, we performed our own meta-analysis, a procedure that combines the results of different studies in a statistically rigorous way, and this confirmed the result of “negligible to none.”

How does this relate to the FMWA? The proposal would increase the federal minimum in three $0.95 steps of 13%, 12% and 10% each. In the last 35 years, increases in the Federal Minimum Wage have ranged between 7% and 14%, with an average increase of 11%-12%. Thus, the proposed increases are quite typical of historical experience, and this suggests that if there is any effect on employment it will be too small to be detectible.

JB: At least as interesting as the question of the minimum wage and employment is “What is the effect of the minimum wage on low income families?” What can you say about this?

PW: We discovered in the course of writing the book that there’s actually little useful work that addresses this issue. Nearly all of the studies in this area instead ask whether the minimum wage has reduced the percentage of families whose income places them below the poverty line. For several reasons, this turns out not to be an interesting question. First, the poverty line was developed about a half century ago and is widely regarded as an out-of-date measure of economic well-being. Second, it leaves out a variety of government programs that effectively increase family income.

A more interesting question asks whether the minimum wage has a noticeable effect on the incomes of low income families, some of whom are officially poor, some of whom are not.

Economist Arin Dube of the University of Massachussetts-Amherst recently completed a statistically sophisticated analysis of the effect of the minimum wage on different parts of the income distribution, from the incomes of very poor families all the way up to those we might call the lower middle class or solidly middle class. He reports that “the evidence clearly points to moderate income gains for low income families as a result of minimum wage increases.”

JB: Your book is titled: What Does the Minimum Wage Do? How about giving us the elevator ride answer to that question.

PW: Limiting my answer to the historical experience, it does not have much or any effect on either the level of employment or on the unemployment rate. It appears to reduce churn in the labor market, both the amount of hiring and the amount of quits and firings. In fact, this may be one way in which the wage increase is absorbed: by lowering costs to low-wage employers of turnovers, vacancies, and training new workers.

The minimum wage increases wages for the lowest paid 10% of all employees and perhaps as much as the lowest paid 30% of women. This is pretty much all that we can be fairly confident about, and it is these effects that led my co-author to say that the American experience of the minimum wage is largely one of intended consequences. Despite the hundreds of studies in just the last 25 years, much remains unknown or known with insufficient certainty: the effect of the minimum wage on low incomes, on prices and output, on the different employment and unemployment experience of men and women, on the people’s choices to remain in or leave school, to name just a few. Work has been done in each of these areas, but either too little to be yet confident of the results or too much of what exists turns out to be plagued by statistical problems of one sort or another.

JB: So, if it’s not through cutting jobs, how do low-wage firms absorb the increase in labor costs?

PW: Again, we don’t know for sure, but one possibility mentioned above is the reduction in turnover. This has two effects. One is a more experienced labor force (since employees hang around longer). The second is lower hiring costs, perhaps low enough to encourage firms to expand slightly since they expect to have a longer period for amortizing these expenses. In addition to the reduction in turnover, there is mixed evidence that restaurants (and other firms) respond by increasing prices, somewhat more evidence in favor than against. Similarly, studies that look for the response in lower levels of firm profits also report mixed evidence, generally considerably weaker than that for prices. Finally, there are hints that the higher minimum wage draws people into the labor force who had been sitting it out, leading to an increase in the average quality of prospective employees and thus more efficient firms. All of these things may be in play, each individually too small to be easy to detect in the available data with current techniques.

This post originally appeared at Jared Bernstein’s On The Economy blog.

 

Whether or not raising the minimum wage is harmful and will cause less employment should be discussed within the larger scope of economic inequality. The proposed measures are at best a sedative to ease the pain of deteriorating livelihoods, but not the solution that is necessary to significantly address income disparities between the wealthy ownership class and the propertyless, non- and under-capitalized American majority.

A National Right To Capital Ownership Bill that restores the American dream should be advocated by the progressive movement, which addresses the reality of Americans facing job opportunity deterioration and devaluation due to tectonic shifts in the technologies of production and global competitive pressures.

There is a solution, which will result in double-digit economic growth and significant job opportunities, and simultaneously broaden private, individual ownership so that EVERY American’s income significantly grows over time, providing the means to support themselves and their families with an affluent lifestyle. The JUST Third Way Master Plan for America’s future is published at http://foreconomicjustice.org/?p=5797.

See two references to the proposed Capital Homestead Act, the centerpiece of legislation of The JUST Third Way at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm.

See two references to the proposed Capital Homestead Act, the center piece of legislation of The JUST Third Way at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm.

For more on how to accomplish necessary structural reform, see “Financing Economic Growth With ‘FUTURE SAVINGS’: Solutions To Protect America From Economic Decline” at http://www.nationofchange.org/financing-future-economic-growth-future-savings-solutions-protect-america-economic-decline-137450624 and “The Income Solution To Slow Private Sector Job Growth” at http://www.nationofchange.org/income-solution-slow-private-sector-job-growth-1378041490.

See the article “Ownership––The Minimum Wage Replacement” at http://www.nationofchange.org/ownership-minimum-wage-replacement-1392301004.

http://www.huffingtonpost.com/jared-bernstein/what-does-the-minimum-wag_b_5617352.html

Why Voters Aren’t Angrier About Economic Inequality

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A demonstration in Washington in January 2012 connected to the Occupy Wall Street protest.CreditDoug Mills/The New York Times

On July 24, 2014, Edurado Porter writes in The New York Times:

Why don’t governments in democratic societies do more to combat income inequality?

Scholars have grappled with this question for years. The median voter theory, a longstanding workhorse of political science, predicts that politicians hoping to get elected will seek to close a growing income gap to woo the big bulk of voters in the middle who feel left behind by the fortunate few.

Yet elegant as it is, this idea doesn’t quite mesh with reality. Researchreveals little connection between the income gaps in any given country and its government’s effort to close it by taxing the rich to spend on the poor.

There are good reasons why not. The poor vote less than the rich, reducing their electoral clout. And they don’t vote exclusively on the basis of their economic self-interest, but are often swayed by noneconomic issues, like abortion, the environment or gun control.

What’s more, the rich might simply buy political power and use it to maintain their privilege. The political scientist Larry Bartels hasdocumented that the rich have about three times as much influence as the poor on votes in the United States Senate.

Researchers at the University of Hannover in Germany propose a simpler reason: Voters don’t demand more redistribution because they don’t grasp how deep inequality is.

Using data from the International Social Survey Programme, in which respondents were asked to locate their relative income status on a scale of 1 to 10, Carina Engelhardt and Andreas Wagener built a measure of perceived inequality, defined as the gap between the median income, smack in the middle of the distribution, and the average income of the population.

Evidently, nobody has a clue: In every one of the 26 nations, most of them in the developed world, for which they collected data, people believe that the income gap is smaller than it really is. And using perceived rather than actual inequality, the median voter theory works much better: Where people believe inequality is worse, governments tend to redistribute more.

“If citizen-voters see an issue, politics has to respond – even if there is no issue,” they concluded. “Conversely, if a real problem is not salient with voters, it will probably not be pursued forcefully.”

This could go some distance toward explaining the American experience. People in the United States not only tolerate one of the widest income gapsin the developed world, but its government also ranks among the stingiestin terms of efforts at redressing the imbalance.

Unsurprisingly, Americans suffer from a pretty big perception gap. They think an American in the middle of the income distribution makes only 4 percent less than the national average, according to Ms. Engelhardt and Mr. Wagener’s research. In truth, the American in the middle makes 16 percent less.

Misjudgments in Inequality

Inequality of income is underestimated everywhere.

1
1.1
1.2
1.3
1.4
1.5
1.4
1.2
1
Actual Income Gap
Perceived Income Gap
Denmark
Mexico
Slovenia
South Korea
Turkey
Britain
United States
Actual gap equals perceived gap
The income gap in Mexico is much higher than Mexicans perceive it to be.

Source: O.E.C.D.; Carina Engelhardt and Andreas Wagener
Inequality is measured by the gap between the income of a citizen in the middle of the income distribution and the average income of the population.

Much is made of Americans’ particular ideological bent. Many, rich and poor, distrust government. They support free-market capitalism and tend to view the distribution of the nation’s economic fruits as roughly fair.

Would Americans demand more Robin Hood policies if they understood the depth of inequity? Research by economists at Harvard and the Universidad Nacional de Las Plata in Argentina found that Argentines who had overestimated their rank on the national income scale demanded more redistribution when they were confronted with the truth.

When Dan Ariely of Duke and Michael Norton of Harvard Business School asked an online panel to build a “Better America,” respondents proposed ideal distributions of wealth that were much more equitable than what they thought was reality.

And, of course, reality is much more unequal than they thought.

Unfortunately, the author and the referenced researchers are stuck in the unworkable paradigm that the solution to economic inequality is redistribution––the taking from those who are productive and spreading money or welfare services out to those who are not productive.
The REAL solution is not redistribution, except in the most dire emergency situations, but FUTURE distribution via broadened individual ownership of new, wealth-creating, income-producting capital assets. This can be accomplished using insured, interest-free capital credit loans repayable out of the FUTURE earnings of the investments in the economy’s FUTURE growth.
For specifics of this solution read the proposed Capital Homestead Act beginning with the overviews at athttp://www.cesj.org/…/capital-homestead-act-a-plan-for…/ andhttp://www.cesj.org/…/capital-homestead-act-summary/.