Untaxing-V (Customer Ownership) ch 22: Implications
We have revealed the following:
- The inclusion of debt in Modigliani-Miller’s Theorem can negatively influence economic thought because the implications of using debt financing are not exposed by the Capital Structure Irrelevance Principle. We then say that Debt is not a component of Capitalism.
- The Laffer curve fails to take into consideration that taxation suppresses the market value of public companies, which consequently suppresses the tax revenue. Jobs are lost in direct relationship to corporate taxation.
- Katchings’ Two Laws of Capitalism exist to guide policymakers’ tax decisions and show the new class of entrepreneurs how to elect the best public company ownership structure for producing the most equity value for the shareholders and the most tax revenue.
- 19,893 US and 73,349 global public companies are operating at about 40% of capacity by Katchings First Law of Capitalism, and this is supported by an empirical study.
We need to endorse the creation of eleven Free-PEV© † monetized social media structures in the US. Each will consist of 14 million members and 364 non-competing public companies. Many of these companies will be Limited Liability Public Companies (LLPCs). These 4,004 new public companies and LLPCs will be 46% owned by 155 million consumers. Many of the 4,004 companies will buy the 40% under-capacity of existing public and non-public companies at wholesale and sell products and services to the members at retail. This will produce the greatest exposition of “shared” capitalistic equity value that the USA has ever witnessed.
What about inflation with so much equity value being unleashed?
Look at what happens with 100% of the US labor units owning 46% of 4,004 new public companies. When prices rise so do the equity values (of their ownership interests) in 364 companies. The current false definition of inflation and the inefficient allocation of scarce resources speculations will die because personal net-worth rises if prices rise.
New Jobs and Tax Revenue
Table 8 below projects the number of jobs created and the amount of tax revenue to each of the 50 United States, District of Columbia and Puerto Rico. This projection comes from 4,004 Limited Liability Public Companies (LLPCs) and Public Companies (PCs) connected with eleven Free-PEV© † social media structures. Note the total number at the bottom of the New Jobs Gained column is 24,999,839 — about 25 million jobs.
The Katchings Curves show an increasing spread between the curves as dividend yield rates decrease. This means that the increase in market values from lower corporate tax rates becomes bigger as dividend yield rates decrease. Lower dividend yield and corporate tax rates increase market value and, hence, revenue from capital gains taxes.
The data from Table 9a is illustrated in Figure 2a to show the effect of tax rates and dividend yield rates on market value. $300 billion in corporate earnings is used in Table 9a.
The case of $857 billion of corporate profits before taxes in 2008 is illustrated in Table 9b and Figure 2b. The difference in market values at a 2.52% dividend yield rate is approximately $12 trillion ($34,008B minus $22,103B). This means about $4 trillion in lost revenue to the US Treasury. A simple change in tax policy benefits shareholders with greater equity value and brings more potential capital gains taxes to the US Treasury.
The implications of the Free-PEV© † monetized social media structures are astonishing:
- $38.84 trillion in equity value is produced by 4,004 new US public companies.
- $17.87 trillion in Product Equity Value© is produced for 155 million Americans.
- $20.97 trillion in equity value is produced for the current 29.6 million US businesses.
- $13.59 trillion in short-long term capital gains as a permanent tax stream.
- A permanent 100% employment is achieved for the US labor force.
- If a $0 corporate tax policy is adopted, an extra $3.5 trillion is potentially added to the $13.59 trillion of capital gains to get $17.09 trillion in potential tax revenue.
The assumption is made that the US tax on the existing 19,893 public companies remains the same as 4,004 new LLC public companies are implemented.
Modern communications makes capitalism universally available to the US and global citizens for the first time in economic history.
† Free-PEV© is an acronym for Free Product Equity Value©.