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

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

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

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

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

The Limited Liability Public Company (LLPC) is designed from scratch to give an average of $9.66 of equity for each $1 spent for the LLPC’s product or service. The ratio of member shareholders to 364 LLPCs is 14 million to 1, while the ratio of US citizens to public companies is 15,745 to 1. These ratios show that more people (or more customers) are receiving ownership interests in the new LLPCs than the current ownership in public companies that’s concentrated in fewer hands. Product Equity Value© connects more people to LLPC ownership.

Credit-Debt takes.

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

Risk-Equity gives.

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

  • $569 billion in capital gains tax on 14 million of 155 million labor units is almost double the $300 billion collected in corporate taxes.
  • If all 155 million labor units are connected in the unique LLPCs giving $9.66 equity per $1 spent, then $6.295 trillion in capital gains taxes goes to the US Treasury.
  • $6.295 trillion in capital gains taxes is $3.795 trillion more than the $2.5 trillion in taxes collected from all sources in 2008.
  • Even if you double the US per capita income of $47,400 (CIA Fact Book 2011), the result still falls short of $116,035.92 in direct individual Product Equity Value©.
  • Eleven “monetized social media” structures bring $116,035.92 to 155 million Americans.
  • Why wait to untax the wages and salaries of US citizens? Product Equity Value© wipes out 98% of the average US Family’s Debt!
  • It is clear by the 9.66-to-1 Product Equity Value© example that the negative consequences of credit-interest-debt are not components of capitalism.
  • When capitalism and its vehicle the public company are used correctly, the US and other governments do not have the “paper tiger” woes called Medicare, Medicaid, Social Security and the Debt Ceiling.

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

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

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

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

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

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

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

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

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

Go to (part V) chapter 22: Implications