Untaxing-III (Laffer Curve) ch 14: Taxes and CFO Actions Suppress the GDP
Uninformed tax policy and CFO actions suppress the US GDP by at least $13.49 trillion. Let’s look at the difference between the current total market value of US public companies and what this total should be with a $0 corporate tax.
The current total market value is $17.14 trillion. When $857.142 billion in corporate profits is declared as dividends (with a 3% dividend yield), the total market value becomes $28.57 trillion. The difference between these total market value numbers is $11.43 trillion.
The suppression of GDP is actually more than $11.43 trillion. Remember the realistic assumption of escrowing repatriated cash for 10 years as dividends causing a $4.583 trillion increase in market value? Adding $4.583 trillion to $11.43 trillion gives us $16 trillion in US GDP suppression!
$18 trillion Reverse Chain Reaction
Now we find that $300 billion collected in US corporate taxes is the “negative trigger” causing a reverse chain reaction that suppresses the market value of the US public companies by $10 trillion. We also see how the failure of public company CFOs to declare more company profits as dividends suppresses market values, in some cases even more than current tax policy. The sum effect of these two policies — tax policy and CEO/CFO policy — is the suppression of total market value and US GDP by $18 trillion. Through a misunderstanding of what true capitalism is, various actions within government and corporations are killing the golden goose of capitalism which produces equity value designed for all US Citizens. Equity value leads to innovation and invention because it lifts the barrier of poverty.
“Carlson’s Law” posited by Curtis Carlson, the C.E.O. of SRI International, in Silicon Valley, states that: “In a world where so many people now have access to education and cheap tools of innovation, innovation that happens from the bottom up tends to be chaotic but smart. Innovation that happens from the top down tends to be orderly but dumb.” As a result, says Carlson, the sweet spot for innovation today is “moving down,” closer to the people, not up, because all the people together are smarter than anyone alone and all the people now have the tools to invent and collaborate.
Academics, government legislators, and corporate executives need to upgrade their knowledge and understanding about the purpose and horsepower of the public company — the vehicle of capitalism — when its profits are not taxed.