Posted: Apr 25, 2005 By: Jack

Subject: Monopoly tax

Comment: Three Steps to Economic Freedom
How to Tax and Spend to Prosperity

Of particular interest may be the "Monopoly Tax" described in this article. The rationale behind the impost [a charge for society's grant of limited liability] and a demonstration of the economic effect of its causing economic growth when properly constructed is presented. As a brief introduction of the tax/fee, it is based on the capital value of limited liability license holders [corporations] with the amounts of the fee adjusted to maximize the growth rates of the corporations.

I have calculated an approximation of the tax receipts using the total presented as the 1999 budget as if it were funded by the Monopoly Tax. Some obvious compromises must be used since there has not been the accumulation of empirical evidence that would be developed as described in the article. However, the scale of things can be derived from existing data.

First comes an estimate of the asset value that would be subject to the tax. Using the Wilshire 5000 equity value of approximately $10.0 trillion and a guess that debt supported by those equities is $5.0 trillion gives a total subject to the tax of $15.0 trillion. Although it would be nice to apply the progressive rates as described in my proposed system, that will have to wait for the empirical data from actual application. Lacking that data, consider a uniform [or average] tax rate of 1% per month.

While 1% per month may appear large to some, consider that:

It is not unusual for the market value of these equities to change by more than 1% _DAILY_.
It is also not much different than the charge states and/or localities charge people for the "privilege" of owning a home.
And, if that is not enough to dissuade those who find the amount excessive, consider that much of the amount to be collected by this tax [Or limited liability license fee.] would have been paid as income and payroll taxes "in the name of their employees" but because those taxes are eliminated it is merely a change in accounting of these taxes that had been called "wages" but were never seen by the so-called wage earner.

For the uninitiated, much of personal income taxes and other payroll taxes are collected by the corporations that would instead pay the monopoly tax while nominal wages [Not after tax wages which likely will actually increase.] are reduced by an equal amount. In further note of this consequence, it may be necessary to remind some that wage rates are not set in a vacuum and the elimination of those liabilities called taxes on wages would substantially affect negotiated nominal wage rates.

Initially, other taxes paid by these corporations would also be eliminated changing only the form [From "variable" to "fixed" costs of production.] and not actual amount of taxes paid by or through these corporations. Subsequent amounts would be determined [as demonstrated in "Three Steps, etc."] by maximizing the growth rates of corporate value and the overall economy.

The yearly amount that would be collected by such a tax would then be $0.15 trillions per month times 12 months, or $1.8 trillions per annum. This is about $70 billion more than the $1.73 trillion budget submitted for 1998. Not a bad approximation for such a crude estimate. A minor consequence would be the replacement of a very complex system of government revenue raising that imposes a myriad of forms, rules and other burdens on many millions of people and wastes untold hours of effort to comply with these burdens that could better be applied to useful production with a system that is simple for both the companies affected and the bureaucrats tasked with enforcement. [There are about 7,000 companies in the current Wilshire 5000 index. This could expand to perhaps 10 times as many as some of the larger companies choose to decompose themselves into several smaller units to reduce their tax liability. This added competition would probably be recognized as a good thing but some may consider it less than desirable.]

In short, the proposal is to:

Tax Privilege, Not People
-- jbod

Tax Privilege, Not People
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