2012: A Good Year For Investors (Demo)

What is amazing is that what is not discussed or explained is that financial capital, such as stocks and bonds, is just an ownership claim on the productive power of real capital. In the law, property is the bundle of rights that determines one’s relationship to things. Thus, we should be addressing the need to FULLY distribute the earnings of real capital to the owners of stock in corporations.

The stock market in its present structure is a gambling casino. While the pre-tax yield of corporate assets of prosperous companies varies from 25 to 60 percent, the yield on secondhand securities is around five or six percent. With capital gains, you can get a little more, but as binary economist Louis Kelso points out, “don’t forget, that’s a zero-sum game; for every gainer, there’s a loser. Wall Street doesn’t fly any airplanes or raise any corn or do anything else in the way of producing products and services. It just plays games with your dough. And when you take it out in pensions, you’re going to get less than the company put in for you. You have to; that’s the dynamics of it.”

While tax and investment stimulus incentives are excellent tools to strengthen economic growth, without the requirement that productive capital ownership is broadened simultaneously, the result will continue to further concentrate productive capital ownership among those who already own, and further create dependency on redistribution policies and programs to sustain purchasing power on the part of the 99 percent of the population who are dependent on their labor worker earnings or welfare to sustain their livelihood. By stimulating economic growth tied to broadened productive capital ownership the benefits are two-fold: one is that over time the 99 percenters will be enabled to acquire productive capital assets that are paid for out of the future earnings of the investments and gain greater access to job opportunities that a growth economy generates.

In order to maximize the economic rewards to the owners of capital, we need to encourage corporations to pay out all their profits as taxable personal incomes to avoid paying corporate income taxes and to finance their growth by issuing new full dividend payout shares for broad-based citizen ownership.

Starting with the business corporation, a legal entity created and sanctioned by state and federal government and judicial law, the government should provide tax incentives for full-dividend payouts to its stockholders, or alternatively dictate that from now on 100 percent of all profits be paid out fully as dividend payments to stockholders (thus, eliminating the corporate income tax), and be subject to progressive individual taxation rates during the short term. This would effectively prohibit retained earnings financing of new productive capital formation (reinvesting the corporate earnings already earned). The government could also limit debt financing by imposing some ratio formula to annual revenue under which a corporation could debt finance new productive capital formation with borrowed monies. Both retained earnings and debt financing only enhance the ownership holding value of the existing corporate ownership class and do nothing to create new owners. Thus, the rich get richer systematically and capital ownership concentration is furthered, facilitated by financing further productive capital acquisition out of the earnings of existing productive capital.

In place of retained earnings and debt financing, the government should require business corporations to issue and sell full-voting, full-dividend payout stock to more people to underwrite new productive capital formation, with the purpose of providing opportunity for new owners, both employees of corporations and non-employees, to participate in a growing economy. Of course, there needs to be a financial mechanism put in place that will guarantee loan risks; otherwise banks and lending institutions will not make the loans, and the system will continue to limit access to capital acquisition to those who already own capital—the rich. This is because “poor” people have no security or collateral, or sufficient income to pledge against the loan as security, and/or are disqualified on the grounds of either unproven unreliability or proven unreliability.

Criteria must be created to qualify the corporations subject to this policy and those corporations that qualify overseen so as to insure that their executives exercise prudent fiduciary responsibility to generate loan payback. Once the guaranteed loans are paid back, the new capital formation will continue to produce income for existing and future owners.

The Capital Homestead Act would make it possible for every American to become a viable owner of productive capital and not just for the tiny elite who now own our corporations. The CHA is primarily a tax-sheltered vehicle for the democratization of capital credit through local banks. According to its architects, it would “enable every man, woman, and child to accumulate wealth and receive dividend incomes from newly issued shares in new and growing companies, without being taxed on the accumulations (including property and shares gained through inheritance, savings, and arrangements like ESOPs, CSOPs, and CICs). In addition to serving as a source of capital credit for corporate workers, CHAs would also provide an ownership-building account for individuals who do not work for profit-making enterprises, such as school teachers, civil servants, military personnel, police, and health workers, and for individuals who have no remunerative employment, such as the disabled, the unemployed homemakers and children.

Support the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm

Sign the Petition at http://signon.org/sign/reform-the-federal-reserve.fb23?source=c.fb&r_by=3904687

Sign the WhiteHouse.gov petition at https://petitions.whitehouse.gov/petition/reform-federal-reserve/PhY3Jswk