STATEMENT OF GARY A. REBER, PRESIDENT, INSTITUTE FOR THE PURSUIT OF ECONOMIC JUSTICE––MARCH 7,8,9, 1973
Before The Committee On Ways And Means House Of Representatives––Ninety-Third Congress––On The Subject Of General Tax Reform
Mr. Reber: I am Gary A. Reber, founder and president of the Institute for the Pursuit of Economic Justice at Berkeley, California. The institute is a non-profit public advocacy, educational, research, scientific, and literary organization seeking new and creative, positive, and constructive solutions to societal development problems, and a reordering of national economic goals and priorities toward the building of a humane and future creative renaissance society––a freer, more just, and more livable society for every human being.
I have been a public advocate for the past 5 years, an economist, and a consultant on societal development problems. I have worked ardently with numerous community organizations and interests in the San Francisco Bay region and nationally to bring about a new awareness of the causes of social and economic inequities and unrest in our society, and to develop action programs which will solve the defects of our present institutional arrangements which foster poverty, alienation, and economic insecurity and dependence for the majority of Americans. I have dedicated my life to the pursuit of economic justice through the furtherance of broadened private ownership of equity and income-producing property in all forms for the individual and for the family. To help move the Nation forward, I believe we need a vision which will create a climate for mutual cooperation and mutual benefit for all people.
Our Institute for the Pursuit of Economic Justice was founded on July 4, 1972, by myself, Daniel W. Cook, an economist and author, and Dr. John W. Dyckman, an eminent professor and international adviser on urban and economic affairs at the University of California, Berkeley.
Other distinguished members of our board of directors include Dr. James D. Miline of the John F. Kennedy University, Martinez, California; Dr. Lucile W. Green, chairwoman of the department of humanities at Merritt College, Oakland, California; Ernest W. Henderson, a former city official and director of planning for the City of Richmond, California; and Michael L. Colbert, editor-in-chief of the Berkeley Daily Gazette and the Richmond Independent.
Our basic premises are these:
There is no genuine political liberty without economic liberty, and that which is destructive of economic liberty is necessarily destructive of political liberty. Liberty does not mean license to steal or hoard.
The “American Dream” of 1776 enunciated in the founding papers of the Republic, underwrote minimal Government and maximal individual political and economic liberty, and drew inspiration from the widely held view that life, liberty, and property were an inseparable trinity, a belief we share.
That dream has largely been converted into a nightmare in modern America through the concentrating effects of giant Government and monopoly capitalism, which may be handmaidens in tyranny. This situation has come about because of philosophical thinking that is inadequate to meet the needs of the 21st century, thinking which has not kept pace with the fruits of science; and the situation is also due to a combination of conspiracy, greed, and imported utopianistic political philosophy.
In a modern, technological era it is the ownership of productive capital wealth, not the labor of people, that is the primary creator of affluence.
Hence, it is access to ownership of productive capital wealth, not to jobs, wherein the national economic policy guidelines for the 21st century ought to lie.
As ownership of productive capital wealth becomes widely diffused, political power ought also to be widely diffused.
The existing taxing power of government ought to be used in a way to restructure the economy along the guidelines of universal access to ownership of productive capital wealth with a thrust toward the creation of new wealth.
The ultimate result of the use of the taxing power of government to stimulate the widespread access to ownership of productive capital wealth should be a growing independence of an economically emancipated people both from reliance upon government and from the wage slavery brought into being by monopolistic and oligarchic ownership; and the role and function in our lives both of government and of monopoly and oligarchy ownership ought to diminish.
Our interest is in fostering an economic policy direction toward broadening private ownership participation for all people in the capital wealth base of our economy.
The American Dream since the time of the Founding Fathers has been to foster individually owned free enterprise. Our economic policies, and tax laws foster concentration of business ownership in the hands of a wealthy few by subsidizing and favoring narrowly owned conglomerates and monopolistic combines. This is not good. We need a new economic policy thrust which will promote the birth of profitable new business enterprises and expand the ownership of large corporations.
We, at the Institute for the Pursuit of Economic Justice, seek to lead “a quiet revolution”––a national movement for economic justice, tax equity, and governmental responsibility. The thrust of this movement is to focus upon tax reformation and economic policy. To guide this movement toward realizing the goal of economic justice we are recommending positive and constructive reforms in the tax laws, policies, and procedures of the U.S. Government.
When the Federal income tax was authorized by the 16th amendment to the Constitution, it was designed to levy taxes in a progressive and fair way on all income, “from whatever source derived.”
But, over the years, exception after exception has been made to this principle; tax loopholes have allowed the wealthy and the wealthy owners of the corporations to escape high taxes. This means that the tax burden has fallen increasingly on low- and moderate-income working people.
The average American worker works 2 out of 5 days just to pay taxes, while scores of wealthy people with incomes over $1 million pay no Federal income taxes at all.
This is not just.
There is hardly any progressivity in taxation. Those with low and moderate incomes pay a higher percentage in taxes than those with higher incomes.
Tax loopholes and Government subsidies are really a welfare program for the rich.
Recommendations For Tax Reformation: A Just Tax Concept For The U.S. Government
The income tax, authorized by the 18th amendment to the Constitution, was intended to levy taxes in a progressive and fair way, in order to pay for the legitimate functions of Government as authorized by the people through their elected representatives.
Implicit in the original income tax concept was the “ability-to-pay-theory,” that those who earn or receive more income should pay a progressively larger proportion of their incomes to support Government.
Another concept inherent in the original income tax law was that Government should limit in some manner the vast personal incomes derived by a few people or legal entities owning huge amounts of capital wealth and property.
Tax policies today encourage concentration of capital wealth and property, generating on one hand a huge governmental bureaucracy to regulate centralized economic activity, and on the other hand, an ever-expanding number of economically dependent people requiring another huge government bureaucracy to administer to their needs.
We, at the Institute for the Pursuit of Economic Justice, believe in economic justice, tax equity, and governmental responsibility, and that the economic, social, and legal injustices of our society are fostered by tax policies which enable the rich to become richer, while the majority of the working people, the elderly, small businessmen, family farmers, and poor pay the taxes.
We advocate an economic policy designed to broaden private individual ownership of all forms of property––particularly property ownership rights which yield viable incomes to people. The function of Federal tax policy then should be to encourage broadened ownership, and discourage private concentrations of capital wealth and excessive personal incomes from property holdings.
For genuine tax reform, we advocate positive, constructive, and just reforms in tax law, with review every 5 years or less.
Recommended Tax Reforms
1. Personal earned incomes and property-derived incomes
For incomes of natural persons derived from work, profession, talents of the individual, or sole proprietorship business, a maximum personal income tax of 50 percent on such earned income is recommended.
For incomes flowing to natural persons from the ownership rights in property interests (property interests include both real property, that is, real estate and personal property, such as stocks, bonds (both governmental and corporate), debentures, notes, trust deeds, mortgages, shares of beneficial interest, mineral rights, leaseholds, royalties, patents, copyrights, etc.) we recommend a maximum tax of 50 percent.
The progressive rate of taxation should start at 1 percent on such incomes of $5,000 and progress at 1 percent in $1,000 intervals up to $20,000. Tax on $6,000 would be $120; on $10,000, $500; on $15,000, $1,500; and on $20,000, the tax would be 15 percent, or $3,000.
On incomes above $20,000 but below $50,000, the tax rate should increase by one-third percent per $1,000. Thus, the tax on $30,000 would be $5,500; on $40,000, the tax would be $8,667; and on $50,000, the tax would be $12,500.
On incomes above $50,000, the tax rate should increase by one-half percent per $1,000, reaching the 50 percent level at $100,000. Thus, the tax on $70,000 would be 35 percent, or $24,500. Half of incomes of $100,000 and above would be taxes.
No exemptions or deductions would be allowed.
2. Inheritance and estate taxes
For capital estates, we recommend a change in the tax laws that would allow wealthy individuals to endow their children and other legal heirs with $500,000 estates with no tax to either the receiver or giver. From $500,000 to $1 million the inheritance tax would be progressive from 10 percent to 90 percent. Above $1 million the bequeather could give his estate to non-related individuals of his [or her] choosing, tax free, in $50,000 trust funds if the net worth of the recipient is under $25,000, or pay an inheritance tax of 100 percent.
Each year tens of billions of dollars in capital wealth assets is passed along to heirs under current tax laws. The revenues generated from inheritance taxes should be pledged to support the social security program, thus achieving a reduction in social security taxes, which are becoming a tax burden.
3. Corporations and business taxes for non-small business enterprises
A. Investment credit tax incentives––The net result of new capital wealth formation is to create more productive land, industrial plant and equipment, machinery, tools, et cetera. In a highly technological economy the purpose of scientific advancement is not to create jobs (labor intensive production), but to substitute more efficient machines, buildings, tools, and productive land for labor; that is, human work effort. This is the basis of increasing productivity, and has been since the invention of the wheel to today’s age of cybernetics. Invention and innovation are supposed to save labor and free people for the enjoyment of the good life, the pursuant of happiness, and the improvement of their minds and bodies––to enable the fulfillment of the needs of the flesh (man’s material needs and well-being), so that the works of the soul may flow.
With an economic policy designed to foster widespread private equity ownership participation in the capital wealth assests of our economy, the use and purpose of the investment tax credit device as a special governmental subsidy to private corporations has a significant potntial for encouraging broader ownership of income-producing productive property rights among all people.
If an investment tax credit is given to a business organization, it should be limited to finance real new capital wealth expansion for widespread private ownership participation by individuals and families. The financing of this expansion should be through the device of an employee stock equity trust (the SET plan, a technique to facilitate employee equity ownership participation in the capital wealth assets of the employing corporations qualified by the Internal Revenue Service as a qualified sock bonus trust under section 401 (a) of the Internal Revenue Code; and.or other financing techniques to facilitate and guarantee widespread public ownership participation for individuals and families.
B. Nonpublic close corporations––All non-publicly registered and traded corporations, that is, those that are close corporations owned by a few people, and not classified under definitions set by the Small Business Administration, Department of Commerce, as a “small business,” or whose stock is not traded on the open markets and broadly owned, should be taxed as personal holding companies. The tax policy for close corporations, which by their nature concentrate wealth and limit free enterprise, should result in expanded ownership of capital wealth and discourage such organizations.
The income of such corporations should be treated as the personal incomes of their owners and taxed at personal income tax rates as herein recommended.
This tax policy will discourage private concentrations of capital wealth, and encourage viable small businesses and widespread private popular ownership shares in the small and large business corporations of America.
C. Public corporations––Tax policy of the FederalGovernment should encourage broad private ownership of public corporations, Publicly registered business corporations should be taxed on a basis which encourages broad ownership and the fullest distribution of earnings to their owners.
We recommend the following tax policies for all publicly owned private corporations, based upon the philosophy that a corporation is a creature of the State, created by law, recognized as an “artificial person,” able to amass vast amounts of capital wealth with limited liability, and can have a life in perpetuity. Since a corporation is a legally created entity, and not a human being, its function, powers responsibilities, and ownership are a matter of significant social, political, and economic policy.
Public corporations should be taxed as follows:
If profits are retained, that is reinvested and not paid to the stockholder owners, the corporation will pay a 90 percent tax on retained earnings.
Dividends paid out to stockholders-owners would be deductible from corporate earnings thus making these earnings subject to personal income tax rates.
All subsidiary corporations and partially or wholly owned enterprises of a parent or holding corporation will be taxed as a separate enterprise entity, as under the above recommended policy.
4. Business sole proprietorships and partnerships, and close corporations classified as small business
We recommend no change in exiting tax procedure, except that the tax rate on such business incomes would be the same for individuals.
5. Capital gains tax–non-public corporations and close corporations
For individuals, capital gains realized on the sale of a personal residence, owned and occupied by a natural person or persons and/or a family would be taxed as under present law.
All other capital gains in property interests (real or personal, securities et cetera) unless exchanged within 1 year for property of equivalent value, would be taxed at the personal income tax rates.
6. Capital property holdings tax: Limits on ownership
All individuals, whether their property is combined with others in joint tenancies, cotenancies, or community property holdings of natural persons should be subject to a capital property holdings tax if the certified net worth or equity value of the property holding of the taxpayer exceeds $1 million. This annual tax on value of equity would progress from 2.5 percent on estates valued at $1 million to $1.5 million; to 5 percent on $1.5 million to $2 million; 7.5 percent on estates over $2 million.
Legitimate Functions Of Government And Governmental Responsibility
We, at the Institute for the Pursuit of Economic Justice, believe that tax policy must by necessity, be linked to a definition of the legitimate functions of Government and governmental responsibility with respect to the uses of Federal tax revenues.
Therefore, the tax revenues flowing to the Federal Government as a result of our recommendations should be used for the following purposes:
1. Promote the general welfare for all people.
2.Encourage viable and broadly owned business enterprise, and a free competitive market.
3. Foster broad private individual ownership of the capital wealth base of our economy.
4. Insure a fair and meaningful stake among individuals in the future of our Nation.
5. Promote economic justice for all people.
6. Enhance civilization, and encourage the arts, science, significant educations, and other creative human endeavors.
7. Guarantee individual liberty, and economic security and independence for all people.
8. Promote peace and world enrichment, while providing for the common defense.
9. Encourage community enhancement and environmental quality.
10. Enhance life, health, and personal happiness for all people.
11. Foster domestic tranquility and fraternity.
12. Encourage human tolerance, respect, and personal responsibility and dignity.
13. Promote mutual cooperation and trust for mutual benefit for all people.
The ultimate result that we should seek is growing independence of an economically emancipated people both from reliance upon government and from the wage slavery brought into being by monopolistic and oligarchic ownership, and the role and function in our lives both of government and of monopoly and oligarchic ownership ought to diminish.
Recommendations For Future Study
While we are certain that our tax reform recommendations would generate substantial revenue increases to the Federal Government, strengthen the Nation, and result in reducing the burden upon all poor and working people, particularly those families with incomes under $30,000 per year, we acknowledge that we have not completed an in-depth study and that one is necessary to determine the full impact of such a new tax and economic policy thrust, as herein advocated.
We therefore recommend that a Tax Reformation Commission be established by the U.S. Congress to conduct an in-depth study of our tax reform recommendations and those of others to determine the impact of these measures on the economy, the structure of private property ownership and free enterprise, the concentration of wealth, income distribution, and revenues generated to the Federal Government.
We recommend, also, that the U.S. Congress establish a census of wealth valuation inventory. Every 5 years, the Commissioner of Internal Revenue, in conjunction with the Bureau of the Census, should conduct a valuation census of the property holding of all individuals, held in accordance with regulations published in the Federal Register. These records should be treated with the same confidentiality as is presently given to personal income tax records.
The wealth valuation computations for each individual would be used to establish one’s priority relative to other individuals for qualifying for Government programs aimed at strengthening the self-sufficiency of the individual through acquisition and ownership of new and/or transferred capital wealth assets.
Concluding Remarks
Recent studies of public opinion have revealed that two out of three Americans sympathize with a tax revolt––but fortunately, to date, no real citizens tax revolt has taken place. So far, no one or group has organized citizen complaints and demands into a revolutionary political force.
We, at the Institute for the Pursuit of Economic Justice, seek to head off a taxpayers’ revolt by instituting a just tax reformation program intended to realize tax equity and governmental responsibility for all people.
Mr. Chairman and committee members, don’t you agree that this is the way to go?
Thank you for your kind consideration.
Let us renew the spirit of 1776!
Mr. Burkel: On behalf of the committee, Mr. Reber, we want to thank you. You have presented a paper that indicates a great deal of work and study has been made on your part and the people whom you represent. I can assure you the staff will study the statement very carefully, and every member of the committee will have a copy of your statement.
Thank you very much for your appearance.
Members of the Committee on Ways and Means:
Wilbur D. Miller, Arkansas, Chairman
Al Ullman, Oregon; James A, Burke, Massachusetts; Martha W, Griffiths, Michigan; Dan Rostenkowski, Illinois; Phil M, Landrum, Georgia;Charles A. Vanik, Ohio; Richard H. Fulton, Tennessee; Omar Burleson, Texas; James C. Corman, California; William J. Green, Pennsylvania; Sam M. Gibbons, Florida; Hugh L. Carey, New York; Joe D. Waggonner, Jr. Louisiana; Joseph E. Karth, Minnosota; Herman T. Schneebeli, Pennsylvania; Harold R. Collier, Illinois; Joel T. Broyhill, Virginia; Barber B. Conable, Jr., New York; Charles E. Chamberlain, Michigan; Jerry L. Peters, California; John J. Duncan, Tennessee; Donald D. Brotzman, Colorado; Donald D. Clancy, Ohio; Bill Archer, Texas; John M. Mathis, Jr., Chief Counsel, J.P. Baker, Assistant Chief Counsel; Richard C. Wilbur, Minority Counsel
Postscript––February 18, 2013, Presidents’ Day
Significantly no progress has been made over the course of the past 40 years since I testified before the United States Congress on the subject of Tax Reform. With slight modifications this could be presented today and is an early foundation to the advocacy of the JUST Third WAY and the Capital Homestead Act, whose economic component is to broaden private, individual ownership of wealth-creating, income-producing productive capital assets. Back in 1973 we advocated the national movement as “a quiet revolution” for economic justice, tax equity, and governmental responsibility. The Master Plan Agenda of The JUST Third WAY Movement is at http://foreconomicjustice.org/?p=5797.
During the time period in which I delivered this testimony I also had founded the San Francisco-based Agenda 2000 Incorporated with binary economist Louis O. Kelso serving as Chairman of the Board and Norman Kurland as a Vice President and Director of the Washington D.C. office. Louis Kelso was also the President of the Institute for the Study of Economic Systems (ISES) of Washington, D.C. and San Francisco, and head of one of San Francisco’s major corporate law firms, and a director of a number of corporations. John W. Dyckman, who was a professor and the Chairman of the Department of City and Regional Planning at the University of California, Berkeley, served as President. Roland Attenborough was a Vice President and a member of Louis Kelso’s law firm. Kenneth Friedman was a Vice President.
Also during this time I was a guest lecturer in the graduate program at the Department of City and Regional Planning, University of California, Berkeley, and as well lectured on binary economics at Harvard University’s John F. Kennedy School of Government, Henry George School of Social Sciences, Columbia University, Dartmouth College, and at the Universities of Virginia and Cincinnati. I was also a charter member and director of ISES.
Presently, I remain an advocate for economic and social justice as the Executive Director of ForEconomicJustice.org (www.foreconomicjustice.org).
