Senator Bernie Sanders Wants Americans To OWN The Businesses They Work At (Demo)

On May 1, 2015, Zaid Jilani writes on AlterNet:

After his presidential announcement this week many wondered how Senator Bernie Sanders (I-VT) would distinguish himself from the other candidates running in the Democratic primary.

With his newly-published issues page, he offers some ideas.

Among the 12 platform planks that he published there are several traditional ideas such as rebuilding American infrastructure and guaranteeing health care to all. But the very last platform offers a genuinely fresh idea: boosting America’s worker co-ops.

The Sanders campaign writes:

“We need to develop new economic models to increase job creation and productivity. Instead of giving huge tax breaks to corporations which ship our jobs to China and other low-wage countries, we need to provide assistance to workers who want to purchase their own businesses by establishing worker-owned cooperatives. Study after study shows that when workers have an ownership stake in the businesses they work for, productivity goes up, absenteeism goes down and employees are much more satisfied with their jobs.”

In the United States, co-ops are often associated with small businesses such as coffee shop[s or groceries. But with the right regulatory incentives and support, worker-owned businesses can be much larger. Take the Monragon corporation of Spain, for example. Today it has over 70,000 employees and brings in annual revenues of over $12 billion Euros. Within the various units of the corporation, workers decide on the direction of production for the company as well as what to do with the profits. While CEO-to-worker pay ratios in the United States have reached over 300-to-1, in Mondragon at the cooperative model ensures that in most of its operations, “the ratio of compensation between top executives and the lowest-paid members is between three to one and six to one.”

Today, there are 11,000 [Employee Stock Ownership Plan (ESOP)] worker-owned companies in America, and there are up to 120 million Americans who are involved in some form of co-op if you include credit unions in the tally. By endorsing their expansion, Sanders is proving that his differences with his opponents are not just in style but in substance––providing an alternative to the top-down corporations that run our economy.

http://www.alternet.org/election-2016/bernie-sanders-campaign-issues-truly-extraordinary-campaign-plank-0

Gary Reber Comments:

This is definitely the right direction that Bernie Sanders is advocating. However, there is a far, far more powerful approach that substitutes REAL personal worker OWNERSHIP of corporations for “cooperative memberships.” This financial mechanism is the Employee Stock Ownership Plan (ESOP). Its salient benefits are:

1. Make debt service on a leveraged ESOP a tax-deductible business expense, so that employees without savings can purchase major portions (up to 100 percent) of a company’s common stock on borrowed funds repayable out of pre-tax corporate profits.
2. Provide a tax-sheltered entity, such as an ESOP trust, so that shares of stock acquired by workers and earnings on the workers’ equity can be accumulated free of taxes until the benefits are distributed to participants, generally on retirement. When distributed, the ESOP benefits are taxed the same as other retirement incomes to the worker or his beneficiaries.
3. Encourage the firm to pay out dividends to workers as supplementary property incomes on their shares by allowing dividends to be taxable at the personal level but deductible at the corporate level. Together with the two previous incentives, this feature, by eliminating the discriminatory double tax on corporate profits, helps to restore private property in corporate equity.
4. Delay taxes in the stock distributions to the workers until the stock is sold and converted into spendable income. Allow the worker a tax-free “roll-over” into a tax-exempt “Individual Retirement Account”, i.e., to further delay paying personal income taxes if the cash proceeds are re-invested into securities of other private sector equity investments. The objective here is to encourage savings and investment and to provide new sources for financing new ventures.
5. Similar to #4 above, free the seller of stock to an ESOP trust (generally the original owner) from any tax on the sale, provided that the seller re-invests the cash proceeds into securities of other productive enterprises in the country. This simultaneously reinforces both the goal of expanded share ownership opportunities and of providing new sources for financing new ventures.
6. Where no adequate capital market exists, require the ESOP or the firm to plan for the repurchase of distributed shares through a tax-free liquidity fund within the ESOP.
7. Allow stock accumulations to be used as substitutes for traditional pension plans and severance pay obligations for workers.
8. Ensure the availability of means for the fair appraisal of the value of shares in closely-held companies and provide a regulatory oversight of ESOPs to minimize abuses, promote understanding and disseminate reliable information on the ESOP among workers, and generally protect the property rights of workers.
9. Provide bankers and other financial institutions tax, credit and other incentives to make loans to leveraged ESOPs.
10. Increase and democratize productive credit by making loans extended by commercial banks to ESOPs within private sector enterprises eligible for discounting with the central bank. New money issuances would be subject to 100% reserve requirement and made at a discount rate limited to a low “servicing fee” (to cover actual costs of administering and regulating national monetary incentives for private sector growth). This reform would radically reduce capital credit costs and increase the competitiveness of the nation’s enterprises in the global marketplace, reduce dependency on foreign capital and other sources of concentrated wealth, lower the risks of default on private sector productive loans, link increases in money to increases in national productivity, move toward an asset-backed currency, reduce causes of inflation, and broaden citizen participation in private sector ownership and profits.

While ESOPs are a powerful financial mechanism to build widespread worker OWNERSHIP, an even more powerful approaches is provided for in the proposed Capital Homestead Act. The CHA would empower EVERY child, woman, and man, whether employed by a corporation or not, to acquire personal OWNERSHIP shares in the capital asset growth of the corporations growing the economy. Using insured, interest-free capital credit EVERY citizen would be empowered to acquire over time a significant, diversified portfolio of full-earnings payout stock, repayable with the pre-tax earnings of the investments.

Bernie Sanders needs to support the Capital Homestead Act and free economic growth from the slavery of past savings (otherwise required to acquire stock ownership). Support the Capital Homestead Act at http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/. See http://cesj.org/learn/capital-homesteading/ and http://cesj.org/…/uploads/Free/capitalhomesteading-s.pdf.