Funding Social Wealth Fund: Mandatory Share Issuances

Matt Bruenig - Corporate Income TaxRight now, the US taxes corporate income at a statutory rate of 35 percent (the effective rate is much lower). The way this works is corporations determine what their profits are and then take 35 percent of them (actually less) and remit that money to the state. If we wanted to build up the wealth fund quickly, we could replace the corporate income tax with mandatory share issuances.

There are two ways to do this. The first way, favored by Dean Baker, is to have companies give a one-time grant of shares to the government equal to whatever we think an appropriate tax rate would be. So, instead of taxing corporate income at 20 percent, we could have each corporation give the state shares equal to 20 percent of its outstanding shares. This would make the state the 20 percent owner of the company and would entitle it to 20 percent of the dividends, buybacks, and any other payouts to shareholders.

The second way, favored by Rudolf Meidner, is to have companies give an annual grant of shares to the government equal to some percent of their annual profits. So, instead of taxing corporate income at 20 percent every year, we would have companies give over shares equal in value to whatever their corporate income tax liability would be that year. So, if a company had profits of $100 million, the 20 percent mandatory share issuance would require them to give the state shares equal to $20 million. This is a much more aggressive strategy than the one favored by Baker because, in the long-run, it would result in far more of the company’s equity getting transferred into the social wealth fund.

–Matt Bruenig
Nickel-and-Dime Socialism

2 thoughts on “Funding Social Wealth Fund: Mandatory Share Issuances

  1. I’m confused.

    Wouldn’t Meidner’s approach give the government more and more shares each year, until the government owns the whole company?

    Also, would these be voting shares, meaning the government gets a 20% vote in each and every company? This may or may not be a good thing.

    • Yeah, the Baker plan makes more sense. I don’t necessarily think it’s a good idea for government to have voting shares in every corporation, although I do think they should have gotten a piece of every bank that took a bailout.

      One way this could work is to slow the transfer rate down and give the government’s voting privileges to company employees, handing ownership over completely to employees once the government’s shares are 50%+. That would effectively mean that every successful company eventually becomes employee-owned. We could decide what the target should be, say 25 years. Private investors would still back the startups because they’d have 25 years to get rich, and few want to stick around that long anyhoo. Anyone who wants to keep their company longer could simply choose not to incorporate it.

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