# Presentation: 079129

## Capital Homesteading for Every Citizen

**Capital Homesteading ****for Every Citizen**

- Presentation to the President’s Advisory Panel on Federal Tax Reform
- May 11, 2005
- Norman G. Kurland, J.D.
- President, Center for Economic and Social Justice
- Washington, D.C.

**Transforming the Federal Tax System to Accelerate****Private Sector Growth, Balance the Budget and****Make Every Citizen a Capital Owner**

## Who Owns Today’s Corporations?

**Who Owns Today’s Corporations?**

**10% Own 90% ****of Today’s Individually Owned Corporate Pie**

**While 90% Split 10% of Today’s Individually Owned Corporate Pie**

## Who Will Own Tomorrow’s Corporations?

**Who Will Own ****Tomorrow’s Corporations?**

**10% Keep Their Part ****of Today’s Pie**

**While the 90% ****Gain Ownership of ****Tomorrow’s Growing Pie**

**Tax reform based on Capital Homesteading would promote wealth creation for all Americans.**

## Champions of Capital Homesteading for Every Citizen

**George Mason, *****Virginia Declaration of Rights*****, June 1776**
**America’s Founding Fathers (Adams, Jefferson, Webster)**
**Abraham Lincoln, *****Homestead Act of 1862***
**Popes Leo XIII (1891), Pius XI (1931), and John Paul II (1981)**
**Louis O. Kelso, *****The Capitalist Manifesto*****, 1958**
**Senator Russell B. Long, ESOP laws for Worker Ownership**
**Senator Hubert Humphrey**
**President Ronald Reagan**
**Walter Reuther, Labor Statesman**
**John D. Rockefeller III, *****The Second American Revolution*****, 1976**
**President George W. Bush, Ownership Society, 2005**

## Main Goals of a Just Federal Tax System

- Yield the revenue necessary to pay the legitimate costs of government.
- Maximize production of wealth in a competitive global economy.
- Minimize the need for income redistribution and tax subsidies.
- Avoid disincentives to a vibrant private sector (the principal source of wealth production), enabling it to become a more direct and efficient distributor of mass purchasing power for all consumers.
- Provide a level playing field and the social tools for every citizen to become capital self-sufficient, to share economic power, and to receive growing incomes from their productive capital as well as from their human contributions.
- Create new capital owners without violating property rights of owners of existing capital.

## Main Elements of a Just Tax System

_**Single personal income tax rate**_ on all cash, imputed and in-kind consumption incomes from all sources above the poverty line, including value of all benefits, gifts, bequests, realized but indexed capital gains, interest, and dividends.
- Income tax rate calculated periodically to _**balance the Federal budget**_ and gradually pay off existing Federal debts.
_**Corporate dividends made deductible at the corporate level**_ and taxable at the personal level, to encourage growing companies to issue new shares to meet their capital needs, thus eliminating the double- and triple-tax on corporate profits.
_**Absorb all costs of Social Security, Medicare and other payroll taxes**_ with revenues received under the single personal income tax rate, eliminating these regressive taxes.
- Enable all citizens, upon birth, to establish at their local banks _**a lifetime personal tax-exempt Capital Homestead Account (CHA)**_ that is structured to receive non-recourse, self-liquidating equity acquisition credit (similar to the financing available under present tax laws for leveraged ESOPs), as well as other income-yielding employer contributions, gifts and bequests.**  **

## Main Elements of a Just Tax System

_**Defer taxes on one’s dividend income applied to paying off loans to CHAs**_ for acquiring newly issued full dividend payout, full voting shares issued to finance new and expanding enterprises, up to a _**$1 million lifetime Capital Homestead Exemption**_. This offers a bottom-up approach to supplying the Nation’s needs for new plant and equipment, new rentable space, advanced energy and information technologies, system improvements, new physical infrastructure and other forms of wealth-generating new capital formation.
- From birth, _**even the poorest and most disadvantaged citizen could accumulate newly issued equity shares**_ repayable wholly with future savings in the form of dividends anticipated on the leveraged shares, rather than with existing savings or requiring a reduction in current consumption incomes. (Under conservative estimates at present rates of new capital formation, in 65 years the average citizen born today would accumulate a $200,000 debt-free capital estate through a leveraged CHA that distributes $30,000 in annual taxable dividends, plus $780,000 in dividend income distributed over the 65-year period.)
_**Encourage voluntary diffusion of large estates from one generation to the next**_, by shifting estate and gift tax burden to recipients whose tax-sheltered dividend-generating assets in their CHAs exceed the Capital Homestead Exemption of $1 million, exclusive of equity in one’s primary home.

## Appendix

## The Four Pillars for Buildinga More Just Economy

**Expanded Capital Ownership**
**Limited Economic Power for the State**
**Free And Open Markets**
**Private Property**

## Pillar 1Expanded Capital Ownership

**Goal****	****	**Promote widespread citizen access to capital
- 				ownership, creating new wealth accumulations for the 			many without taking old wealth from the few.
**Means****	****	**Democratization of productive credit, for financing
- 				growth through ownership-expanding mechanisms, 				institutions, and laws.
**Result****	****	**Decentralizes economic power and profit sharing to 				each citizen as the principal means of securing
- 				fundamental human and political rights, and as the
- 				ultimate check against the potential abuse of power by 			the state or by the majority against minorities.

## Pillar 2Limited Economic Power for the State

**Goal****	**Shift ownership and control over production and income
- 		distribution from the public sector to the private sector.
**Means****	**Limit government power over economy to:
- 		1.  Encouraging growth and policing abuses within the private sector;
- 		2.  Ending economic monopolies and special privileges;
- 		3.  Lifting barriers to equal ownership opportunities and credit;
- 		4.  Protecting property and enforcing contracts;
- 		5.  Preventing inflation and providing a stable currency;
- 		6.  Promoting democratic unions to bargain over worker and
- 		     ownership rights.
- 		7.  Protecting the environment; and
- 		8.  Providing social safety nets for human emergencies.
**Result****	**Promotes economic justice for all, reduces human conflict and waste, 	and increases efficiency and wealth creation, thus increasing revenues 	for the public sector while reducing the need for income redistribution.

## Pillar 3Free and Open Markets

**Goal****	****	**To restore free and open markets for determining
- 				just prices, just wages and just profits.
**Means****	****	**Gradually eliminate all state subsidies, barriers to
- 				free trade and free labor, price and wage controls,
- 				and all non-voluntary, state-controlled or collectivist
- 				methods of determining prices, wages and profits.
**Result****	****	**Decentralizes economic choice and empowers each
- 				person as a consumer, a worker and an owner.

## Pillar 4Private Property

**Goal****	****	**Restore personal rights of property in the means of
- 				production, particularly in corporate equity.
**Means****	****	**Reform laws which deny shareholders the original
- 				rights to participate in control and receive all profits
- 				proportionate to their property stakes.
**Result****	****	**Secures personal choices and economic
- 				self-determination. Re-establishes the economic
- 				equivalent of the ballot for re-creating an effective
- 				economic democracy within a competitive free
- 				enterprise system. Links income distribution to
- 				participation by new owners of new wealth.

## Creating Money for Capital Homesteading

## 	Projected Wealth and Income Accumulations Under Capital Homesteading

- 	Homestead	     Annual	 Acquisition	  Payments	Service &	Total Debt	Residual to
- _Age_          _Accumulation_	    _Earnings_	_Debt Balance_	 _of Principal_	_Risk Fees_	  _Service_	_Homesteader_
- Birth	$3,000.00 	    $450.00 	$2,666.67 	   $333.33 	  $90.00 	 $423.33 	     $26.67
- 10	33,000.00	   4,950.00	12,000.00	  3,000.00	  450.00	3,450.00	  1,500.00
- 20	63,000.00	   9,450.00	12,000.00	  3,000.00	  450.00	3,450.00	  6,000.00
- 30               93,000.00	  13,950.00	12,000.00	  3,000.00	  450.00	3,450.00	10,500.00
- 40             123,000.00 	  18,450.00 	12,000.00 	  3,000.00 	  450.00 	3,450.00 	15,000.00
- 50             153,000.00	  22,950.00	12,000.00	  3,000.00	  450.00	3,450.00	19,500.00
- 60             183,000.00	  27,450.00	12,000.00	  3,000.00	  450.00	3,450.00	24,000.00
- 65             198,000.00	  29,700.00	12,000.00	  3,000.00	  450.00	3,450.00	26,250.00

**	****PARAMETERS (ASSUMPTIONS)**
- Accumulation Beginning at Age:                 0
- 			Annual Capital Credit Allocation:   $3,000.00
- Annual Service and Risk Fees on Outstanding Principal:	      3.00%
- “Pre-Tax” Rate of Return on “Full-Payout” Shares:       15.00%
- Term of Acquisition Loan in Years:	    9

**RESIDUAL INCOME RECEIVED BY HOMESTEADER DURING PERIOD OF ACCUMULATION:  $780,450.00 **
**Gross Benefits to Homesteader by Age 65 (Accumulation plus Residual to Homesteader"):  $978,450.00 **
- Cost to Government or Other Taxpayers (Taxes avoided on "tax free" Homestead Accumulation (28%)):     $55,440.00
- Taxes on Dividend Income (28% assumed rate on all Homestead residual income):   $218,526.00
- Net Tax Benefit to Government due to Homestead Program:   $163,086.00
- Net Benefits to Homesteader by Age 65:   $759,924.00
*[Annual Capital Homestead accumulations would continue after age 65]*