How to do Socialism, but Super Subtly..
Even a Neoliberal Georgist Boi like me can't complain
For a while now people have been asking me about my views on corporate tax policies (my friends are weird, don’t ask questions) and so I just wanted to put pen to paper explaining my position. I’ve been calling "Tax Free Sovereign Wealth Fund" - very much open to better name suggestions if you’ve got them - but here's how it would work.
Currently, companies are obliged to pay a corporate tax rate of 21% on their profits. This is a well-established mechanism that helps ensure corporations contribute to our society and infrastructure. However, I’d argue that this traditional setup is insufficient and outmoded for our evolving economy. By imposing this taxation system, we inadvertently shrink the size of our organizations and stifle their potential to expand the economy. We’re quite literally pulling money directly out of the coffers of the largest employers in country and while I’m not about to pretend that people are employed by these companies out of some form of charity, their expansion, as an aggregate, not necessarily as individual companies, but at a sector and nation wide level, is definitely good for the public, all things equal. As a secondary problem, we as workers and as citizens, possess little to no control over the operations and decisions of the world's largest companies.
On the global front, it's worth noting that several other nations have already established massive sovereign wealth funds, primarily through Georgist policies, which I also support. These funds serve as a permanent source of income, allowing them to invest in various sectors of their economies and enhancing their economic resilience. On the other hand, the United States, one of the largest economies globally, has no such equivalent. Alaska does - it’s Georgist - and a couple other states do too, but at a federal level, we’ve got nothing.
In a perfect world, here's how I envision the solution to these issues. We would retain the 21% corporate tax rate, ok, I’ll be honest, probably a little higher, but companies would have the option to simply release new shares of an equivalent value to the taxes they owe. These shares would then be handed over to the government. That said, there’d be a lock-in period of ten years during which these shares cannot be sold by the government.
During this decade, the voting shares would be divided equally between Congress and the company's workers. Every employee would have a say in the company's direction proportional to their work hours over the past year. After the ten years, the government would be allowed to sell shares, but they’d have to divest across all companies, not targeted against any specific one, meaning that any given company could be confident that, in all likelihood, the SWF stake would not be sold ever, and if it was, it wouldn’t be against specifically their given organization but rather the Wealth Fund writ large.
Once a company is already partially owned through this model, the amount owed in conventional taxes would remain the same. However, the amount owed in SWF transfer would be based on the corporate tax rate that would otherwise be owed only on non-SWF shares of the profit. In effect, if a company is 50% owned by the SWF, it would owe only half of what it would otherwise owe if it allows the SWF to continue growing its ownership share rather than downsizing the company through conventional taxation.
As more companies take advantage of the SWF model, we build a positive feedback loop. This system ensures greater accountability of companies to their workers, because all of a sudden, major companies are going to be owned, yes, by the government, but the voting control would be in the hands not of the federal government, but of the workers themselves (half of voting shares) and of the local government of said works (the other half). It would also result in a lower effective tax rate for organizations that are more worker and citizen-controlled, which gives them a competitive advantage, combating the fact that, while other voting stock holders are obligated strictly and legally to do what is in the financial interest of the company, these SWF share voters would not have such obligations.
Imagine, if you will, that PPG Paints, one of the largest employers in my hometown of Pittsburgh becomes 30% owned by the Sovereign Wealth Fund (SWF). Pirates are doing very well by the way, and I just wanted to brag. This means 15% of its voting rights would be in the hands of its workers and another 15% in the hands of the local government, which predominantly in this case would mean Pittsburgh.
One immediate and profound impact of this change would be the stabilization of PPG Paints' presence in Pittsburgh. The company's interest in relocating would be greatly diminished, as such a move would face considerable opposition from workers and local governments who now hold a significant portion of voting rights.
Beyond preserving the company's local footprint, this arrangement could also bring about significant benefits to the physical spaces the company inhabits. PPG Paints, I’m using them as an example because the public amenities their headquarters provide to the city are already better than any other employer outside the universities, but even still, like any public space, it could see significant upgrades an if it were 30% owned by the Sovereign Wealth Fund I propose, it’d be far more inclined to invest in these public spaces. Why? Because, suddenly, such enhancements would not merely be considered an expenditure, but a political move towards securing or maintaing board seats as it’s something capable of rallying the worker and local government shareholders. What matters is the board. What always matters is the board, and these would be the only voters on the board who have no obligation to do what’s in the interest of shareholders writ large, they’d strictly be responsible for doing what’s in the interest of themselves as workers, or ourselves, as citizens of Pittsburgh (presumably this would be a role handed over to the city/town governments of the home address, not workplace, of workers, though either would be a marked improvement over what we’ve got now).
On a more granular level, the day-to-day experiences of the employees at PPG Paints could also be transformed. Employees, now being partial owners with voting rights, would likely have a stronger voice in company affairs. This could lead to improved working conditions, enhanced benefits, and a more inclusive company culture. As employees have a say, there could be an increased focus on work-life balance, professional development, and equity in decision-making.
But now let’s look at it from the opposite side. I’d argue it presents remarkable opportunities for non-governmental owners of the company, just normal shareholders of PPG. First, with this model, the company can dedicate its efforts entirely towards expansion without siphoning off money every year that goes to Uncle Sam Altman. The traditional strategy for many young companies—like Google, Amazon, Uber, Lyft, and Twitter—has been to drive expansion through reinvesting revenues, basically all revenues, and raising capital via stock sales, often prioritizing growth over immediate profitability. This strategy has proven its worth time and again, catapulting companies to global prominence. The SWF model, by reducing the tax burden on companies by letting them pay back what’s owed in the same way they pay for all their other expenses - though stock- enables companies like PPG to follow the same successful growth-oriented strategy, one that’s good for them, sure, but also represents increased, likely local, employment.
Secondly, the SWF model offers a considerable financial edge over competitors. As the ownership share of the SWF in the company increases, the tax obligation decreases. This reduction in taxes allows the company to retain more of its earnings, providing it with a significant advantage over competitors that are fully taxed through conventional means.
Moreover, the SWF model ingrains a robust mechanism that nurtures loyalty among the company's workers and local governments, fostering a long-term symbiotic relationship. By handing over a part of the company's ownership to workers and local governments, the company gives them a vested interest in its success. This investment engenders loyalty, not unlike the bond between institutions like Carnegie Mellon or the University of Pittsburgh and the city itself.
Consequently, PPG would be able to weave itself into the fabric of the city more tightly, both literally and metaphorically, as is already the case of our local universities, museum systems etc. This permanency facilitates investment in infrastructural improvements, expansion into new sectors, and fostering a deeper relationship with the local employees and citizenry.
It also reassures all stakeholders—shareholders, employees, and local governments—that their interests align with the company's, creating a sturdy foundation for sustained growth and mutual prosperity.