Re: Economic reform policy: Some views and proposals

["John O'Donnell" <jackodonnell@xxxxxxx>]

Trond Andresen wrote:
<<SNIP>>

> I made it explicitly clear that I did not suggest a transaction tax. Instead
> I proposed a tax on stocks held, i.e. a "property tax", based on current
> value. I have simulations of my long-wave stock model that shows that such a
> tax very efficiently dampens the long cycle. Imagine a person holding a stock
> portfolio in -- say -- 1996. It has finally sunk in for that (and many
> other) person(s) that the market is really taking off -- that stock
> appreciation is now in the double digit range and that this seems to be a
> robust trend. But in my scenario the "stock market tax committee" meets --
> assesses the situation analogously to the board of a CB when they meet to
> adjust the overnight rate -- and increases the stock tax to -- say -- 10%.
> This will take the momentum out of further increase. The balloon is given a
> small puncture before it has gotten very big.
You're getting close. A progressive tax on the total value of
corporation assets [i.e. -- equity defined by market price of common
stock plus mortgage/debt defined by preferred stock plus all outstanding
debt] imposed on the privilege of limited liability granted to
corporations and adjusted to cause the greatest rate of increase in the
underlying tax base [i.e. --  corp. equity plus debt] will also impel
stock prices to avoid irrational exuberance as well as encourage lower
prices [i.e. -- to reduce the per unit tax burden of this fixed cost of
production] particularly when the taxes thusly raised are used to reduce
the transaction taxes that create a distortion by placing a wedge
between the prices paid and the prices received for each transaction.

Stick that in your model and see what happens.

If your model can't handle it, see the model at
http://www.geocities.com/CapitolHill/1067/widgets.html with description
beginning at http://www.geocities.com/CapitolHill/1067/c04r4a.html

--
			-- jbod

		Tax Privilege, Not People
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