ESOP-COOP in the time of COVID - Public Policy

This is part three. Read it last.

Joint action between ESOPs and COOPs should include publicly or privately available insurance for ownership shares. One third if voting and preferred shares would be traded to a central pool in return for pool shares. If 25% +1 of a firms *sharehold requests it, the fund would use insurance fund voting shares to investigate, possibly suspend and, if cause were found, reorganize management, add or shed components. Taking either too much or too little risk or any corruption would be cause for reorganization. This is better diversification than playing the Wall Street roulette wheel. The workers win, not the house.

Multiple ERISA changes may be required to maximize the opportunities cooperation affords. Additional changes in public finance are also worth noting.

Enacting an employer-paid subtraction VAT to replace payroll, corporate, property and low rate income taxes would fund or virtually fund education, childcare and child income, healthcare and retirement services. These would either be provided by the government or by the employers in lieu of tax payments. 

Employer payment or reporting is a different version of present reporting and tax flows, but with virtually no household filing requirements. This change would also eliminate the incentive to have a gig economy, franchises and 1099 employment disguised as contracting. Liabilities are turned to tax credits. Longevity and childbirth are also encouraged. In time, incentives will no longer be required, but this is not that time.

Higher income earners would pay salary surtaxes or these could be replaced with higher tier subtraction VAT rates on such income. Some high wage individuals could sell their services as consultants, but these firms would have to pay the subtraction VAT instead. For people with large personal staffs, this may be preferable for all concerned. Salary surtaxes could be prepaid with bonds and either would fund debt reduction and payment of net interest on the national debt.

A Credit Invoice VAT would fund domestic military and civilian spending. Like a carbon VAT, receipt visibility would induce pressure for spending cuts and environmental good citizenship. This tax also funds legacy OASDI benefits.

The most relevant change is to move taxation of capital income (rent, dividend, interest, pass through), inheritance and gains taxes to an Asset VAT at point of sale or distribution. All such activities, short or long term, would be taxed.

The tax would be marked to market price at option exercise or the first sale after inheritance or gift. Most importantly, sales to qualified ESOPs and COOPs would be tax free. This includes sales at or during retirement.

The requirement to sell all shares at this point would be eliminated. This lowers dividend rates required to build up share balances because distribution would continue during spend down. Note that a big ERISA change is required here.

The A-VAT, with or without the S-VAT, will encourage ESOP formation and growth. By applying it to all stick sales, it will reduce trading volume, volatility and purchase prices. Passive investment by heirs and trusts to avoid taxation will go away because S-VAT and I-VAT liability and the A-VAT ESOP exemption end their utility, as well as the need for a large public sector.

*Either 25% retained ESOP shares or 25% of COOP members.