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The Economic Democracy Act:

Capital Ownership for Every Citizen


You never change things by fighting existing reality.

To change something, build a new model that makes the existing model obsolete.

— Buckminster Fuller


The Economic Democracy Act or “EDA” (formerly called the Capital Homestead Act) is a proposed Federal legislative program of tax, monetary, and fiscal reforms for promoting sustainable economic growth while creating equal opportunity and access for every citizen, every year from birth to death, to become a shareholder in the technological frontier. It is designed to connect every person to the global economy as a fully empowered participant and owner of productive wealth, by dismantling structural barriers in our basic institutions and by financing capital formation through ownership democratization vehicles.

The EDA embodies Article 17 of the Universal Declaration of Human Rights, which states “Everyone has the right to own property, alone as well as in association with others” and “No one shall be arbitrarily deprived of his property.” This economic agenda for the 21st Century provides a blueprint for leaders committed to restructuring the legal and financial system to grow the economy at maximum rates with no inflation, in ways that build a Just Third Way version of economic democracy as the essential foundation for effective political democracy. The Economic Democracy Act promotes an “equal capital ownership opportunity” approach for financing a sustainable and just economy.

The Economic Democracy Act offers a just, free market-oriented way to save the Social Security System as a national retirement income security plan.  But, at the same time, the Economic Democracy Act offers a new national policy to foster life-long  “capital income self-sufficiency” as a means to achieve true economic independence for all citizens. If implemented, capital ownership would be systematically de-concentrated and made directly accessible to every person, without reducing property rights of the wealthy.


How the Economic Democracy Act Would Change the System

Through the Economic Democracy Act (aka, the Capital Homestead Act), access to asset-backed money and capital credit — which today helps make the rich richer — would be enshrined in law as a fundamental right of citizenship, like the right to vote.

Using its powers under Sec. 13, para. 2 of the Federal Reserve Act, the Federal Reserve System would supply local banks with the money needed by businesses to grow. The new money and credit for private sector growth would, however, be “irrigated” through Capital Ownership Accounts (aka Capital Homestead Accounts) and other economic empowerment vehicles.

Through a well-regulated central banking system and other safeguards (including capital credit insurance to cover the risk of bad loans), you and all other citizens could purchase with interest-free capital credit, newly issued shares representing newly added machines and structures. (See how to structure safeguards) These purchases would be paid off with tax-deductible dividends of these companies. Nothing would come out of your pocket or reduce the income you use to put food on your family’s table.

Capital Homesteading reforms would simplify today’s overly complex and unfair tax system by substituting a single-rate tax on non-exempt personal incomes from all sources, while:

  1. paying from general revenues all entitlements and other government spending at present levels,
  2. eliminating the payroll tax on workers and employers,
  3. making dividend payouts deductible to corporations, and
  4. balancing the budget.

The Economic Democracy Act (EDA) would re-write and radically simplify the existing Federal tax system to automatically balance the budget. Its tax reforms would keep more money in the pockets of taxpayers from their initial earnings to cover their own health, education, housing and other basic household living expenses. EDA tax reforms would make Congress more directly accountable and responsive to all taxpayers.

While encouraging corporations to issue new shares to finance their growth and pay out all dividends on their shares, the Economic Democracy Act would eliminate all tax provisions, personal deductions, tax credits, and exemptions (except for the front-end exemptions for adults and dependents) that unjustly discriminate against or discourage property accumulations and investment incomes for poor and non-rich families.

A single tax rate on all sources of labor or capital income over exemptions would be automatically set to meet all Federal entitlement and other programs, and to pay down past deficits. To meet personal living costs the basic incomes of all taxpayers up to $30,000 per adult and $20,000 per dependent (or $100,000 for a family of four) would be free from any income or payroll taxes. To increase taxable income incomes for all citizens, corporations could escape from the multiple tax on corporate incomes by deducting dividend payouts.

For example, under the reforms proposed here, a “typical” family of two adults and two children would pay no tax of any kind until aggregate income exceeded $100,000 ($30,000 of exempt incomes per adult and $20,000 per dependent). This family would pay a single rate of approximately 48% on any income over its $100,000 exemption. The 48% rate on incomes above exemption levels would apply to all forms of income — whether from wages, dividends, capital gains, etc. This is less than what dividend and capital gains income would be taxed currently under the “double (sometimes triple) tax” of up to 50% (35% corporate tax rate plus 15% on dividends and capital gains).

In contrast to the present system, a single tax covering incomes from dividends, interest, rents, and inflation-indexed capital gains would enable the over-burdened Medicare and Social Security systems to be funded out of general revenues. The single tax rate would drop significantly with a broadening of the tax base, as all citizens begin to receive substantial dividend incomes through their Capital Ownership (Capital Homestead) Accounts and as entitlements (constituting two-thirds of the current budget) can be radically reduced after keeping all current entitlement promises.

Under the Economic Democracy Act (formerly called the Capital Homestead Act), the wealthy would be encouraged to break up the estates they leave to their heirs, so that wealth would not keep concentrating from generation to generation. Rather than taxing the estate, the recipient/s of the estate would be taxed over a certain amount (say $5 million) on what they receive through inheritance.

Thus the wealthy person could avoid all estate and inheritance taxes if he or she leaves the estate to many people, such as relatives, friends, employees, etc. The recipients could further shelter their portion of the inheritance from taxation if they roll the assets into their tax-sheltered Capital Ownership Account (POA).

The Economic Democracy Act/EDA (formerly called the Capital Homestead Act) proposes a number of ownership empowerment vehicles that would enable every man, woman and child to get interest-free capital credit through their local bank. You and every member of your family could get access to this special credit by setting up a tax-sheltered Capital Ownership Account (COA) — like a “Super-IRA” — at your local bank.

Through your COA, and with the guidance of your financial advisor, you could purchase with your capital credit part ownership in: 1) companies for which a member of your family works; 2) a company where you have a monthly billing account; or 3) “qualified” companies that are well-managed and highly profitable, like Microsoft, Exxon-Mobil, Proctor & Gamble, IBM, etc.

Future earnings of the capital purchased would pay off the loans, including bank service fees and premiums to cover capital credit default insurance.

Within a relatively short period of time, you would become a full owner of your shares. (See projections) For the rest of your life, you would receive a decent and regular income from the earnings of the capital you accumulate over the years. Then you would have income-producing property to pass on to your children. This is how the Economic Democracy Act works.

These links describe ownership democratization vehicles for universalizing access to capital credit — the means for every worker and citizen to become a direct owner of income-producing capital and technology.

Capital Homestead Accounts (CHAs) to create equal access to the means for every citizen to become a citizen-owner.

Citizens Land Development Cooperatives (CLDCs) for every resident in a specified community, city or region to gain an ownership stake in land development.

Employee Stock Ownership Plans (ESOPs) to turn every worker in a corporation into a worker-owner.

Homeowners Equity Corporations (HECs) to enable homeowners faced with foreclosure to save their homes through a lease-to-own arrangement.

Consumer Stock Ownership Plans (CSOPs) to enable customers of utilities to acquire an ownership stake.

Ownership Unions.

The Economic Democracy Act will gradually change the major institutions of our economy from those of a wage-welfare system to a universal citizen ownership system. To embed and continue this change, we will also need to change the broader culture to transform the thinking, behavior and actions of citizens to more fully participate as capital owners with full property rights. Not only our educational systems, but such institutions as unions will also need to re-orient themselves to the universal ownership system of an economic democracy. By transforming themselves into “ownership unions”, today’s labor unions can build their constituency and expand their vital social role of protecting economic rights of working people, to educating, organizing and protecting the full ownership rights of all citizen-owners, including worker-owners.