The following 1992 white paper on a Net Asset Tax is summarized in the following excerpts:
The government should tax net assets, in excess of levels
typically protected under personal bankruptcy, at a rate equal to
the rate of interest on the national debt, thereby eliminating
other forms of taxation. Creator-owned intellectual property
should be exempt.

The levels typically protected by personal bankruptcy can be
approximated by the median price of housing an individual added
to the median capitalization of a job in the economy. Together,
these exemptions add up to between $50,000 and $100,000.
Additional but smaller exemptions may be added to represent the
lower levels of bankruptcy protection typically extended to
children within families.

The NAT is a self-adjusting system that seeks an equilibrium
between government debt levels, current tax rates and private
wealth distribution, without attempting to achieve an outright
balanced budget or direct intervention in the economy.

Under current (1992) asset distribution and government debt the
NAT would generate between $1 trillion and $1.5 trillion in
revenue, thus totally displacing other forms of taxation.
only assets whose existence is legally recorded in titles, insurance
documents, etc., or that are currently reported for capital gains
and losses would be individually assessed.  Since most households
own few major assets changing little from year to year, the NAT
would greatly simplify tax computation.
With the exception of basic functions of government and the pay
down of debt, the government budget should be dispersed to
citizens as cash, rather than being spent in government programs
or even limited in the form of vouchers.  This is "market
democracy" in which the citizens and their markets, rather than
central planning and politics, influence the selection of goods
and services to be capitalized and provided.

Date: Thu, 26 Mar 92 15:03:49 PST
From: (Jim Bowery)
To: crash!!
Subject: NAT White Paper (part 1 of 2)

A Net Asset Tax 
Based On 
The Net Present Value Calculation
Market Democracy

By James Bowery
The Coalition for Free Enterprise


In nature, predators benefit prey by feeding on the weakest
members of the population, thus strengthening the gene pool of
the prey.  Parasites are far less discriminating than predators. 
Parasites are careful to avoid killing their individual hosts by
focusing on the vital fluids, rather than killing for tissue. 
Parasites are beneficial to neither the individual host nor to
the host's gene pool.

In his opus, "The Discourses" Niccolo Machiavelli counsels the
founder of any new state to present tolerable challenges to the
people at all times, so as to strengthen their character.  Either
the founder should locate in an austere land where nature herself
will provide discipline, or, if locating in a fertile area, the
founder should impose measured austerities on the people himself. 
Machiavelli specifically mentions taxation as an attractive tool.

There is hidden morality in Machiavelli's apparent ruthlessness:

At each stage of life, you have passed beyond dependence on that
which raised you to that stage.  If you continue accepting what
was once given to you, it weakens rather than strengthens you.  

If we follow Machiavelli's wisdom and are consistent with the
ecological model of predator/prey dynamics, we should avoid
parasitic tax systems which drain off productivity in the form of
income, capital gains, sales and value added.  We should instead
look for a tax policy that acts as a predator, applying
disciplinary pressure to the economy by measuring how effectively
business entities are utilizing their "living tissue" or net
assets.  We should do so without violating nascent businesses and
families, as these are the fountainhead of wealth and value.

To that end, this white paper argues for the adoption of the
following policy reform:

The government should tax net assets, in excess of levels
typically protected under personal bankruptcy, at a rate equal to
the rate of interest on the national debt, thereby eliminating
other forms of taxation.  Creator-owned intellectual property
should be exempt.

The use of government-backed debt instruments as a baseline for
the calculation of asset value in the net present value formula
indicates the existence of a de facto negative tax on net assets
pervading all sectors of the economy.  

This situation, which provides a form of "capital welfare", sets
off a familiar chain of events:

Centralization of net assets leads to corporate central planning
and monopolistic practices in the private sector with a drop in
wealth-creating entrepreneurial investment.  The consequent loss
of equity in the general population, particularly in families
with children and new businesses, has a tragic and predictable

Structural economic decline and social decay.

This flaw in the capitalist system has been exploited by the
enemies of free enterprise throughout history.  But the defenders
of capitalism have been disturbingly silent except to address the
weaker arguments of capitalism's detractors.

The economic policy described herein, including the above tax
reform and associated deregulation of financial institutions,
repair this flaw in the foundation of our free enterprise system.

Further, it provides immediate relief from the current economic
disease afflicting our society, in a virtually revenue neutral
manner (more than $1 trillion in tax revenue per year), while
laying the ground work for optimal economic growth far into the


"The rich get richer" is an old saying based on a widely used
mathematical formula in business economics:

The net present value formula. 

The net present value formula allows asset value to be calculated
as the size of a low-risk loan that one could pay off (amortize)
with the after-tax profit stream generated by an asset, adjusted
for risk.  This means an asset's present value is proportional to
the estimated wealth it will generate in the future divided by
the prevailing rate of return on low-risk debt instruments.

For example, a patent might be expected to produce some profile
of royalties over a period of time -- ramping up as the
technology comes into full production and then declining to
nothing as the technology becomes obsolete or the patent expires. 
When multiplied by the probability of achieving that expectation
(adjusting for risk) this royalty stream is equivalent to a
series of payments on a low-risk loan.  The size of the low-risk
loan that could be amortized by the after-tax real profit stream
is the patent's "net present value".  

The most obvious indicator of pervasive de facto capital welfare
is a positive inflation-adjusted rate of return on government
debt instruments.  The market compares private investments and
their risk-adjusted rates of return against the rates offered by
the government, backed by its fiscal and monetary authority.  If
a private asset isn't obviously a better deal and the investor,
as in socialist central planning, is too far removed from the
private asset by wealth centralization to make a well informed
judgment about the investment's viability, the investor will
generally opt for investments that are backed my a history of
known profit -- resorting to U. S. Treasury paper and their
positive real interest rates, if all else fails.  This is
equivalent to a welfare "safety net" for capital.  

The widely used net present value formula, being based on these
government supported interest rates, indicates the real rate of
interest on the national debt is the rate of negative asset
taxation the economy pays to all wealth in society and therefore
quantifies the level of capital welfare pervading society.


A primary function of the market is to place assets under the
ownership of those whose unique skills, knowledge, courage,
intelligence and enterprise will maximize the assets' profitable
use and minimize the risk of waste or idleness.  This happens
when people contending for the use of assets estimate the net
present value of the assets.  

Those perceiving the greatest value in the asset use their
capital or credit to purchase the asset.  If they underestimate
the risk and/or overestimate the profit, they lose some capital
or credit and therefore are less likely to grab assets and make
poor use of them in the future.  However, if they are right, they
gain capital or credit at a greater rate than competitors.  Thus,
the market strives to maintain an optimal match between the
particular qualities of owners and those of the assets they own
as reflected in the owner-specific net present value calculation.

We eliminate the market equilibrium in asset ownership when,
independent of any particular qualities of the owners, our
policies not only protect the inflation-adjusted value of assets,
but actually provide a net return, including capital gains, on
ownership.  In such an environment, society pays a negative asset
tax which amounts to welfare for capital, creating debilitating
incentives similar to welfare for labor.  In both cases,
nonperformance is rewarded over enterprise.  When combined with
taxation on income, capital gains, sales, value added,
inheritance, gifts, etc., (all market activities that reallocate
resources within the economy), the disincentives placed on
productive investment are greatly compounded.  

Just as important, capital welfare severely distorts the
optimization of asset ownership in society by placing, as a
matter of public policy, ever more assets under the control of
those who already have the most assets.  Capitalism expresses its
worst potentials when capital welfare debilitates the character
of the wealthy while it gives them ever more economic authority. 
This asset centralization impoverishes the population at large,
ending with a collapse in consumer demand.  Supply-side theory
fails to predict this collapse because it fails to deal with the
fact that the wealthy are just as prone to character erosion by
welfare as are the poor.  It is even more destructive than
welfare for the poor because it corrupts the decision makers in
the economy.  In the face of collapsing consumer demand and
capital welfare, acquisition of more capital assets is promoted
over the productive use or investment of those assets.  

Political rhetoric defining "the rich" or "the wealthy" as those
with high levels of income or capital appreciation, focuses
public sentiment against the most productive members of society
and away from the centralization of net assets as the underlying

The incentive for productivity in the economy, left after the
disincentives of capital welfare are subtracted, is the long-term
economic growth rate minus the interest rate on the national
debt.  When the interest rate being paid on the national debt
equals the growth rate of the economy, the fruits of all
productivity are being confiscated to pay capital welfare and the
incentives for productive investment and labor disappear.  When
the incentives for productivity become negative due to capital
welfare in excess of the economic growth rate, wealth is
structurally centralized at the expense of others in the economy. 
The absolute level of net assets owned by the general population
actually decreases so as to increase the net assets of the
wealthy.  This not only removes all incentives for production and
entrepreneurial investment from the economy, but consumer demand
collapses as credit is liquidated to pay for necessities. 
Depression ensues.  It is under these circumstances that demands
for socialist intervention in the economy via "public investment"
take on an air of urgent legitimacy.

In such a desperate environment, Marx's arguments in "Das
Kapital" appear as rational and appealing as any made by
Schumpeter, Laffer or even Adam Smith.  It is therefore critical
to understand to what extent socialist criticisms of capitalism
are valid so we can credibly argue against their fallacies --
particularly when they are promoted during obvious manifestations
of capitalism's flaws.


Communists advocate the emergence of a "scientific state" in
which all revenues and all functions of society are subsumed by
government planning and execution.  In updated terminology, Marx
predicted that ultimately science would advance to the point that
there would be no role for labor or enterprise -- only
scientifically optimized systems of automated planning and
production.  In this situation, there would be no free market to
sustain the masses since they would not own the automated means
of production, and, labor being worthless, would, therefore, have
no income.  Although Marx predicted a "withering away of the
state", the communist interpretation of Marx's dilemma was that
the state should confiscate ownership of the automated means of
production and distribute the products to the masses based on
social need.  Since science would have removed all uncertainty as
to the most optimal way in which to plan and operate these
facilities, there would be no need for the incentives of the
market to optimally allocate assets.

Clearly, communism touched a chord with this vision of an
automated future in which laborers could not feed themselves or
their families while capitalists, who controlled vast production
facilities, had no incentive to operate them.  The communist
movement dominated the politics of the 20th century.  Adolf
Hitler exploited a related idea when he attacked "international
Jewish bankers" in his national socialist movement.  When such
profoundly destructive movements run their course, it behooves us
to do more than merely condemn their evils in moral outrage. 
Analysis of this recurring political disease, why we are
susceptible to it and what can be done to prevent it in the
future is just as great a moral responsibility as is condemnation
of its manifest evils.

The appeal of communism (and an appeal of fascism) is that it
addresses a truth which capitalists exploit and typically resist
acknowledging in a material way -- that nature and civilization
provide common assets of knowledge, resources, infrastructure and
defense of legal rights which enhance and secure the productive
value of private assets.  It is precisely this pervasive
influence of common assets, attributable to natural and
historical heritage rather than the merits of any living person
or operating corporation, that provides the definition of
government's proper function, and, therefore, its proper level
and source of revenue.


In the 1800's Henry George advocated a "single tax" based on
unimproved land value.  His rationale for this was that
unimproved land was the only heritage in common to all and
therefore not attributable to the merit of any person.  This was
a reasonable approximation of the contribution of "common assets"
to wealth generating activity during an era in which most
economic growth was occurring in the westward expansion across
the continent of North America.  

But in modern technological civilization, the common assets of
scientific knowledge, public domain technical knowledge, defense,
law, infrastructure and education dominate our society.  Perhaps
at some point space will become a physical frontier and allow
real property rights to become as important as they were during
the 1800's, but at present, Henry George's approximation is a
poor one.  Indeed, it has never been a good approximation in
urbanized areas, which is a major reason that Henry George's
"single tax" ideas have failed to find great currency in
political and academic circles.

One of the greatest strengths of Henry George's land tax was that
it would have promoted a much more rapid development of the
American frontier by allowing the government to simply open more
of its territories to private claim, without worrying about
unproductive hoarding of those territories.  

Because of this fear of hoarding, the government resorted to a
highly political system of land grants which created the rail
road trusts that became a persistent blight on society.

  Similar blights are now being created in the bureaucratic
allocation of frequency spectrum by the Federal Communications
Commission and geostationary orbits for communications

In reality, we are surrounded by "frontiers" in many dimensions. 
Few have the profound implications of a physical frontier such as
the American west or space, but all share in common the attribute
that proprietary access to them is restricted by government so as
to prevent unproductive hoarding.  

In the case of technological frontiers, this problem is solved by
limiting the patent claims to 17 years.  An inventor can sit on
an invention doing nothing with it for up to 17 years, but beyond
that time, its use cannot be inhibited by the inventor.  In
practice, most inventors are so eager to see their invention
brought into widespread use, they endanger their own claim.  The
patented technique is unique among frontier claims in that it's
use is not inherently limited -- techniques are not "resources",
and in that it is truly the creation of the inventor -- not an
emergent phenomenon of civilization and nature.

But in other areas, such as radio frequency and orbital slots,
the analogy with frontier "land" is almost perfect.

The NAT, unlike George's land tax, makes it possible for the
government to open up all frontiers to private claim and
development.  Claimants must simply define and register the
nature of the property rights that they wish to claim so that
others can avoid overlapping claims or negotiate easements.  

Naturally, there are many such abstract property rights which are
now in use by people, although unclaimed.  The principle of first
use, like first to invent in patent law, should be the criteria
for priority on a claim.  "Use" should include not only direct
physical utilization, but declaration of intent to use the
property right via claim.

NAT liability begins with the date that the claim is protected
under law.


While, unlike Henry George, communists recognized the
contribution of all common assets, they provided no clear and
verifiable measure of this contribution.  They could not define
to what extent civilization had achieved an automated scientific
optimum, and, therefore, to what extent economic production was
attributable not to the qualities of individuals, but to the
qualities of civilization.  It is the lack of such a measure and
corresponding limits on the role of government, that has made
communist theory so destructive.1

Fortunately, we have evolved just such a measure in our own
society.  This measure is the ratio of the interest rate on the
government debt to the overall economic growth rate in the
economy -- the degree to which a typical asset's value, as
calculated in the net present value formula, arises from the
existence of nature and civilization.  Government debt
instruments "automatically" produce more wealth for their owners. 
They are financially certain.  The interest rate on these
instruments describe the degree to which capital enjoys a welfare
safety-net that reduces the incentive for productive investment. 
It, therefore, approximates the degree to which it is appropriate
and practical for government to collect society's wealth for the
maintenance of common assets.

When the proceeds of society's productive capacity are just
enough to pay out at a rate equal to government debt instruments,
we confront capitalism's dilemma in which the only sustainable
source of income is ownership of the means of production and our
only choices appear to be economic depression or communism.  This
is the first indication that the large deficits of supply-side
economics must inevitably lead to an a promotion of centralized
management -- whether in government or corporate bureaucracies.

A corollary of communism is that the common knowledge, that makes
private ownership of resulting wealth immoral, make central
planning the most efficient way to allocate resources.  Just as a
wise and benevolent dictatorship is the best form of government,
so central economic planning, given adequate knowledge, is the
best way to allocate assets.  Central planning efficiently
exploits economies of scale without wasteful duplication of
facilities and competition between different ideas.  Of course,
central planning assumes that the central planners know what
consumers want in the absence of any demand-side market

Indeed, this is virtually identical to the failure of supply-side
theorists such as George Gilder, who claim that centralized
wealth not only can make good decisions about what people want
without purchasing power necessarily being placed in the hands of
the consumer, but will go ahead and invest in such an
environment.  In Gilder's supply-side manifesto "Wealth and
Poverty" supply-side economics is founded on Say's Law which
states that supply creates demand.

Both communists and supply-side economists distrust the
consumer's wisdom to make wise choices in the marketplace --
preferring the conservative wisdom of centralized power to make
such decisions and trusting their altruistic instincts.  Both
prefer centralized authority over consumer sovereignty.  Neither
supply-side nor communist theory accept the democratic dynamics
of a consumer market.

Ironically, supply-side policies seem to amplify the errors of
communism in two ways:  1) By requiring consumers to go into debt
for their basic necessities, supply-side economics imposes
negative wealth on consumers so that, at some point, not only may
they not obtain the bare necessities of life, but they must also
provide what they do not have to those who are already own
everything.  The material rights of communism prevent this ultra-
pathological situation from arising.  2) Deficit spending for
government contracts awarded to large corporations typically goes
into advanced technology projects, as opposed to mature-
technology infrastructure projects.  With mature technology, the
management is much more "scientific" than it is with technology
development, and therefore more compatible with communism.  For
examples, it is obvious that a mile of train track built across a
given kind of terrain will cost no more than a certain amount of
money.  When building a new space vehicle, or thermonuclear
fusion furnace, however, there is no way for central managers or
politicians to determine whether initial bids and/or cost
overruns are reasonable given the difficulty of the project, or
whether those executing the project are simply dishonest and/or


There are property rights that deserve special treatment in our
laws and markets.  If we are to avoid a political free-for-all in
seeking exemptions from normal tax and regulatory burdens, there
must be basic principles that define which property rights are
and are not special.

A starting point is the foundation of modern democracy.  The
cornerstones of this foundation are the principles by which
democracy replaced systems such as slavery and feudalism in the
Old World.  

First among these principles is that people are not to be treated
as property.2

Since they are not property, investments in their health, safety
and education are not recoverable as profits by investors in the
free market.  This difficulty in recovering human investments,
resulting directly from abandonment of slavery, is a "market
failure" which must be addressed by non-market institutions such
as the family, religion and government.  In a sense, the
abandonment of slavery was a first step away from the primacy of
property since it undermined one's right to own one of the most
valuable assets conceivable:  Human beings.  

Public investment in the health and education of people also
happens to be one of the highest-return and most obvious ways
that society can increase its overall wealth.  Although the best
means of educating and maintaining health may not be so obvious,
market synthesis is feasible as a means of optimization.  An
example of this is the proposal for education vouchers and school
choice, although the value of such vouchers should, as a moral
matter, be adjusted by a bidding system to fit individual student
needs.  Similar market syntheses can be proposed for national
health insurance and many other government functions.

Failures of the market, such as the difficulty of collecting
tolls on roads and other infrastructure, have been used to
justify government intervention, but they are not nearly so
fundamental as the abandonment of slavery.  For example, systems
are now available which can automatically identify vehicles
traveling at full speed, and bill for the use of roads.  This
means the state can now sell its road systems to private
interests and leave optimal investment decisions in road
infrastructure to the market, assuming market-driven means of
allocating rights-of-way are established.

Although formally abolished, degraded forms of slavery continued
in feudal times.  After capital became a central organizing
principle, debtors prisons were abolished as part of the move
away from feudalism, thus the power to enslave via legal contract
was virtually eliminated.  

The institution of bankruptcy protection against creditors was a
final rejection of slavery and feudalism.  Bankruptcy protection
allows one to maintain ownership of one's residence and the tools
of one's trade despite the claims of creditors.  Not only is
one's own person exempt from market confiscation but one's vital
possessions are protected as well.  

Elimination of debtors' prisons and the institution of bankruptcy
protection of limited personal assets were the final steps away
from slavery and feudalism.  These steps toward freedom caused
additional failures in the capital markets.  These capital market
failures provide the basis for many government policies including
progressivity in taxation and the promotion of home ownership and
small businesses.3

During the Great Depression of the 1930's, two additional
interventions were established to protect the immediate assets of

1) Securities and Exchange Commission regulations to protect
average individuals against losses in risky investments, and

2) Deposit insurance for banks and savings and loans.

SEC regulations have required compensating programs in an attempt
to deal with the capital market failures created by these

Deposit insurance, being backed by the federal government,
created the need for highly intrusive federal banking regulations
to prevent monopolistic abuses -- regulation which ended in the
early 1980's.  Government support of deposit insurance continued,
however.  This imbalance of authority of responsibility resulted
in the banking abuses and failures of the late 1980's.  

Significantly, all of the government interventions which protect
the immediate assets of individuals have about the same cut-off
point.  SEC regulations define "qualified investors" (those
qualified to make high risk investments) as those who have net
assets on the order of $100,000.  Deposit insurance for
individual savers cuts off at $100,000.  Bankruptcy protection
for one's residence plus the tools of one's trade is typical at
around the same level.

The unifying principle behind these exemptions and regulations is
the protection of one's control over one's own person and vital
possessions.  The abandonment of slavery with the ancillary
abandonment of debtor's prisons plus the protection of home and
tools, are at the foundation of our free society.

Finally, the U. S. Constitution contains a provision for patents
of invention and copyright along with a prohibition on patents of
nobility.  In a very real sense, the "royalties" collected by
inventors for their inventions and artists for their creative
works are the basis for a new definition of "nobility" upon which
the United States culture is founded.  In the United States,
nobility is in the creative act rather than in the mere
possession of land or titles conferred by the authorities.  Just
as the land of old world nobility was protected from the normal
contention of the marketplace, so the "creative spark" of
inventors, researchers and creative writers should be protected.  

Indeed, given the need for inventors and artists to focus their
energies on creative rather than acquisitive disciplines, special
protections are far more necessary than they were for the old
world nobility, which possessed exceptional acquisitive
capabilities.  For this reason, patents of invention and
copyrights, when possessed by their creators, should be treated
as vital possessions of their creators for a limited time (17
years in the case of patents).

The particularly perverse trend toward government-financed
technology development has been attributed to a failure of the
capital market to address these critical needs.  However, the
real problem with technology competitiveness is simply that
technologists have been economically disenfranchised by a capital
welfare system favoring acquisition over creation.  The present
reforms eliminate capital welfare for acquisitors while restoring
creativity to its Constitutionally-mandated place of nobility. 


The existence of pervasive capital welfare discussed above
provides the basis for a system of taxation.

The principles of freedom upon which our country was founded
provide the basis for exemptions from taxation.

These insights yield the following proposal for a Net Asset Tax
(NAT) reform:

The government should tax net assets, in excess of levels
typically protected under personal bankruptcy, at a rate equal to
the rate of interest on the national debt, thereby eliminating
other forms of taxation.  Creator-owned intellectual property
should be exempt.

The levels typically protected by personal bankruptcy can be
approximated by the median price of housing an individual added
to the median capitalization of a job in the economy.  Together,
these exemptions add up to between $50,000 and $100,000. 
Additional but smaller exemptions may be added to represent the
lower levels of bankruptcy protection typically extended to
children within families.

The NAT is a self-adjusting system that seeks an equilibrium
between government debt levels, current tax rates and private
wealth distribution, without attempting to achieve an outright
balanced budget or direct intervention in the economy.

Under current (1992) asset distribution and government debt the
NAT would generate between $1 trillion and $1.5 trillion in
revenue, thus totally displacing other forms of taxation. 


Under the NAT, government functions and regulation can be cut
back as capitalism becomes more functional.  This does not mean,
however, that government expenditures will necessarily decline.  

As government debt is paid down, the role of government declines
and capital productivity climbs, the rate of interest offered on
government debt will fall to unprecedented levels with respect to
the economic growth rate.  In this situation, it will become the
responsibility of the legislature to determine to what extent
society has reached a scientific optimum and increase its deficit
spending accordingly.  Although the legislature has this
Constitutional responsibility in any case, the NAT will make this
clear as never before.

One way of viewing public and private domain functions under the
NAT is that as optimum ways of doing business are discovered in a
sector and become "scientific" or common knowledge, investment
risk disappears and with it the merit of private investment. 
Theoretically, in such a mature sector, the government could
invest and compete with the private sector without any
appreciable loss in productivity.

As demonstrated in communist societies, not only is such a
theoretic optimum never fully achieved, but the bureaucracies
that are supposed to apply the scientific knowledge of a mature
sector in order to optimize and distribute its value invariably
succumb to politics.  Just as monopolistic corporate
bureaucracies can become regressive in a relatively mature
sector, such as the U.S. automobile industry, so will any attempt
to subsume such sectors under government control result in
bureaucratic regression.

With the exception of basic functions of government and the pay
down of debt, the government budget should be dispersed to
citizens as cash, rather than being spent in government programs
or even limited in the form of vouchers.  This is "market
democracy" in which the citizens and their markets, rather than
central planning and politics, influence the selection of goods
and services to be capitalized and provided.

In fulfilling the moral mandates of a free society, such as
education and health care, government assistance feeding the
market should be restricted in ways that ensure the market is
providing those goods and services to the people who need them. 
However, it is imperative that the recipients of government
assistance be allowed to choose from multiple sources so as to
suppress the monopolistic failures typical of bureaucracies,
whether corporate or government.  

In areas of such moral mandates, the need of the individual
recipient, as determined by a bidding process, should determine
the amount of restricted financing provided to the individual.
This is in contrast to the even distribution of unrestricted

In essence, "market democracy" allows the people to direct their
portion of the government budget directly rather than going
through a political or bureaucratic process.  Market democracy
synthesizes a competitive market from public demand for goods and
services.  This motivates the risk of private capital in the
provision of services and cost containment.  It avoids not only
the central planning fallacy of communism, but also the political
failures that have so plagued our system of government in recent


In general, all assets are subject to assessment in computing
taxable net assets.  Payment of taxes may be deferred with
interest on the unpaid balance equal to the taxation rate.  The
unpaid balance is counted as a liability in the calculation of
net assets.  When one's tax liability grows to the point that one
has no net assets in excess of bankruptcy protection levels,
forced liquidation or transfer of assets takes place to cover the
tax liability.  The only privately owned assets not assessed are
the Constitutionally defined intellectual property rights of
patents of invention and copyright, when owned by their creators.

In order to avoid creating a bias toward debt financing and to
treat economies of scale rationally, corporate assets should not
be subjected to double taxation.

As with current systems of taxation, there are practical limits
to assessment.  For example, in theory every agreement in which
value is exchanged is subject to taxation.  In reality, life is
filled with "quid pro quo's", including cash transactions, that
are never reported to the Internal Revenue Service, nor would it
be practical to do so.  The practical realities of tax assessment
and auditing dictate that large portions of any tax base be
ignored, concentrating only on the most visible and accessible
aspects of the economy.  In the case of the NAT, only assets
whose existence is legally recorded in titles, insurance
documents, etc., or that are currently reported for capital gains
and losses would be individually assessed.  Since most households
own few major assets changing little from year to year, the NAT
would greatly simplify tax computation.

The actual value placed on an asset can be determined in a number
of ways, including self-assessment with mandatory and timely sale
if an offer to buy at the assessed price is made.  The present
systems of appraisal such as those already used in real estate
taxation could also be used.    In any case, the exact method of
assessment is secondary to the requirement that errors in the
estimate remain unbiased.  

Under no circumstances should there be an "assessment day" upon
which all assessments for the year depend.  What is assessed is
NOT one's possessions and liabilities on some arbitrary day, but
rather the time over which one owned various assets or held
liabilities during the prior year.


A fundamental problem with our economy at present is what might
be called "risk inversion" where households with high net worth
disproportionately invest in low risk instruments while
households with low net worth find their savings unwisely
invested at high risk by deregulated but relatively unskilled
financial institutions.

New technologies and job-creating enterprises find it difficult
to obtain capital because they are caught in the horns of a
dilemma:  The wealthy, who have the business experience needed to
manage the risks of a new enterprise, have given their money to
government or corporate bureaucracies to manage while small
savers find their savings accounts squandered in speculative
investments by institutions which are, in reality, qualified to
do little more than purchase Treasury paper, which is what they
should, in fact, be doing.

Even more perverse, the government finds itself stepping away
from its traditional low-risk investments in mature
infrastructure in order to perform functions for which it is
particularly ill-suited, such as technical innovation, while
private sector businesses retreat from the very technical risk it
is most suited to manage.

The government then finds itself bailing out the failed
investments of insured, but deregulated, financial institutions,
thus creating even more government debt which is purchased by
those most qualified to capitalize business enterprise.

The current hue and cry for saving the "middle class" arises from
the failure of our deregulated financial institutions to focus on
their original purpose, which was the creation of affordable home
ownership.  Instead, they speculated in the creation of large
amounts of theoretically profitable commercial real estate as
young families were being crushed under the weight of sky-
rocketing home mortgages and declining real wages.

The "middle class" it is currently in vogue to worry about are
those people, primarily people born in the 1950's (middle to late
baby boomers), whose family stability and household net worth
suffered greatly as a result of these housing shortages combined
with lowering real incomes.  

Throughout the 1970's and 1980's these 50's babies were locked
out of homes in perpetual courtship behavior.  The relative
unaffordability of housing delayed the onset of nesting far
longer than those born before 1950.  Courtship behavior is
notoriously consumptive and exhausting.  Nesting behavior is
investive and constructive.  Thus 60 million Americans born in
the 1950's are now suffering from low equity for their ages, and
little hope for the future.

In reality, it is too late to do anything for the members of this
group since most of its females are now leaving their
childbearing years -- some desperately risking late pregnancies. 
Most families have already been irreversibly damaged, assuming
they were formed at all.  The best we can do now is attempt to
rebuild the middle class for future generations and try to allow
those we have decimated to build some equity for retirement with
their productive years.4

Starting in the 1960's and early 1970s', in order to hoard assets
that would soon be in demand by the 50's boomers and to enjoy the
resulting capital gains, it was necessary for speculators to
borrow large amounts of money prior to the earning power of
boomers reaching "buy in" levels.  The boomers were then forced
to borrow even more money at higher real interest rates, while
the speculators liquidated and moved on to ownership of the
corporations which were paying the boomers lowered real wages and
therefore enjoying higher profits and capital gains because of
the increased experience level and productivity of the 50's

Centralization of the growing asset base, with values inflated by
debt, were the result.  Little was done in government policy to
get boomers into ownership of their own businesses during their
years of peak productivity.  This is because the profits on this
huge influx of highly productive man-hours could more easily be
captured from increasingly centralized and anti competitive
corporations.  Naturally, many boomers revolted against this
trend and attempted undercapitalized "self employment" instead of
working long hours for a large corporation that offered them
little or no security.

The end result of this risk inversion is a low rate of return on
the U.S. economy's highly centralized assets, compounded with
debt.  This low rate of return is even more significant given the
potential of the 50's boomers during their peak years of

We are now seeing an increasing social burden from 60 million
people born in the 1950's no longer willing and able to exert
themselves, during their peak years of productivity, for what
they see as a life-long Ponzi scheme which continually dangles
the American Dream before their eyes and never delivers.  Many
have postponed childbearing and nesting too long.  Millions of
potential families, not to mention tens of millions of children
aborted for financial reasons, have been lost to our society

In short, our social contract has been breached and the angry
plaintiffs are about to realize they can sue.

This is a politically explosive situation.

Although decisive action is needed to stave off the explosion, it
will probably not be taken until too late since those controlling
policies have benefited from this breach ever since the 50's
boomers began entering the workforce in the 1970's.  However the
increasing demoralization of this group combined with its
increasing age and experience is leading to an inevitable
collision with destiny.  Those who helped concoct the current
situation will continue to point in all directions, including at
the 50's boomers themselves, in their panic to appear to be doing
something.  But someone, probably a destructive demagogue, is
bound to call their bluff sooner or later.  

At that point, a political catastrophe will occur.

Adoption of the NAT and market democracy can avert this tragic
outcome and resurrect the American Dream.


This proposal is timely because the supply-side exploitation of
capital welfare has made this flaw in the foundation of our
economic system obvious, and its correction urgent.

Our tax policies have increasingly violated basic moral
principles during the 1980's and threaten to continue doing so in
the 1990's.  The symptoms are many and varied, including a heavy
consumer debt load with corresponding over centralization of net
assets.  A Keynesian collapse in demand and therefore a collapse
in the incentives for entrepreneurial investment of the capital
that was centralized by supply-side policies during the 1980's,
is creating a classic depressionary scenario.  Coming at a time
when we must convert our industrial base from a Cold War
configuration to commercial competition, this collapse in
investment incentives is particularly damaging.  The resulting
demoralization of our society is everywhere evident.

Of all the proposals for economic renewal, the NAT is the only
one that can provide immediate relief of our worst economic
symptoms while, at the same time, providing a solid foundation
for long term economic conversion and robust economic growth
rooted in basic moral principles.



Source US Congress Joint Economic Committee "The Concentration 
of Wealth in the United States Trends in the Distribution of 
Wealth among American Families" Washington Joint Economic 
Committee 1983 p. 24.  Some figures are provided to us by the 
Federal Reserve Board  following publication of the Joint 
Economic Committee Report.

			Total		Top	Top	Top
Type of asset		Amount(1)	.5%	1%	10%
Trusts			   495.7	77.0	81.6	95.1
Corporate stock(2)	 1,005.0	45.6	58.4	89.8
Bonds			   328.1	41.3	49.6	88.0
Business assets		 2,274.6	39.0	51.6	90.9
Money market accounts	   285.0	15.9	22.5	58.8
Real estate		 5,355.0	14.9	19.3	49.2
Land contracts		   111.0	13.9	15.2	50.4
IRAs and Keoghs		   142.2	13.0	21.1	67.3
Checking accounts	   115.9	 9.7	17.2	46.3
Insurance cash value	   259.0	 6.7	10.5	34.9
Certificates of deposite   383.1	 4.8	10.7	49.9
Savings accounts	   189.5	 2.1	 5.2	31.1
Automobiles		   359.5	 1.6	 3.0	20.1
Miscellaneous		   201.1	15.2	22.1	70.2
Gross assets		11,486.4	24.6	31.6	63.5
Net worth		10,038.9	28.7	34.3	67.92	

(1) In billions of dollars
(2) Including stock owned directly or thorough mutual funds but 
excluding holdings of pensions and trusts

In 1985, the accuracy of the above table was challenged by the 
Federal Reserve Board whose estimates indicated a more even 
distribution of wealth.  In 1991, independent studies based on 
the 1990 census indicated that the Federal Reserve Board's methods 
were inaccurate and significantly underestimated the skew in wealth 
distribution by percentile.  At present, the Federal Reserve is the 
dominant source of data on wealth distribution in the U.S. with 
only 2 comprehensive independent studies having been  conducted in 
the last 20 years, both indicating wealth is more concentrated than 
typically indicated by the Federal Reserve.  This checkered history 
indicates a serious gap in the credibility of wealth distribution 

As of 1990, total U.S. net worth is estimated by various sources 
including the Brookings Institute, Federal Reserve and First Boston 
Bank, at between  $20 trillion and $30 trillion dollars.  Depending 
on the impact of  Resolution Trust Corporation liquidations on real 
estate values, this range could be as much as $5 trillion dollars 
too high.



Tax Liability

The simplified tax calculation is as follows:

tax_liability = maximum(net_assets - bankruptcy_protection , $0) * treasury_rate
net_assets = assets - liabilities

bankruptcy_protection is set at approximately $100,000 per household 
to be conservative.

Assets, as well as liabilities are calculated as 12 month averages.

Expected Federal Tax Revenue

From the data in Appendix I, the following inferences can be made:

As of 1990, with a higher concentration of wealth than in 1983 or 1985, 
households with $100,000 or more in net assets start at between the 
50th and 75th percentile.

Those tax-paying percentiles own between 80% and 90% of all net assets.

Assuming there are approximately 50 million households represented in 
the asset distribution table, the average per-household assets of taxable 
households is between $640,000 (at 25 million households) and $2,160,000 
(at 12.5 million households).

Average taxable assets per taxable household are between $540,000 (at 
25 million households) and $2,060,000 (at 12.5 million households).

The interest rate on the national debt is approximately 6%.

Average tax liability per taxpaying household is therefore between 
$32,400 and $123,600.

TOTAL FEDERAL TAX REVENUE is therefore between $800 billion and $1.5 trillion.

These calculations are very rough due to the dearth of asset distribution 
studies, but they do demonstrate that the NAT generates revenues similar 
to those generated under the current tax system.




Won't the savings rate go down under a Net Asset Tax?

Savings rates will increase along with the increased after-tax rates of
return on savings for households.  Most households will be well below the
standard exemption and can, therefore, put their savings into government-
backed debt instruments and receive an even higher rate of after-tax return
than they can get now.  They'll have more disposable income to save as


I thought only rich people could invest in T-bills.

Since only middle class people will find government debt instruments
attractive, financial institutions will offer savings and checking accounts
backed by government debt instruments.

This has a very important side effect:

Under the NAT, deposit insurance can be eliminated and along with it, the
most burdensome regulations of financial institutions.

How with the NAT affect retirees?

The AARP's figure for median net worth of retired households is just under

Since the NAT household exemption would be on the order of $100,000, not
only would most retirees pay no taxes at all, but even some wealthy
retirees would find themselves paying LESS tax than they pay at present. 
Doing a bit of algebra:

NAT_liability ~= (household_net_assets - 100,000)*.06
CURRENT_liability ~= income * .28      (Assuming 28% tax rate.)
income = household_net_assets * .06
(This assumes all their assets are bearing income at an average of 6%.)

Setting CURRENT_liability = NAT_liability and substituting "income":

(household_net_assets - 100,000)*.06 = household_net_assets *.28 *.06

Solving for household_net_assets:

household_net_assets = $138,888  (This is around the 80th percentile.)

So you have to have more than about $140,000 in net assets before you will
end up paying more in NAT taxes, as a retired household, than you currently
pay in productivity taxes.  This makes the pessimistic assumption that you
will leave all your assets in low yield instruments instead of using your
years of experience at accumulating all those assets to help young people
start their own businesses, or help your
children start their families, a la SBA's SCORE and the extended family.

What about the impending collapse of the Social Security system that baby
boomers are so worried about?

This NAT reform is the best hope boomers have for a happy and secure
retirement.  The NAT was developed by boomers motivated to deal with the
lack of economic equity experienced by those born during the 1950's
resulting from the stress they placed on the job and housing markets. 

By causing the long-term growth rate of productivity to increase, the boom
generation's retirement will be secured and the Social Security trust Fund
kept solvent.  The NAT will head-off a fiscal and monetary disaster which
now looms over the retirement of those born in the post-World War II baby

Enemies of the boomers (typified by Federal Reserve economists who
represent capital welfare interests) have already started to fight the NAT
by misrepresenting it as a tax which will target the pensions of boomers 30
years from now.  

If the NAT is adopted soon, boomers (especially the 60 million born in the
1950's who have few net assets) can use their peak productive years to
prepare themselves and our country for their retirement.  Indeed, since
there is no such thing as a free lunch (except capital welfare), timely
adoption of the NAT reform is the only realistic means of assuring boomers
of a happy and secure retirement for boomers..

What about the federal deficit?

The federal deficit will come under control as the tax rate is tied to the
treasury rate.  This doesn't eliminate the federal deficit -- it merely
ensures the deficit will remain at reasonable levels.

Further, the NAT links spending to the tax rate, through the aggregate
interest rate being paid on the national debt.  If Congress goes on a
spending spree and drives up the Treasury rate for a period of a few years,
the aggregate interest rate being paid on the national debt will rise

This will create the same kind of constituency to control SPENDING as now
exists to control TAXATION, but it still gives the government the
flexibility to borrow and spend large sums of money in times of emergency.

What about loopholes?

There are several things that make this tax system far better at closing
loopholes than the productivity tax system.  From most to least

1)  Unlike the NAT, it is impossible to construct a productivity tax system
without a labyrinthine system of loop holes, simply because the economy
would grind to a screeching halt without them.  For example, a big problem
with "flat tax" proposals is the fact that businesses have expenses which
must be deducted.  A productivity tax without business deductions would
favor conglomerates and wipe out small businesses or businesses that have
high dollar volume with small value added.

     Once you admit the need for deductions, the rich hire armies of
lobbyists and make sure that hidden in that mountain of rules and
regulations defining how deductions are to work, are their special little
loopholes that they can drive a Rolls Royce through.

     Under the NAT, activities are not taxed, therefore there is NO NEED
FOR DEDUCTIONS.  It can be a genuine flat tax.

2)   Assets are harder to hide than transactions.  Transactions are EVENTS
which means they don't necessarily leave a trace or record.  Assets are
POSSESSIONS which exist across time.  Even abstract properties like stocks
and partnership shares are meaningless as assets without some sort of legal
record.  Most highly valued assets are insured and/or their titles are

3)   By eliminating productivity taxes, the NAT creates a great positive
incentive to put assets to productive use.  Once in productive use, it's
hard to hide them.

4)   The last resort of the incompetent and nearly brain-dead would be to
sell off everything they can't make use of at reasonable prices to people
who CAN make use of them (which is one of the main purposes of the NAT) and
either move the money to Swiss banks or purchase diamonds and other easily-
hidden assets of high value.

     This is actually a very good thing.  What you are doing in the final
analysis is removing domestic power from capital welfare.  A bag of
diamonds sitting around in a secret safe isn't power -- control of assets
needed for production and life is power.  Other countries might not be too
happy with the U.S. for dumping our parasites on them, but then they are
getting cash at the same time as compensation.

     In reality, many foreign banks will receive these deposits and decide
to simply turn around to reinvest them in the U.S. due to the greater
investment opportunities of the NAT economy.

How does one value net assets for tax purposes? 
Recalling the NAT reform:
  The government should tax net assets, in excess of levels typically
  protected under personal bankruptcy, at a rate equal to the rate of
  interest on the national debt, thereby eliminating other forms of
  taxation.  Creator-owned intellectual property should be exempt.
Net assets are simply the assets you own minus the liabilities you owe. 
The liabilities you owe are counted as assets owned by those to whom you
owe the liability.
There are a number of ways to solve the NAT assessment problem.  The
literature on property value assessment is voluminous and easily available. 
Real estate is only one kind of asset.  Just about any approximation of
asset value in a NAT would yield a tax system superior the current forms of
taxation.  Of course, some methods of assessment would yield NATs that were
superior to others.
An interesting method used by the Chinese was to allow the owner to self-
assess.  If the government thought the owner was undervaluing the asset, it
could purchase the asset at the owner-assessed price.  This "fair
compensation" is at the basis of the right of eminent domain.  Such a NAT
assessment system has a constitutional basis (in the 5th amendment). 
Something which is more difficult to say about the income tax considering
the shady circumstances surrounding its enabling amendment.
However, it would be better to leave the government out of the decision. 
Simple market dynamics are probably the ideal method of asset valuation. 
You estimate your assets' values and then if someone wants to buy them at
that value, the government exercises its right of eminent domain to force
the transaction.  Naturally, these transfers of ownership must be allowed
to occur in a commercially reasonable manner in all other respects.  

Also, the fact that people would tend to over-value their assets, so as to
discourage purchase by others, is NOT a flaw in this form of assessment. 
Everyone would experience the same incentive and would, therefore, share
about the same burden of taxation as they would under a "perfect"
assessment system.  
There would be some differential tax relief enjoyed by those who were
actively trying to liquidate their assets, since they would lower the
assessments as a means of expanding their market.
But I want to reemphasize, the chosen method of assessment could be no
better then the current, highly politicized, methods of real estate
assessment for property taxation, and the NAT would STILL be superior to
the current tax system.

Taxing wealth seems to be an obvious thing to do, yet I've never heard of
it being seriously considered before.  Why not?

To quote from "A Tax On Wealth:  An Alternative to Revolution in America"
by Mortimer Lipskey:

	Income is taxed; wealth is ignored as if it never existed.
	It is all a reflection of the cloak of sanctity that has
	been thrown around wealth -- wealth the unmentionable, the
	ineffable.  Perhaps that is the reason why there has been
	so little discussion of wealth taxes compared to other
	sources of revenue in the United States.

	This writer knows of only one serious book that deals
	with the subject.  That book is "Taxation of Personal
	Wealth" by Alan A. Tait published in 1967 by the University
	of Illinois Press....  "The April Game:  Secrets of an 
	International Revenue Agent", published in 1973 by the
	Playboy Press, devotes a small section to a wealth tax.
	In 1963 there was one article by A.T. Peacock in the
	British Tax Review on the subject and one by M. Stewart
	in "Bankers Magazine".  Peter Barnes made a passing
	reference to an annual wealth tax in a 1972 article in
	the "New Republic".

	That is about the sum total of bibliography on the subject
	of wealth taxation appearing in the last decade or so.  Yet,
	the concept of a wealth tax is as old as civilization itself."

This book was published in 1977.  Recent searches have been only a little
more fruitful.

Conversations with economists about the NAT have consisted of one of two

"No one is thinking along those lines.  It must be a nonstarter."


"It's a great idea and you are doing a tremendous public service
 by promoting it, but we don't dare study it here."

There really does appear to be a conspiracy of silence concerning wealth
taxation, enforced by the wealthy who control those whose job it is to
study economic options.

Indeed, in economist Ravi Batra's book "The Great Depression of 1990" the
author describes the solution to depression as a wealth tax but despairs of
seeing it implemented short of revolution due to the kind of control
excerised by wealthy individuals over the institutions that pay economists.

Has the NAT reform been tried anywhere? 

There have been various "wealth tax" systems proposed and some wealth taxes
have even been implemented, but these have been very limited in scope.

Interestingly, the countries with the highest standards of living in the
world, such as Sweeden and Switzerland, also have the highest net wealth
tax rates.

What are the advantages? 

We recover from our current economic downturn within months of enactment. 
Economic activity is no longer taxed.  Monopolistic or hoarding behavior is
strongly discouraged.  No more depressions or extended recessions. 
Families are nurtured as are small businesses.  Greater return on
entrepreneurial investment.  Greater investment in human capital.  Greater
investment in technology and intellectual capital.  A more just and humane
society.  Tax simplification.   Greater privacy (less total information
reported to the government).  A greater middle class savings rate.  A more
enterprising upper class.  A restoration of the American Dream's
credibility to the lower class.  The U.S. budget, tax rates, net asset
distribution and interest rates are linked together in self-correcting
control system, without the need for political intervention.

What are the disadvantages?
This is a radical reform.  It will require a major readjustment of our
business and legal system.  Politically, it will be attacked, is
represented and amendments will be pushed to make it as destructive as
possible so that actual experience with the NAT is negative.  In that way
the NAT can be permanently discredited by those who are threatened by its
disciplinary pressures.

Other than that, most apparent disadvantages have immediately obvious
For example, although the government ends up knowing a lot more about what
you OWN, it also ends up knowing a lot less about what you DO, and since
the things you do provide more information than the things you own, there
is a NET gain in privacy.

Another example is the loss of what might be called, for lack of a better
word, our "royalty" or "nobility".   The exquisite traditions and knowledge
of old wealth do posses value which is protected from generation to
generation by capital welfare.  The loss of that "nobility" is replaced by
the nobility of the creator in the form of the intellectual property
exemption.  On balance, it is the unique privilege and burden of America to
be creative.  We should treat the creator, not the acquisitor, as nobility
in America.

When they taxed bank deposits in Texas, the bank deposits used to be pulled
out of state before the tax date.  What is to keep similar things from
happening with the NAT?

Assessment should be integrated over the course of the year.

Having an "assessment day" is ridiculous.  Any such date will lead to all
sorts of pathological business practices.  A NAT on a statewide basis isn't
so pathological but since the total tax burden at the state level is small
compared to the federal taxes (including FICA) one wouldn't expect to see a
huge impact on the economy of those states.

It is easy to make a mess of anything if you want to.  Believe me, powerful
interests don't want this tax because it makes them get off the usury dole
and back to work with their capital.  They will want to hang all kinds of
destructive features on the NAT so they can portray it as an economic
disease instead of a cure.

When the NAT is being legislated, watch out for lobbyists advocating an
"assessment day" or the removal of language specifying that assessment
shall be integrated over the course of the year.  They represent the enemy.

Most taxes are based on "ability to pay."  With the NAT you tax assets, but
you PAY in cash.  How can you pay with some acres of land, a share in a
building, part ownership of a corporation? 

The net present value calculation states that an asset's value is
proportional to its combined casflow and appreciation 
rates, discounted for risk and the Treasury rate.

All of the assets you mention produce either the cashflow or the
appreciation predicted by the net present value calculation.  The taxpayer
can pay directly or leverage against the appreciation.  The taxpayer can
even opt to defer payment and, in effect, borrow from the government at the
treasury rate with that counted as a liability.

Forced liquidation only takes place when the net assets of the taxpayer,
including tax liabilities, approach the level of bankruptcy protection.

If you want too really go into theory, why not tax personal abilities,
figuring that is an asset (divorce courts sometimes do)?  In fact this is
an old idea-the way it was originally done in the British colonies.

This violates the principle of not treating people as property.  People are
not assets and have not been ever since we abandoned slavery, feudalism and
debtor's prisons.  Any investments made in people, such as education,
health improvement or skill acquisition, would not be taxed under a NAT
that is consistent with the founding principles of this country.  The close
association of bankruptcy protection to these basic American values, and
the ability to obtain a statistical measure of its level, is why that is
the definition of the personal exemption.

The case of divorce is interesting because of the unique nature of the
institution of marriage.  It is not a normal legal contract -- but a
binding together of two lives.  When a wife becomes a mother and gives up a
career in support of her husband's family, it is quite clear she has a
claim on his person.  But this relationship is unique and definitely not
the relationship between the government and the individual.

Aren't property taxes regressive due to the fact that small properties tend
to be valued at closer to true value than properties of great value?

The current real estate property tax is regressive for much more profound
reasons than that:  

1) It is a tax on GROSS assets, i.e.: regardless of your equity.
2) It taxes property that would typically be protected under
   bankruptcy proceedings -- i.e.: assets which are essential
   to one's life and livelihood such as housing and small 
   business property.

Number 2 is actually a special case of 1, because the maintenance of one's
own person can be seen as a "liability" imposed by nature -- a debt that
one must service in order to remain alive and healthy.  This is ultimately
the cleanest theoretic justification for a large personal exemption in a
NET asset tax system and it eliminates regressivity.  Income taxes, by
taxing one's abilities, and sales, by taxing one's needs, and value added,
by taxing one's productivity in the most direct sense, are far
moreregressive than the proposed NAT reform.

Wouldn't this be a one time tax?

No.  The net present value calculation proves otherwise.  Assets don't have
a market value if they aren't capable of producing value over time.

The NAT may be a "one time tax" for those who posses assets that are highly
valued by others, but the owners don't have any idea what to do with them. 
The NAT will simply cause them to do what they would normally do in a
"perfect" market -- sell.  Their cash, or other form of payment, will then
become subject to the NAT.

Aren't "the rich" those who have high spending power, which comes both from
income and assets?  If so, why not tax income?

Only if the income isn't committed in debt service and if the assets aren't
offset by liabilities.

But even so, the person who is currently serving the marketplace and is
therefore enjoying high income is proving that he is being productive with
his assets.  This is a desirable stateof affairs and one which we should
not tax. 

This sounds like Henry George's "Single Tax" on unimproved land.  Hasn't
this already been tried in much of Australia, New Zealand and western

Henry George ignored all of the things, tangible and intangible, provided
by the existence of civilization.  He also ignored all of nature's assets
except unimproved land.  His was a reasonable attempt at a morally
defensible tax system during an era in which most new wealth was being
generated in the American West.  However, it is entirely inadequate today.

What about double taxation?

Since the NAT is a NET asset tax, you subtract all your liabilities from
your gross assets.  Assessing one's liabilities is nothing more nor less
than going to the party to whom the liability is owed, and finding what
they assess that liability at.

In the case of corporations you do one of two things:

1) You simply don't treat corporations (or any businesses) as
   taxable people or households for tax purposes (although 
   ownership shares in them would still be assessed).


2) You allow the outstanding shares, as well as debts, to be
   counted as liabilities.

The first option is superior to and simpler than the second.

How will this affect our technology competitiveness?

In effect, the NAT has an even greater impact than a universal research and
development tax credit system.

Commercial technologies will advance rapidly in entrepreneurial businesses
started up by inventors.
A variety of authorities from supercomputer entrepreneur Seymour Cray to
the National Science Foundation, have repeatedly found that small,
inventor-capitalized firms are the fountainhead of commercial technology in
our society.
The NAT elevates technological innovation to the status of a noble pursuit,
which is its Constitutional place.  As a result, we should experience a
tremendous explosion in the rate of technological progress and therefore,
our comptitiveness. 

What about antitrust laws?

Antitrust enforcement will become less necessary as the diseconomies of
scale inherent in large corporate bureaucracies are exposed by their poor
profit/net-asset ratios.

Where economies of scale are actually realized, the NAT will favor the
formation of joint ventures and mergers.

Will there be an impact on unfair discrimination practices?

There will be many forms of unfair discrimination, not now recognized as
such, which will be eliminated by the NAT.

Unfair discrimination in the economy will be reduced without specific
legislation or programs.  Corporations bureaucracies can afford to
discriminate against productive members of society only when they are
anticompetitive.  When mere size is no longer favored relative to unit
productivity, businesses choosing to select employees on criteria other
than their productivity will simply be put out of business by competitors.

How about competition with Japan?  Can a bunch of small creative businesses
really make it in the international market place where Japanese
corporations act more like feudal kingdoms?

Our problem is that we attempt to preserve and extend various remnants of
feudalism which is to play the game on Japanese terms.  For example, until
recently, the "cradle to grave" employment practices of U.S. corporations
led to feudal practices such as corporate retirement plans, corporate
healthcare plans, etc.
We have recently moved away from these benefits of corporate feudalism
which would be a movement toward a freer societyexcept for the fact that we
had no other institutions set up to take the place of feudalism.  
When the feudal lords are disloyal to their serfs, feudalism becomes
unbearable and the serfs begin "job hopping".  This is then taken as
further justification to avoid feudal responsibility by the lords.  A
vicious cycle of decay ensues.
In the U.S. this decay of loyalty between corporate lord and serf began in
the 1970's when inflation allowed unethical lords to lower the real wages
of loyal serfs without appearing to do so.  The smart serfs recognized
their loyalty was being abused and so chose to abandon their lords for
others who were more than willing to take on smart serfs at a fair wage. 
This was the genesis of the decay of American corporate feudalism.
So now we have lost our corporate feudalism and are groping to find
something to replace it with in this country.  Attempts are even being made
to legislate corporate feudalism back into our business community, such as
mandatory healthcare plans paid for by employers.  Such attempts fail to
recognize that feudalism is simply incompatible
with the American character.
While we are groping around for a new business paradigm, Japanese feudalism
is alive and well.  Naturally they are gaining on us.
The NAT will provide us with the new American business paradigm, which
urgently needs acceptance.  

It is a highly interconnected and redundant network of small to medium
sized businesses that form and dissolve based on the requirements of
rapidly evolving markets and technologies.  In such a system, security
resides not in the loyalties of a single feudal hierarchy, but in the
social contract and statistics of the economy as a whole.  The
inefficiencies of bureaucracy are traded off against the inefficiencies of
independence.  Social mandates against unfair discrimination in the
workplace are achieved, not through government regulation, but, through the
ruthless justice of fair business competition combined with social programs
creating equal opportunity for all children as they enter adulthood.
The net gain of the NAT paradigm is in a society of free men with their
greater incentives and creativity.



Imagine a sole proprietorship in which the proprietor simply offers advice 
to people from his home via his home telephone.  He has no assets devoted
to the business, except the investment he has made in his own education.  

The taxable assets of this sole proprietorship are 0 hence there is no NAT
liability.  The owner can simply declare the value of his assets to be 0
since there is nothing to purchase out from under him.  He runs his 
business and makes his profits unimpeded by taxation or takeover of his
assets, since there are none.

If the business itself is to be treated as an asset, then one has to look
at the investment entity that owns the asset, how accurately it calculates
the net present value of the asset at the time of purchase, and what it
does with the asset to improve on that value after purchase, since the
capital gains

in the asset aren't taxed under the NAT.  Only in that way
can you decide whether the relevant business is "efficient" or
not.  In other words, "efficiency" means you are getting a
high return on your assets, however you define them.  

Here is a mathematical argument:

Let's say ROR is the BEFORE TAX rate of return an entity can typically 
get from its assets including capital gains as well as profits.  Let's 
say ITR is the income tax rate and ATR is the government debt rate
and therefore would be the hypothetical asset tax rate.  Let's say
the entity owns net assets with a market value totaling MV.  

For simplicity, let's ignore the standard exemption and assume
that the capital gains tax rate is the same as the income
tax rate:

The income I = ROR*MV  
Income tax IT = I*ITR  
After income tax income AITI = I-IT
After income tax rate of return AITROR =  AITI/MV
Asset tax AT = MV*ATR
After asset tax income AATI = I-AT
After asset tax rate of return AATROR = AATI/MV

Now we can ask:

What how efficient does a business currently have to be in order
to prefer the NAT over the current tax system?

This is the same as asking:

At what values of ROR is AATI>AITI?

First let's set AATI=AITI:

I-AT = I-IT				; Substituting for AATI and AITI
I-MV*ATR = I-I*ITR			; Substituting for AT and IT
MV*ROR-MV*ATR = MV*ROR-MV*ROR*ITR	; Substituting for I
ROR-ATR = ROR-ROR*ITR			; Dividing by MV
1-ATR/ROR = 1-ITR			; Dividing by ROR
ATR/ROR = ITR				; Subtracting 1
ROR = ATR/ITR				; Solving for ROR

So if your BEFORE tax rate of return on net assets is greater than 
the hypothetical asset tax rate divided by the income tax rate, 
you want the NAT.  If it is less, you want the present system.

In terms of current AFTER INCOME TAX rates of return, this translates to:

AITROR = AITI/MV			; Definition of AITROR
AITROR = (I-IT)/MV			; Substituting for AITI
AITROR = (I-I*ITR)/MV			; Substituting for IT
AITROR = (ROR*MV-ROR*MV*ITR)/MV		; Substituting for I
AITROR = ROR-ROR*ITR			; Simplifying
AITROR = (ATR/ITR-ITR*ATR/ITR)		; Substituting for ROR
AITROR = ATR/ITR-ATR			; Simplifying
AITROR = ATR*(1/ITR-1)			; Collecting ATR

So under current conditions (approximately)
Setting ATR = .06	; Interest on national debt is about 6%
Setting ITR = .28	; Income tax is about .28% (ignoring social

AITROR = .06*(1/.28-1)
AITROR = .154

In other words, if our current after tax (ignoring social security tax)  
income (including capital gains) is more than 15.4% of our net assets, 
we benefit from the NAT.  We'll call the AITROR at which we prefer
the NAT over the current tax system the "Critical AITROR".  For each
Critical AITROR there is an implied "Critical AITI" which is simply
the level of after tax income one must be making under the current
income tax system, in order to prefer the NAT.  

If we factor in the standard exemption (E) as well (still ignoring
social security tax relief) the Critical AITROR is given by the formula:

Critical AITROR = (1/ITR-1)*(1-E/MV)*ATR

The Critical AITI is given by:

Critical AITI = MV * Critical AITROR


Setting E = $100,000:

Critical AITROR = (1/.28-1)*(1-$100,000/MV)*.06

For various values of MV (market value of net assets), then the 
Critical AITROR's (still ignoring social security tax relief) are:

MV		Critical AITROR	Critical AITI/YEAR
$0 - $100,000	0%			$0
$150,000	5.1%			$7650
$200,000	7.7%			$15,400
$300,000	10.3%			$31,200
$500,000	12.32%			$61,600
$1,000,000	13.77%			$137,700

These are the figures that are most relevant to wealthy retirees
and other individuals who pay no social security.

The most regressive of all taxes, Social Security payroll tax, is
at 15.3% of your income (I) up to $53,400 (split 7.65% for you and 
your employer half and half).  Taking this into account, for 
incomes (I) up to $53,400, ITR is close to 40%, so adjusting
for social security, the critical AITROR without the exemption
is only 9%.  With the exemption the formula is:

Critical AITROR = (1/.40-1)*(1-$100,000/MV)*.06

This formula is a good approximation for MV's up to approximately
$500,000.  As MV values rise beyond $500,000, the Critical AITROR
factor of .40 decays, approaching .28.

For each level of net asset ownership, there is a critical after
income tax income (AITI) above which we prefer the NAT over the
current tax system.  This critical AITI is simply the critical
after income tax rate of return one one's assets, multiplied
by one's assets.  

Taking into account social security tax relief under the NAT, as
well as the $100,000 standard household exemption on net assets,
the critical AITI levels needed to prefer the NAT are:

For various values of MV (market value of net assets), the 
levels of income we need to prefer the NAT over the current
tax system are approximately:

MV		Critical AITROR		Critical AITI/YEAR
$0 - $100,000	0%			$0
$150,000	3%			$4500
$200,000	4.5%			$9000
$300,000	6%			$18,000
$500,000	7.2%			$36,000