Small Business Equity & Growth Tax Code

Alan Banjac - 11/11/2024 

Over a week has passed since Donald J. Trump won the 2024 election after a successful campaign. He has been playing around with some intriguing ideas, including a proposal to remove income tax, as he discussed on the Joe Rogan Experience. However, the probability of this materializing remains low, as it directly challenges the interests of institutions like the Federal Reserve and the IRS. Historically, figures such as JFK, Lincoln, and Gaddafi who opposed usury or similar financial structures took a risk and paid the price. Income tax remains as one of the Fed's most powerful tools for their monopoly of power over our economy. However, the SBEG Tax Code proposes a model designed to effectively reduce the Fed's economic influence, transferring greater power to the people, serving as a pathway to abolishing income tax.
The model works as follows: Consider the top tax rate in the U.S., currently set at 37% for the upper class. Under the SBEG Tax Code, high earners would have the opportunity to reduce this rate to just 3.7% by investing in small businesses. For example, if an individual earns $100 million, instead of paying $37 million in taxes, they could choose to invest $33.3 million in small businesses (with revenues between $1-$10 million) and become equity partners. This concept also applies to the middle class. For example, if the income tax rate for middle-income earners is 15%, an individual earning $100,000 could reduce their tax obligation to just 1.5% by investing $13,500 in initiatives such as supporting the homeless, churches, charities, or other humanitarian efforts. In this way, the SBEG Tax Code encourages reinvestment in the community and economic growth through direct, targeted contributions. Furthermore, we propose eliminating all tax liabilities for individuals earning less than $30,000 annually and for businesses in farming, natural resources, and manufacturing industries generating less than $10 million annually. This adjustment would effectively reduce the income tax rate to 0% for both lower-income individuals and small companies within these crucial industries. These sectors add sustainable value to the economy, a focus we have drifted away from since the 1980s, and a trend that must be reversed.
In The War on Small Business, Carol Roth argues that government actions during the pandemic undermined small businesses, broadened the inequality between small and large companies, and threatened the principles of free-market capitalism. The SBEG Tax Code aims to address these concerns by incentivizing direct investment in small businesses, advancing economic freedom, and preserving entrepreneurial opportunity in America, countering the potential long-term consequences of corporatism.

Partisanship & Mitigating Risks

While the SBEG Tax Code presents substantial opportunities and benefits, no system is flawless. Inevitably, it will have weaknesses, threats, and potential loopholes. Beyond that, this policy challenges the interests of many political elites, meaning its weaknesses may be heavily scrutinized and propagated by partisan media, even if its positive impacts overwhelmingly outweigh any negative ones. Looking back through history, from Genghis Khan to Napoleon, Hitler, and Stalin, there has always been someone fighting for ultimate power. Today, psychological warfare, subversion, and small people divided over small-minded issues is all just for someone's big agenda. With that in mind, public perception of this tax code will ultimately dictate its feasibility and future potential for implementation.
One cheap narrative that may arise is that this model is 'communistic' due to its inevitable redistribution of wealth from the upper to middle classes, and from the middle to lower classes. However, this interpretation would be far from true for two reasons: 1) Freedom of choice, and 2) Financial incentives. In a collectivist society, citizens don't have a choice, as assets are seized under the illusion that 'government is people.' Here, people retain the freedom to decide whether to allocate their income toward government, business, or community investments, effectively decentralizing government's monetary power. A U.S. citizen who believes the government is doing a good job of representing its people by supporting the impoverished, small businesses, and local communities can simply continue paying taxes in full. For others who feel the government has neglected the people, this model allows them to take matters into their own hands by providing the opportunity to make direct investments within their communities. With investments being viewed as a tax advantage, small businesses would have consistent access to operating and growth capital, effectively creating generational wealth that could be reinvested into the economy and local communities. For those unfamiliar with how investments work, investors provide entrepreneurs with needed capital and, in return, seek a return on their investment. In contrast to this, there is no financial incentive when paying taxes. A good example is the funding of the COVID-19 vaccines: taxpayers funded the development, yet vaccine manufacturers profited. Our tax code counters this phenomenon.
This potential shift in tax policy not only challenges traditional fiscal structures but also poses a direct threat to the entrenched interests of neoconservatives and their global empire, as it could reduce income tax revenue by up to 90%. The 'United States of Globalists' maintains 800 military bases worldwide, which they defend at all costs, often polarizing the environment between liberals and conservatives to the point of moral exhaustion to sustain American imperialism. A prime example is Trump’s 2016 campaign, during which he proposed pulling troops out of NATO and reinvesting tax dollars domestically. He questioned why we continue to spend exorbitant amounts only for 'people to hate us'. However, the Russian collusion narrative was then propagated, effectively cornering him on his anti-NATO stance and limiting his ability to withdraw troops and refocus on the American economy. This Russian collusion story, now debunked, served its purpose by suggesting Trump could be working for Russia, despite his multi-billionaire status and lack of material interest in doing so. Ultimately, the anti-Russian and anti-Trump propaganda blinded people to the reality that our tax dollars are funneled into global ventures instead of being invested in America.
We must also not let the weaknesses of this policy slip our minds. Primary risks and threats include conflicts of interest, fund misallocation, exploitation, lack of accountability, and unequal benefits. Corporations may prioritize investments that align with their own interests rather than genuine community benefits, leading to biased support. Funds could be directed toward investments with minimal community impact, therefore diminishing the policy's intended effect. Furthermore, loopholes may allow individuals or companies to exploit the system by making nominal investments solely to claim tax deductions, without contributing meaningfully to societal goals. Inadequate oversight further risks the misuse of tax-advantaged funds, as it becomes challenging to verify the actual impact of donations or investments. Lastly, wealthier individuals and larger corporations might exploit these deductions more effectively than others, potentially increasing economic inequality.
Considering these risks and threats, it's clear that proper regulation, transparency, and accountability are critical to ensure these tax incentives achieve all of their intended outcomes. Clear reporting requirements will be necessary, mandating detailed public reports on how tax-advantaged funds are used to confirm they meet genuine community needs. Regular independent audits should also be conducted to verify compliance and assess actual impact (Third-Party Audits). Defining specific metrics to measure the social or economic outcomes of tax-deductible investments will further ensure accountability. Setting limits on tax deductions based on percentage thresholds will help prevent overuse by large corporations and individuals. Enhanced penalties for misuse or fraudulent claims will deter exploitation, while incentivizing local governments to monitor and report on the outcomes of these investments or donations within their communities can add a valuable layer of oversight. Together, these measures can help tax-deduction programs fulfill their intended purpose, supporting communities while minimizing misuse or the loss of public funds.
A potential solution to address conflicts of interest in small business investment tax deductions is to expand the SEC’s role in ensuring impartiality. A system could be created where investors opt into randomized investment opportunities. Under this model, the SEC would maintain a vetted pool of small businesses that meet specific standards, much like platforms such as StartEngine. Each investor would be matched with up to 100 or more randomly selected businesses. The SEC would establish clear qualification criteria, verify legitimacy, and monitor the relationships between investors and businesses, ensuring a transparent, unbiased allocation process that minimizes conflicts of interest.

Capital Markets On Steroids

Involving the SEC in creating a randomized selection system for tax-deductible small business investments could strengthen capital markets by stimulating diversification and reducing the risk of concentrated investments in specific industries, which can mitigate institutional risk. It would enable capital to flow into a broader range of small businesses, supercharging economic performance and conceivably leading to job creation and innovation. Increased transparency and impartiality in investments could also help build trust among investors, making capital markets more attractive and accessible to both small businesses and middle-income investors (non-accredited investors).
The U.S. capital markets currently represents 46% of the global equity market share. However, the majority of this capital is concentrated in the stock market, bonds, derivatives, and money markets. According to projections from the U.S. Federal Government Tax Revenue by Year, federal revenue is estimated to reach $5.49 trillion for fiscal year 2025, with income taxes contributing approximately $2.6 trillion. If income tax revenue were theoretically reduced to $260 billion, and the remaining $2.34 trillion were redirected into the economy, local communities and equity markets, the U.S. global share could increase to 47%. While this may not seem like a significant rise, the impact becomes clearer when considering that the top 2% of taxpayers currently account for 40% of total income tax revenue. This shift could inject an additional $1 trillion into the capital markets, specifically targeting small businesses, creating a long-lasting ripple effect on economic growth.
Without this type of opportunity economy and tax advantages, investor willingness to take risks will remain low, leaving limited capital for countless small businesses. Instead, this system would support entrepreneurs with limited access to networks and resources, reduce competition for funding, and create a world of opportunity for both investors and small businesses.