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value added between $1 billion and $2 billion. The nation’s top ten were found \(with an occasional assist from estimating proLimiting Corporate Power* Fortune 500 Industrial Comparisons* value Corporation added sales assets net income Part ll 1.AT&T $27 2.General Motors 17 $47 3.Exxon 16 48 4.IBM 13 16 5.Ford 10 29 By Samuel M. Loescher 6.Mobil 10 26 Professor of Economics 7.General Electric 9 16 Indiana University Bloomington 8.ITT 9.5 5 12 12 10.Texaco 4 26 $24 $2.9 36 2.6 18 1.8 16 1.0 19 0.9 12 0.9 11 0.5 11 0.9 18 0.9 Why do I suggest that a progressive corporate value added tax would be markedly superior to a progressive corporate sales tax, progressive corporate assets tax, or a progressive corporate income tax? 9 First, value added is an unbiased, yet fully inclusive, measure of the scope of concentrated direction of activity taking place in any corporation. The full service values of both labor and capital are captured without misleadingly overstating of less vertically integrated corporations. Second, value added, unlike assets or net income, is not amenable to accounting manipulation, directed at minimizing a size tax obligation. Third, no disincentive is provided by a progressive corporate value added tax relative to a progressive corporate income tax for such highly profitable emerging Polaroids, Xeroxes, or Amands long before they reach the top 100, while no escape is provided for such profitless stumbling giants as Penn Central, Lockheed, or A&P. . Political pluralism is a dimension of freedom and democracy no more amenable to simple quantitative benefit analysis than is justice. \(Indeed discussion is better treated in terms of reducing latory agency, must evaluate the beneficial value of corporate in reduced efficiency in mektsured goods and services. Hence, Congress must set the schedule of charges. Better yet, Congress would establish a time frame in which nal tax rate was increased at specific value added levels. Gradual stiffening. of both bites in the rate would give Congress an opportunity to estimate empirically the quantum of efficiency which was actually being traded off as our nation sought to enhance its social-political environment. Suppose Congress had established a progressive value added tax schedule in 1975, beginning at 0.5 percent for $1 billion of value added and with the marginal rate rising an additional 0.5 percent for each additional $1 billion. A 5 percent marginal rate would have been reached at $11 billion of value added and 10 percent marginal rate at $21 billion of value added. On the basis of data from Compustat tapes, plus a few heroic estimates in labor costs, I find that in 1975 about 100 corporations from all areas of businessmanufacturing, utilities, transportation, and retailwere found to have generated $1 billion or more of value added. Substantially over half generated * A paper presented at a Joint Meeting of the American Economics Association and the Association for Evolutionary Economics, Allied Social Sciences Association Annual Convention, Chicago, Illinois, August 30, 1978. *in billions I assume that corporate managements will be motivated to maximize profits for their shareholders, if only for fear that takeover corporate raiders will bid to replace management, if managements fail to optimize spin-off policy, so as to maximize the aggregate of stockholder after-tax profit, with or without spin-offs. \(I also assume that utility regulators will push, where appropriate, deconcentration in the interest of consumers, much as utilities were induced to seek treble damage recovery from their supplying electrical equipment conspirators one decade ago. Given the low price elasticity of demand for the services of most natural monopolies, our AT&Ts and American Electric Powers might otherwise resist spin-offs, irrespective of the cost-effectiveness of holding companies in an environment of forego incremental size consolidation whenever the incremental private advantage \(for reasons of both true efficiency and mere for its stockholders below the aggregate profits \(after lower corporations. Where profit maximizing turns against the spin-off, management can be expected in the long run to pass along most of the incremental tax to consumers. 1 But if narrowly defined material efficiency does dictate the retention of superconcentrated corporate organizations in some instances, it is fitting that consumers pay the full costs for that corporate production which entails socio-political environmental degradation. Indeed, any degree of price elasticity in consumer demand for the-corporation’s products will induce consumers to engage in some inter-industry substitutionthus indirectly adding at least some weak check on corporate giantism. Four sets of consideration concerning tax incentives for corprovisions to prevent erosion of an effective corporate value short-sightedness concerning the consequence to deterring among business, in support of a progressive corporate value rate limitism can co-opt the “free rider” to renew the political climate, so as to better countervail. misused corporate power. trol over economic activity by creating subsidiaries and joint ventures. Corporations which own 5 percent or more in the stock 16 FEBRUARY 2, 1979