A Presentation by: Rahul Patel, Kevin Henry, Ted Papadapoulos, Kevin Ketcham, Suneeta Fora, Fatima Shams, and Fran Buday

The Estate Tax Regulation of Financial Services S.E.C. Exchange-Listing Regulations Dividend Taxes The Capital Gains Tax Securities Trading Regulation

    Our Mission Statement

Our mission is to educate the public about the adverse regulatory and tax climate that affects the financial services industry, banking industry, and small business growth. To do this, we have accumulated information and statistics that explain the harms of excessive regulation, the benefits of looser regulation, and why various federal taxes should be lowered or discontinued.

    Our Concern

    The Finance Group’s general concern is robust and sustainable economic growth. We agree that capital accumulation  - the ability to finance the development of new products and services, finance the purchase of plants and equipment, educate and employ a skilled labor force, and fund research and development - is inextricably tied to the sustainable growth of a market economy. Employers of all sizes rely on their investments to provide the necessary means to undertake all of these important tasks. This applies to everything from issuing stock and purchasing bonds to contracting loans and filing tax returns – which all have important regulatory and tax concerns attached to them.

   Our Position

    Our group’s position on government regulation of these markets and industries is that they should not be controlled as strictly as they are currently. Said markets and industries should be subjected - to a greater degree than they are currently - normal market forces and lower tax rates.These sentiments directed our research. Our research goal was to prove that there are connections between excessive taxes/regulation and lost economic growth potential.

A Background To Our Research

    By observing trends in the regulatory and tax environment described above, we can make certain generalizations about the effects of taxes and banking/securities regulation on the health of our economy.

    After performing initial research we learned that our original sentiments regarding tax and regulation had to be refined and separated – that they are two different issues that affect “Finance” in their own ways, and our efforts bifurcated from there. This resulted in two things. First, our research has focused in general on capital accumulation, where we gained an understanding of the important roles of corporate reinvestment and small businesses in our economy. Second, it allowed us to determine how different taxes imposed by the federal government on various economic agents and the regulations on the securities and banking industries affect capital accumulation.

    By engaging in this new research pattern, we also discovered many pieces of legislation – some involving taxes explicitly, some involving regulation of industry activity. Examining these laws and the repeals of some of them revealed trends, which progressed over time, that have helped us expose the economic benefits of lower taxes and decreased regulation.


    Our research has indicated that many of the controversial taxes that hinder reinvestment and capital accumulation have been deemed ineffective and counterproductive. Repatriation taxes keep an estimated $300 billion to $500 billion overseas. The estate tax has “reduced the stock of capital in the economy” by approximately $497 billion. It has been documented that the Capital Gains tax has stifled minority business growth in the past and severely affected the long-term stock portfolios and family business ownership that many elderly people rely on as a steady source of income. The Estate tax has also been proven to destroy opportunities to create or preserve jobs, as family-owned business (as part of an estate) are typically liquidated to pay estate taxes, in order to maintain control of other tangible assets.

    It has been documented that there are trends in foreign direct investment (FDI) that are inversely proportional to personal and corporate income tax rates in the United States. The United States saw an influx of nearly $500 billion in FDI after a nearly 33% reduction in these rates. By encouraging foreign investment, meaningful economic, research, and technological partnerships could be created that not only spur economic growth, but also create more congenial relationships between the United States and other countries. That might be especially helpful now that many, unfortunately, question the United States’ competency with respect to foreign policy.

    The following segments are full of information that explain the benefits of eliminating the Estate and Capital Gains taxes. They are the taxes that not only have the greatest adverse effect on capital accumulation and small business growth, but also create relatively small amounts of tax revenue for the federal government. The federal government stands to lose very little from their repeal, while the economy as a whole stands to gain so much.

Regulation of the Banking and Securities Industries

    Regulations put on the banking and securities industries are generally thought intended to protect an uneducated yet enthusiastic investment-making public. We have found that is not necessarily the case. Our research indicates many regulations contradict popular normative economic practices.

    For instance, the average fee to become listed on the New York Stock Exchange is approximately $67,000.00. This generated 1,428 corporate complaints in FY 2003, and approximately 1/3 of the firms that complained filed for bankruptcy that year. This is a good example of the “barrier to entry” problem that many economists ponder. There is no way to be certain how much potential for growth could have been locked inside those firms that were not able to make public offerings of stock. In addition, the bankruptcies that resulted destroyed jobs.

    Entrepreneurship is firmly tied to banking regulation, a trend that is confirmed by a 2002 working paper released in August of 2003 by the St. Louis Federal Reserve Bank. The barrier to entry problem was has also been greatly ameliorated in times of looser bank restrictions. Simple economic theory dictates that a greater number of agents in a market (easier access for entrepreneurs who may be carrying large amounts of funding from interesting investors) increases competition. Increased competition spurs innovation and beneficial price behavior – both of which have obvious positive effects on economic growth.