The Economics of SolarMethod
The immediate objective of our business model is to create a supplemental income for working families in the transition to clean energy. Our longer term objective is to turn solar energy into an equity based income stream for everyone.
A key aspect of how our business model is that through our reinvestment of the tax credit which accrues, the investment tax credit becomes self-funding.
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Deploy a solar power system and monetize the investment tax credit.
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Donate 22% of the system value to a 501(c)3 whose mission is to provide supplemental income to working families. The 501(c)3 which buys shares in a REIT and then donates those shares to people who rent.
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The 501(c)3 agrees to buy shares in a REIT (Real Estate Investment Trust).
These shares are conveyed to working families. REITs pay out 90% of their income as dividends to shareholders. Working families become equity stakeholders.
The faster we transition to clean energy, the faster we create supplemental income for working families.
The economic activity that results from acquiring and conveying REIT shares to renters results in a self-funding tax credit.
REITs buy property.
Investing in a REIT results in an increase in the money supply because REITs finance their acquisitions.
Equity REITs have a debt equity ratio of 33.4%.
Each dollar invested in a new share issue gives the REIT the capacity to borrow two dollars.
(Equity REITs have a debt equity ratio of 33.4%)
That two dollar increase in the money supply (M1) will generate additional GNP in the amount of $11.48 because velocity of money is 5.74. Which just means how many times in a year a dollar changes pockets.
Predicated on a velocity of M1 of 5.74, those two dollars will generate additional GNP in the amount of $11.48.
Federal tax revenue is 18.1% of GNP.
Additional tax revenue generated = $2.07.
The tax credit equals $1 of tax revenue foregone, so net positive tax revenue is $1.07.
Federal tax revenue is 18.1% of GNP.
Additional tax revenue generated from the additional GNP;
The extra GNP = $11.48.
$11.48 x 18.1% rate of tax revenue generation = $2.07.
The tax credit costs $1 of tax revenue.
So, net positive tax revenue is $1.07.
A Tax Credit that Generates Net Positive Tax Revenue
Equity REIT debt ratio = 33.4%.
Federal Tax Revenue is 18.1% of GNP.
Every dollar invested in a REIT generates an increase in the M1 money supply of $2.00
Due to the velocity of money, which is 5.741 for M1, each new dollar generates $5.74 of GNP.
$5.74 x 2 = $11.48.
$11.48 x .18.1% generates $2.07 of new tax revenue.
So, the investment tax credit, which costs $1.00 in tax revenue, generates net positive tax revenue of $1.07.
What is “M1”
M1 is a metric for the money supply of a country and includes physical money — both paper and coin — as well as checking accounts, demand deposits and negotiable order of withdrawal (NOW) accounts. The most liquid portions of the money supply are measured by M1 because it contains currency and assets that can be converted to cash quickly. “Near money” and “near, near money,” which fall under M2 and M3, cannot be converted to currency as quickly.
BREAKING DOWN “M1”
Using M1 as the definition of a country’s money supply references money as a medium of exchange, with demand deposits and checking accounts the most commonly used exchange mediums following the development of debit cards and ATMs. Of all of the components of the money supply, M1 is defined the most narrowly. It doesn’t include financial assets like savings accounts. It is the money supply metric most frequently utilized by economists to reference how much money is in circulation in a country.
Attribution:
Investopedia http://www.investopedia.com/terms/m/m1.asp#ixzz4HydVxFEh
http://www.investopedia.com/terms/m/m1.asp#ixzz4HydgA2Nj