Posted on 12/05/2004 9:03:22 PM PST by APT Project Director
AUTOMATED PAYMENT TRANSACTION (APT) TAX Taxation technology for the 21st century
Dr. Edgar L. Feige, Professor Emeritus of Economics from the University of Wisconsin-Madison and the originator of the APT Tax concept, has just produced new estimates suggesting that a broad-based transaction tax as low as six tenths of one percent could replace the entire Federal and State 2005 budget revenue requirements of the United States of America.
The APT concept is elegant in its simplicity - potentially replacing the entire federal and state tax system - including income, corporate profits, excise and estate taxes - in favor of a tiny tax on all transactions. The tax would be automatically deducted from special taxpayer accounts, linked by software to all accounts at financial institutions capable of making final payments to the government seamlessly in real-time. The APT tax therefore eliminates the need for individuals and firms to file income and information tax returns. This is estimated to save citizens and the government roughly $200 billion per year in administration, enforcement, evasion and compliance costs, roughly seven times the amount currently being spent on homeland security.
The APT tax seeks to maximize the goals of both the government and the people - collecting necessary revenue with the lowest possible tax rate. The difference between the APT tax and our current income tax, as well as the proposed consumption taxes, is simplicity, progressivity, and breadth-the APT tax allows for significantly lower rates spread more equally throughout the world of economic activity. The APT is a transaction tax, and as such, taxes every single transaction that occurs in the economy including fund transfers between accounts and transactions involving the exchange of bonds, securities and foreign exchange. Because the wealthy conduct a disproportionate share of these financial transactions, the tax is highly progressive despite its flat rate. Progressivity is achieved through the skewness of tax base itself rather than through the progressive income tax rate structure of the current system. The very small tax is "sliced" off each side of every transaction as it moves electronically through banks and all other qualifying financial institutions. The tax collection is orderly and transparent, the rules are simple and universal and apolitical. The APT system eliminates the entire present tax code. No more exemptions, no more deductions, no more special interest loopholes and no more tax returns.
Feige's 2005 projections of total debits of $881 Tril., and total transactions of $832 Tril. (based on the most recent 2002 Bank for International Settlements data) update the figures he used in his original paper, published in Economic Policy in 2000. Taking the average of these two estimates ($856 Tril.), he conservatively assumes that the replacement of the current tax system with a revenue neutral APT tax will reduce total transactions by 50%. The projected potential APT tax base for 2005 would then be $428 Tril., permitting a revenue neutral flat tax of .57 percent on all transactions or .28 percent on each (buyer and seller) transactor to replace projected 2005 Federal and State tax revenues.
The tax rates required for a "revenue neutral" tax are divided into three phases which are the result of a suggested implementation plan that would gradually replace virtually all Federal and State taxes. The projected tax rates are calculated conservatively, assuming that only 50% of the potential 2005 APT tax base is available, since the volume of total transactions is expected to fall with the introduction of the APT tax. To the extent that transactions decline less than is assumed in the current calculations, an even lower tax rate would be able to raise the requisite revenues. As individuals and businesses use their new found economic freedom, transactions naturally grow over time, suggesting that future tax rates could be even lower.
Utilizing 50% of the projected APT tax base for 2005 of $856 Tril., that is, $428 Tril, the estimated tax rates required to raise the revenues projected for 2005 budgets are as follows:
Phase I (Eliminate all Federal taxes other than SS and Medicare) Required revenue neutral target=$1.242 Tril: Required tax rate = 0.29% per transaction or 0.15% per transactor.
Phase II (Eliminate all Federal taxes including Social Security and Medicare "payroll" taxes) Required revenue neutral target = $2.036 Tril. Required tax rate = 0.48 % per transaction or 0.24% per transactor.
Phase III (Eliminate all Federal taxes including Social Security and Medicare "payroll" taxes and all State personal income; corporate profits and sales taxes) Required revenue neutral target = $2.436 Tril. Required tax rate = 0.57% per transaction or 0.28% per transactor.
The estimates above are based on 2005 revenue and transaction projections. Implementing the three phases will require several years and careful government management, especially the third phase. However, Dr. Feige has built in a safeguard for the APT Tax by calculating the required tax rate based on only half of the transactions that are actually observed.
Examples: Assuming full implementation of Phase three: 1. $100 restaurant bill would have a tax to the customer estimated to be 28 cents and the restaurant would pay 28 cents. 2. $50,000 family income deposited and spent or moved to savings results in $100,000 of transactions paying a total tax of $280 distributed over all the individual transactions as they occurred through the year. These amounts would be doubled if businesses fully shifted their tax burden to the consumer, but nowhere near the $15,000 to $20,000 the family would pay under the current federal and state systems.
It is now important to begin the process of planning the economic, legal, technical and administrative requirements necessary for a smooth and transparent transition from the current tax system to an APT system. The proposed, new collection system will be tested by computer simulation to capture all potential errors and omissions (new job for the IRS). Then, it will take several years to rollout, especially Phase III involving central collection and distribution to the States. A national commitment to this revolutionary, fair, automatic and lowest cost tax system is needed NOW!
For more details, please visit www.apttax.com
William J Hermann, Jr. MD, Director APT Tax Project Contact: administrator@apttax.com , 713-932-3773
Try ( (1.0025)^n - 1 ) x 100%, where "n" is the number of financial transactions involved in the production, transportation, and sale of the product. That alone shows that you are peddling a lie, trying to pass this off as a quarter of a percent rather than the real costs. Assuming only 100 financial transactions in the process (which would be laughably low for anything manufactured), I get a tax rate of 28.4%, not 0.25%.
Each of these catagories pass their costs on to the consumer. Just like today. The difference is that the consumer just thinks the price is the price, with the NRST they see the added costs come right out of their hands.
Why are you supportive of hiding the cost of government from the electorate? That is the point. The same portion of our economy is stolen to fund the government, yet people either see it or they don't. You don't want them to see it, I do. When they see it they will start to kick the spenders out of office and a dramatic reduction in government will follow. Keep it hidden and the spenders can buy more votes on the back of the productive.
BTW, I don't think I have been calling you names....
How about taxing the "Federal Reserve"/Central Bank for the right to print our money and to control our economy instead of the citizens, after all they make lots of money and pay no taxes.
Where do you think the money comes from? Face it, all costs of producing products or providing a service is passed along to the consumer. ALL COSTS. No cost is just "absorbed" unless there is still an acceptable (very large) profit margin. Our major mfg. industries do not have the margins available to absorb even fractions of percentages.
On the other hand, let's assume you are right and they just absorb these costs. Wouldn't that mean that their operating costs are higher than their foriegn competition? Doesn't it mean less money available to pay the stock holders? Doesn't it mean less money available to give raises to employees? Even if they absorb the cost, the American citizen will still absorb the cost in less return on investment, lower wages, etc.
I have no interest in any system that makes stealing from productive people painless. In fact, the more people absorbing the pain the better. If we can make the cost of government largesse as painful as possible for as many people as we can, then that largesse will be slowly wittled back to constitutional duties! If you make it painless, you make it easy to raise the levels of taxation and grow government.
You seem to have taken the anti-conservative position.
I am sorry to pour water on the beloved NST but open you minds PLEASE.
Our minds are open, the problem is that and open mind does not mean ignoring the obvious problems inherent in the APT.
It hides the true burden of government from the view of the American electorate, thus fosters unrestrain growth of government, and is designed in a way that specifically harms financial, equity and commodity market liquidities, that will tank the Amercan economy with a cascading tax embedding ultimately into all consumption by the American citizen.
By they way, we are supporting the NRST , (National "Retail" Sales Tax)of HR25, not VATs or any flavor of tax on business or investment purchases.
LoL so you think inflation will lower interest rates?
When you remove all those embedded taxes NST claims there might be a little room to absorb a tiny little tax -- after all aren't prices going down 20% or more under NST? The same embedded taxes are removed under APT!
APT will do EVERYTHING that NST does
Sorry it fails to at least do one thing the NRST does accomplish,(infact it fails in other regards as well but this one is the biggy). It fails to inform the citizen & voter of the cost of government burdening incomes, there purchases, and their equity value.
The National Retail Sales Tax, isolates and informs the electorate of those burdens by explicitly displaying the tax revenue collected by government by it.
The APT fails to inform the electorate of the 98.6% of the revenue burdens that ultimately impact their lives. That freind is one whale of a hidden tax burden your system buries beneath the electorate's radar horizon.
No thanks, that is not the way to limit govenment growth nor encourage any level of accounability of government to the American people who bare the weight of those goverment imposed taxes.
And then added right back in again under the APT, under different guises. Individuals eventually bear the brunt of all taxes -- shifting them around and changing their names doesn't affect this.
The APT would kill American manufacturing and destroy the stock market. Fine goals if you're a Marxist, but completely out of whack for the goals of FR.
after all aren't prices going down 20% or more under NST?
No, producer (i.e. product prices) go down under National Retail Sales Tax (NRST), as a consequence of the repeal of business and investment level taxes whose cost get embedded into the price of everything.
The amount paid by the consumer, NRST with the product price remains essentially constant with what he pays today for the same goods and services. The consumer/citizen/voter, however is appraised of the cost of government in his life in the NRST he visibly pays, as the tax is discretely removed out of prices and declared as a whole (in rate & amount) in a clear receipt at each retail purchase.
The same embedded taxes are removed under APT!
And put right back in plus more, with the APT that taxes all transactions involved in business and investment in a way that exponentially accumulates down to the consumer hidden into price of his goods. The APT actually hides more from the citizen than the current tax system with its individual income tax that at least lets some folks know that they are getting hit with a biggy.
Your disengenuousness in this debate is beginning to wear thin.
"Now let's say a $100 product used parts from 5 subs at $20 a piece. Each purchase from the subs would be $20 at 0.25% or 5 cents so the tax in the final product is 25 cents then when the final product is sold another 25 cents is added. That brings the price to $100.50."
Except you fail to recognize the next 10, 15, 50 or 100 levels in the supply chain for this part. That would add thousands, if not tens of thousands of transactions to this one part.
"Now let's talk about the APT tax base -- it is enormous at $856 Trillion (nearly a quadrillion)."
Yet, you fail to actually tell us what this base is. You cited a few examples in a post to me, but the bottom line is that it will be passed to consumers. Businesses are not charitable organizations. Your APT proposal doesn't expand the base, it only spreads the expense over more actions. An example of expansion would be the Flat tax proposal of getting all adults to pay. That would double the tax base.
"ALL THESE LOW RATES ARE ACTUALLY BASED ON ONLY HALF THE TAX BASE AVAILABLE."
This is the second such statement that you have made that makes your philosophy clear. It is pretty easy to deduce that you hope to recover as much taxation as possible and that is why you prefer the "painless" or hidden method. Are you sure you wanted to have a discussion around this subject with conservatives?
I'm beginning to think you are testing the waters and getting conservative responses so you will be prepared for their response.......
So what is your solution to taxes??
John
"I would rather approach that differently than everyone paying through the nose."
"What we have here is failure to ku-mune-i-cate"
Strother Martin
Cool Hand Luke
about 1954
Your proposal is revenue neutral, yes? That means that the federal government is taking in the same amount of revenue, right? That means that taxpayers are paying the same amount, right? It would seem, then, that everyone would be "paying through the nose" under either system, the difference being that, under the FairTax, they would realize how much they are paying.
"No one has answered my question about how you explain, under the (un)Fair Tax, the severe double taxation of after-tax savings and after-tax home equity from which retirees draw their living -- that is mean and nobody will address it. I'll be mean to day traders and you take on the retirees and we'll see who wins."
A couple of nationally recognized money managers have forecast that the Dow Jones would double within 2 years of passage of the FairTax. That dwarfs any minr differences in the amount of taxes that they would pay during that period. Furthermore, to the extent that they purchase US produced goods, they would be paying about what they do now. In addition, they would get the rebate up to the poverty level and that would untax them and increase their purchasing power by 15 - 30% up to that level.
So how is it that retirees are being hurt?
and finally, does this or that argument mean that we should all continue to pay 70 TIMES more tax than we have to?You can't seriously believe this horsesh!t, can you?
If the same amount of money (that's what "revenue neutral" means) will be collected, and our taxes "fall" under this proposal, just who do you think will be paying the difference?
Seems it is a small percent of what you pay a broker now. I wouldn't see it grinding the market to a halt anymore than a slight bump in brokers fees would.
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