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
Feel free to propose and discuss it, but an APT is a bad idea -- it takes the worst aspects of an income tax and of a VAT, and only offers simplicity in return.
As a NRST supporter, I'd rather go with a flat income tax than an APT because it at least has some measure of visibility in it, and is at least as simple as the APT.
"Investors would simply stop, and I mean STOP as in totally and quickly, trading securities on US stock exchanges. Capital formation would CEASE, and jobs would disappear QUICKLY as investment would halt."
Not at the tiny rates they are quoting. My biggest concern is as follows. Using their own numbers, we are talking about a huge decrease in the taxes that individuals would pay (at least directly to the fed govt). And yet, they claim that the proposal is revenue neutral. That means a huge increase in taxes that businesses would pay. That, in turn, means that an even greater proportion of our tax burden gets buried in the prices of the goods that are produced in the USA. The end result would be that US producers are even less competitive in the increasingly global world economic market that we are faced with today.
My conclusion is therefore that, although the poster may be right about the transaction tax accomplishing some of the goals of the FairTax, in this crucal respect, it would make the current situation worse, rather than better.
I am more than willing to give the transaction tax a seat at the tax reform debate, as well as any other legitimate proposal. A friend of mine who is a strong FairTax supporter told me that he supported the flat tax when it first came out, then switched to Tauzin's sales tax proposal, because he thought that it was better, then later to the FairTax. He said that if someone came out with a better plan tomorrow, he would support it. I agree totally with that sentiment. I am just not convinced that the transaction tax represents a better approach.
"....is any argument reason for everyone to continue to pay 70 TIMES more tax than they have to."
That confirms my concern posted above. If you are selling this based on a huge decrease in taxes that individuals will pay, then I would say that concern is very legitimate. In the end, consumers pay all taxes.
"Sure there well be some past throughto the individual but most will not. Because the tax is relatively so small much of it will be taken up by the market forces and bidding process."
I assume that you have an economic study that backs that claim up?
Yes. Obviously. Indubitably. Buy a clue, will ya?
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?
Thank you for posting this. It is the clearest possible statement in support of my earlier post that this is a crackpot idea and -- now established -- you, sir or madam, are a crackpot. Your attempt to wave away the many cogent counterarguments on this thread are laughable! Even you must know that ALL of the tax burden falls ultimately on the people and that the people are not going to get a 70-times reduction in taxes while still getting a government, bloated as it is.
Frankly, I'll be surprised if he ever posts here again, after what SAJ did to his position in #62. ;-)
The guy might never show his face in public ANYWHERE ever again! LOL...
It is one thing to write a paper, article or book to sell a plan without the light free and open public debate and dissenting opinion.
Anything can be sold to people in a vacuum where only one side can be presented.
That is the essence of what has been lacking with Mainstream Media and traditional modes of communicating for decades.
It is another to engage in free debate and be exposed to light of opposing information.
Public forums such as FR, open up the procress of critical review of all ideas that they may be tested in the fire of public discourse instead of the academic hothouse where even the weakest concepts can grab hold and grow like a fungus.
I would if there wasn't anything better. I wish you the best with your efforts.
:)
...."ask yourself - would an internationally known Professor of Economics not have considered these thing before putting his name on the line?"....
So what's so special about an internationally known economist??
The name Jack Krugman comes to mind, poisioning the minds of his Princeton students, and his RAT readers.
Amen to that. That's the same problem with a VAT. By the time the product or service makes it to the consumer, the control freaks are getting rich and the consumer is getting raped.
D@mn right! ;^)
Your comments are jeuvenile. Grow up. No tax proposal is perfect, and all have their merits. Let's have some intelligent civil discourse here. OK?
SAJ is the one who shouldn't show his face in public. APT Project Director is earnestly engaging Freepers in high level discourse. I guess some lack the maturity to pick up on that.
The incidence of APT tax falls lightly on the inividual. If revenue neutral, APT shouldn't increase any "hidden" tax burden. P.S. Please watch the name calling. OK?
As for the incidence falling on individuals, all taxes fall on individuals at some point. You can't raise the same amount of revenue and claim that individuals aren't paying it. The only thing you can say, under most tax reform proposals, is that simplification of the system reduces compliance costs.
Hi,
I was just using 1% as an example. But I think using the banks is a novel idea when you consider they already have the infrastructure in place to adminster it.
John
There would have to be some tweaks to the system, and 1% is way too high number. I was just using it as any example.
John
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