Posted on 12/20/2004 7:58:33 AM PST by tvn
US Treasury Secretary John Snow said all options remained open for a bipartisan panel that will examine potentially far-reaching reforms to the American tax code.
"The president will ask the panel and ask me to give him the very best thinking across the board on how to produce broad-based reform of the tax system. So everything is on the table," Snow said.
The panel, which President George W. Bush has yet to appoint, will make its recommendations as soon as possible in 2005, and proposals could go to lawmakers before the end of next year, Snow told the "Fox News Sunday" television program.
Snow said the experts will try to hammer out a plan for "a fairer tax system, a simpler tax system, getting out all this complexity, and finally, a tax system that's more pro-growth."
Bush has called for simplifying the tax code, without making any specific proposals.
The president last week vowed to cut the budget deficit, which scaled a record 413 billion dollars for fiscal 2004 ended September 30, by keeping spending under control.
But he has also called for a major overhauls to the Social Security pension scheme without raising taxes or payroll contributions.
Bush has passed tax cuts with a value approaching 1.9 trillion dollars over the next decade. All the tax cuts expire by the end of 2010. Some expire earlier, but Bush wants all the tax cuts made permanent.
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
1. If you like hidden taxes, you'll love the APT.
2. Regarding real tax reform in DC: I'll become hopeful only after Hell freezes over.
I'm game to listen to critiques of this methodology, as far as I know, newly minted.
First thing that would happen is that I would ask my employer to pay me in cash and I would pay for everything in cash. That should knock out at least one level of taxes. If I could get my company to pay my big bills directly (like my mortgage and car) instead of paying me, I would save another 0.6%. It would be a very small step from there to just having the company own my house and car and let me use them. They could also provide for my food, medical care, entertainment, etc. to avoid any financial transactions.
Now compare two supply chains. One a big car company that owns coal and iron mines, smelters, metal shaping plants, oil wells, refineries, plastic factories, car assembly plants, dealerships, banks and insurance. They would pay a total 0.6%. Compare that to a set of specialized companies each producing one custom item. That would mean 0.6% on each level of transfer.
A huge advantage would be given to the vertically integrated companies even if they aren't the most efficient because they are so generalized. The little companies couldn't survive long. ADM would own the farms, processing plants and grocery stores.
The big speculative transactions in various stock and bond markets would dry up. They rely on 0.1% differences in prices. 0.6% would kill them, so that part of the transaction tax would never be collected, even if it was budgeted for. This is similar to the proposed Tobin Tax which had the twin goal of collecting huge amounts of money on foreign exchange transactions while reducing the number of transactions. You can't get both.
Overall, I would say that this is not only a bad idea, it would be absolutely destructive to the nation as a free country.
The only fair tax is a national retail sales tax. One tax at one level. Same rate for everything. Tax those who take from society through consumption rather than those who put into society through production and income. < /rant>
This is close to the Floating Instantaneous Sales Tax (FIST), but lacks two vital features:
1) Every time Congress passes a spending bill, the FIST rate goes up or down, as needed, and is visible to everyone on their next transaction.
2) When a majority of the voters in a district (Congressional district for a member of the House, or the entire state for a Senator) press a red button expressing their unhappiness with the increased tax rate, a small explosive charge would be ignited embedded inside the head of the offending representative, rendering them unable to vote for any more increases (or anything else, for that matter).
I have a challenge for Congress.
Take the current tax code (thousands of pages) and pare it down to less than 5 pages (double spaced, size 48 Arial Font).
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