Meet the Transaction Tax- 0.35%

[solarhydrocan]

We can re-ignite our economy by re-inventing taxes.

We can pull the United States and Europe out of our looming debt crisis – and create millions of new jobs – by abandoning our outdated tax systems. In the US, a transaction tax of just 0.35% could raise enough revenue to balance our federal budget, while shrinking the IRS and saving trillions of dollars. At the same time, a transaction tax would dramatically reduce taxes on consumers and small businesses and spur much-needed economic growth.



How would my tax bill change?

Under a transaction tax, every individual, rich or poor, and every company, big or small, would pay the same flat tax on transactions. The tax would be progressive because wealthy individuals and corporations conduct the most transactions, and it would be fair because no interest group could avoid it through loopholes or illegal means. With everybody paying their equal share, we would all benefit from much lower tax burdens, more money in our pockets and a growing economy. In fact, you may be pleasantly shocked at your new tax bill.

FAQ:

Is the transaction tax the same as a national sales tax?

The Transaction Tax is similar to a national sales tax in that it completely replaces our current tax system - and provides all the benefits that go with that. The difference is in what is taxed. And how the tax is collected. A national sales tax does not tax the vast majority of transactions – only retail sales. Due to this, the tax base is much smaller for the national sales tax, and the tax is much higher. So if you buy a $1 Million house, you pay $300,000 in sales taxes. But with the Transaction Tax, you pay $3,500 in taxes. Also, enforcement is harder for a sales tax. The tax is passed on to the end consumer, so someone can avoid the tax by simply convincing the buyer that they will resell the item and not be the end user. And theres a lot of paperwork with the national sales tax. The retailer has to do the paperwork in order to correctly pass on to the government the sales tax it has collected. Suppliers and manufacturers have the administrative burden of supplying correct certifications, as well as checking that their customers (retailers) aren’t consumers. The Transaction Tax is collected automatically through our banking network. And there is no documentation or paperwork at all...

Was this tried and abandoned in Sweden?

No. Sweden tried a financial transaction tax. That is an tax ADDED ON TOP of the existing taxes. The Transaction Tax would REPLACE all other taxes. Sweden’s financial tax was not successful and abandoned, so critics of financial transaction taxes like to use it as a cautionary tale. However, there are a number of financial transaction taxes that have been very successful. Great Britain and Brazil have both had successful financial transaction taxes. But the most important point here is this – no country has ever REPLACED ALL TAXES with a transaction tax. That is an entirely new idea.

MORE

http://thetransactiontax.org/

[WinkyDink]

1. It's still Flat, and I say To Hell with it!

[Donald Ian Rankin]

2. Wealthy individuals spend less as a fraction of their wealth on transactions.

So no, I don't think this would be progressive.

[zazen]

6. but if every trade were taxed? then they spend a lot more, right?

It's all of that day trading and speculation that doesn't get taxed that fuels a system that worsens inequality. Wouldn't this do double duty in slowing that shit down and better distributing the burden?

I don't see it having a snowball's chance in hell of passing in this current climate, though, but it's nice to dream.

[solarhydrocan]

10. exactly!!! Someone gets it!

What we have now is NOT working. Look at all the resistance to a new IDEA!

[Donald Ian Rankin]

11. I'm not sure, but if so then that's an argument *against* it.

Trading only takes place when both people believe their benefiting; making people trade less would be a bad thing, not a good one.

I'm also - although I can't be sure - very sceptical indeed about the claim that this would result in more of the tax burden being born by the rich than the poor compared to at present.

[Gormy Cuss]

17. The nature of trading would change to avoid the transaction tax.

Corporations and people with wealth would structure deals in ways to minimize or eliminate the taxable transactions.

You know who wouldn't have that luxury? Low and middle income people. This is just another harebrained flat tax proposal.

[Squinch]

18. But the response of the numbers of trades to small price increases in trade costs

is negligible. For example, when the now defunct Zecco increased their discount trade price a number of times, they continued to grow in number and size of trades. (They are defunct because they were purchased by another company.)

[gcomeau]

26. The second the tax is implemented...

...the rich and corporations start restructuring and bundling their transactions into fewer and larger events to cut the tax they have to pay.

[Fla_Democrat]

28. How would that cut the tax?

Maybe I am missing something, but isn't .35% of one, $6,000 sale the same as .35% of six, $1,000 sales?

[muriel_volestrangler]

30. They consolidate into large 'vertical' companies

So rather than buying raw materials and components from independent companies - a transaction that would be subject to the tax - they have divisions which just pass goods between themselves until they reach a final customer, on which the tax is paid once.

[solarhydrocan]

7. It's every transaction by corporations as well as individuals

look at all the financial transactions that are not being taxed at all.

For example, Collateral Debt Obligations (CDO’s) which TMK are not.

[msanthrope]

3. What a load of shite. nt

[solarhydrocan]

8. Thanks so much for your valuable critique. nt

[Freddie]

4. Please define a "transaction"

Paying a bill online? Using my debit card to buy groceries? Transfers between bank accounts?

[solarhydrocan]

9. The website does a fair job of explaining. nt

[muriel_volestrangler]

12. Yes, to all of those

The transaction tax would be collected at the time of each transaction and routed directly to the US Treasury over our secure electronic banking network. Billions of digital payments would flow into the US Treasury every day, providing our government with a steady “cash flow”. No buyer or seller would be responsible for collecting the transaction tax. It would be a direct transfer from the buyer to the US Treasury, and from the seller to the US Treasury. The transaction tax would never record the sort of personal information that your credit card company or your retailer would collect. All of your transaction payments would be kept secure and private – only the amount of the transaction would be recorded, not the purpose, time or location.

Cash purchases could potentially avoid the tax, but they would not be banned. Instead, cash withdrawals would be charged a fee of 0.875%. Professor Fiege, the economist who developed the concept behind the Transaction Tax, was an expert on the underground economy. He determined that cash goes through an average of 2.5 transactions between leaving a bank and returning. So to counteract those unreported transactions he made the fee on cash withdrawls 2.5 times (0.875%) the transaction tax to cover that. This fee would apply to any money that is taken “out of the system” in order to discourage US corporations and wealthy investors from shifting their money overseas to avoid taxes.

http://thetransactiontax.org/overview/

The website does not, however, explain who would be paying more under this system, and whether they might be able to avoid it - by, for instance, trading somewhere else.

[Wounded Bear]

23. Explaining how large corporations would pay less...

is hardly a ringing endorsement of your proposal.

[NightWatcher]

5. Let the people who manipulate markets with split second high volume trades pay their share

If you make money off of money you should pitch in and not leave it to a sales tax.

On Edit:

Don't tax every transaction but instead tax stick market sales a fraction of a penny on every sale. Day traders and market manipulaters who take advantage of split second trades should be taxed. I don't think that every transaction (ie buying groceries, prescriptions, gas.... should be taxed). Consumption/sales taxes place the majority of the burden on people in lower classes who spend a higher percentage of their income on a regular basis.

[Fla_Democrat]

13. Interesting idea, never gonna happen.

http://thetransactiontax.org/overview/

It would cut out all the opportunities for fraud, corruption and political influence.

It treats all of us equally

Under the Transaction Tax, no individual or company gets special treatment through the tax code.

If one is waiting on politicians to pass a law, that removes their political influence, well, it will be a long wait. With out being able to campaign on 'raising their taxes' and 'lowering your taxes', they surrender too much political power.

http://thetransactiontax.org/benefits/

Under the Transaction Tax, using cash to avoid taxes would no longer work.
Cash withdrawals would be taxed at 0.875% based on the fact that cash is passed around 2.5 times before it returns to the system.

This lends itself to claims of abusing the poor, seeing how poor people are less likely to have accounts with electronic transfers, so they would be paying the entire 'tax', when they cashed their check.

http://thetransactiontax.org/

And finally..

This in itself will cause enough outcry, that it would never be enacted.

[tkmorris]

14. Economic woo

Sorry to be so dismissive, but seriously. There is so much wrong with this idea it amazes me people still keep throwing it out there like it's some brilliant new concept they just came up with that will solve all of our problems.

I don't have the patience to explain it fully to you OP but... here's a thought for you. What happens to the frequency of an event when you impose a new tax on it?

[adirondacker]

24. +!. I find it amazing the number of DUer's that do Not know the difference between a Regressive tax

and a Progressive one.

Simply put;
"A regressive tax is a tax which takes a larger percentage of income from people whose income is low"
That can include Sales Tax, Property Tax, and Sin Tax.

"Investopedia explains 'Regressive Tax'


Some examples include gas tax and cigarette tax. For example, if a person has $10 of income and must pay $1 of tax on a package of cigarettes, this represents 10% of the person's income. However, if the person has $20 of income, this $1 tax only represents 5% of that person's income.

Sales taxes that apply to essentials are generally considered to be regressive as well because expenses for food, clothing and shelter tend to make up a higher percentage of a lower income consumer's overall budget. In this case, even though the tax may be uniform (such as 7% sales tax), lower income consumers are more affected by it because they are less able to afford it."

I often thought a mandatory basic economics high school class should be Federally implemented. That way the general public could tell when they are getting taken for a ride and being sold a jar of snake oil.

[hfojvt]

15. unrec

Rich people would just love to get rid of the progressive income tax and replace it with something flat they could pass on to poor people.

Now a small additional tax on stock trades....

THAT, I could support.

But otherwise - DO THE MATH.

Plan A = Revenue A
Plan B = Revenue B

Supposedly Revenue A = Revenue B.

If that teacher's taxes are dropping by 96% then somebody, somewhere is gonna have to pay more.

As bad as our income tax is, made less progressive by Reagan, Clinton, Bush, and Obama, it STILL was the case that the top 0.1% paid 18.5% of all income taxes in 2008, and the richest 10% paid 70% of them.

So get rid of the Federal Income tax and THE RICH will get huge gains from that. I doubt very much if they will pay more with the transaction tax. And if they get huge gains - the richest 10% will get 70% of the benefits from getting rid of the income tax - somebody, somewhere is gonna be paying more.

Like Broadway Joe "I guarantee it"

Somebody, somewhere is gonna be paying more.

[Squinch]

19. As it is implemented, the income tax is anything but progressive. It is amazingly regressive in

practice.

Those percentages you cite are not the story. The rich pay a much smaller percentage of their income than the poor. If our taxes were progressive, the rich, who own basically all the wealth, would pay more taxes than they do now.

So, yes, somebody would pay more. Because the transaction is taxed, the money gets caught before it goes off shore, so all that money is taxed. The money gets caught before the government welfare to oil and agribusiness kicks in, so all that money is taxed. The money is caught before the hedge fund guys can apply their tax favored rates. So all that money is taxed. So look at THAT math.

This is an idea worth looking at.

[hfojvt]

20. actually, on average it is still progressive

http://journals.democraticunderground.com/hfojvt/169

There are exceptions, depending on loopholes and circumstances, like Romney paying a lower rate than Ryan http://www.democraticunderground.com/?com=view_post&forum=1002&pid=1167192

But that's a rich guy paying a lower rate than an upper middle class guy.

Compared to me, with wage income of $31,329.74 and AGI of $25,541.84, I paid federal income taxes of $1,724 for a 6.7% rate - much lower than Romney's rate - even lower if you use my wage income (which knocks my federal income tax rate down to 5.5%)

There simply is NO doubt, zero, none, that the FIRST beneficiaries of getting rid of the Federal income tax - are those at the top. Whether they would pay more under this system, is anybody's guess, but they certainly gain more by getting rid of the current income tax.

My own preferred solution is - replace the Federal income tax of 2014 with the system we had in 1974. Bring back "the good old days".

I am 100% certain that the rich would pay more under that proposal.

[Squinch]

21. You don't know what Romney's rate was because you don't know how much of

his money goes offshore. That is the point. He had to scramble to pay 13% on his declared income. Without a phantom charity contribution, he would have been paying 9%. Figure in whatever he has offshore, and it is likely he paid less than you.

GE pays no taxes. Apple pays no taxes. Oil companies not only don't pay taxes but are subsidized.

So, yes, there are exceptions depending on loopholes, which are what makes the system regressive. Which is the point.

[hfojvt]

27. you are talking about corporate income taxes

I am talking about personal income taxes.

Two different things.

And the personal income tax is largely progressive, with a few exceptions. Like these

"Six American families paid no federal income taxes in 2009 while making something on the order of $200 million each. This is one of many stunning revelations in new IRS data that deserves a thorough airing in this year’s election campaign."

http://blogs.reuters.com/david-cay-johnston/2012/06/06/the-fortunate-400/

Still, the bottom line is progressivity

"Overall, the top 400 paid an average income tax rate of 19.9 percent, the same rate paid by a single worker who made $110,000 in 2009."

As the table shows, those making less than $110,000 are paying a much lower rate.

Johnston mentions the payroll tax, which is much more regressive than the income tax, but even there, to my surprise, if the payroll tax was abolished, the rich would benefit more than the poor. That was shown by Obama's accursed payroll tax cut of 2% http://journals.democraticunderground.com/hfojvt/160

Getting rid of the whole 10.4% would have the same distribution - the numbers would just be bigger - five times bigger.

[JHB]

16. For anyone looking for more information that isn't from an advocate site...

Here's the Wikipedia page:
http://en.wikipedia.org/wiki/Automated_Payment_Transaction_tax

The Automated Payment Transaction (APT) tax is a proposal to replace all United States taxes with a single tax (using a low rate) on every transaction in the economy. The system was developed by University of Wisconsin–Madison Professor of Economics Dr. Edgar L. Feige.
****
There is disagreement over whether the tax is progressive, with the debate primarily centered around whether the volume of taxed transactions rise disproportionately with a person's income and net worth. Simulations of the Federal Reserve's Survey of Consumer Finances [4] demonstrate that high income and wealth individuals undertake a disproportionate volume of transactions since they own a disproportionate share of financial assets that have relatively high turnover rates. However, since the APT tax has not yet been adopted, some argue that one can not predict whether the tax will be progressive or not.

That page provides enough key names and phases to run searches. I've seen at lease one page with a claim that Dr. Feige has backed off his view that the tax could entirely replace current taxes, but that's after only a few minutes searching and skimming, so I can evaluate neither the claims nor the sources. Be warned that the "get rid of the IRS" claim draws the kind of people who regularly demonize it, like goldbugs and Paulites, so try to stick to places that just provide information on the proposal.

For my own opinion, it seems like something to consider, but I'm wary, and find it highly unlikely that it would pan out as wonderfully as its enthusiast claim. What counts as a transaction? Who's responsibility is it to send the tax, to where? What happens if they don't? Who enforces that? What are the ways to dodge it, and how do you mitigate them? etc, etc, etc.

And I'm an advocate of high progressivity in taxation, especially at the high end where it's been all but eliminated, as a disincentive (ironically, market-based) to the kind of practices that squeeze everyone in order to funnel wealth upward as fast as possible.

Haven't looked into it enough to decide if it would be useful or just another gimmicky panacea, and it's the sort of thing I fear will be used more as a tool to dismantling existing taxes at the top than on implementing new ones. And what exactly would be the political path anyway? Which politicians would gain by throwing away the grease for their wheels? Favors to trade? I'd expect exemptions to creep in there, defeating the whole supposed purpose.

Short answer: No, especially without some real-life test runs somewhere.

[hunter]

22. Flat taxes suck. This one too.

People living on minimum wages shouldn't pay any taxes. People earning middle wages should pay their fair share. People who are wealthy should pay much more than any "flat" tax since they are the primary beneficiaries of this economic system. The uber-wealthy, people who can "buy" politicians, ought to be taxed out of existence.

[DebJ]

25. Hm. Supporting a regressive tax in a progressive forum. n/t