APT: A Tiny, Flat Transaction Tax - Far Better for the Nation than the National Sales Tax

www.apttax.com ^ | 11/1/04 | Edgar L Feige, PhD

[ancient_geezer]

. after the second sale, the buyers have a used home that has never been lived in that paid 16% tax instead of 23%.

I would point out that such being the case is clearly covered in the business purpose definitions and registration clauses.

That first sale was business to business, at the very least no NRST was to be collected by statute, The second sale establishes that a business purpose was involved (no one living in that home after the first transfer) the full NRST must be collected on that re-sale of business inventory the taxable property as defined in the statutes:

Chapter 1 defines business purpose and when the NRST cannot be collected as well as when it must be collected.

`SEC. 102. INTERMEDIATE AND EXPORT SALES.

`(a) IN GENERAL- For purposes of this subtitle--

`(1) BUSINESS AND EXPORT PURPOSES- No tax shall be imposed under section 101 on any taxable property or service purchased for--

`(A) a business purpose in a trade or business, or

`(B) export from the United States for use or consumption outside the United States, if, the purchaser provided the seller with a registration certificate, and the seller was a wholesale seller.

`(2) INVESTMENT PURPOSE- No tax shall be imposed under section 101 on any taxable property or service purchased for an investment purpose and held exclusively for an investment purpose.

`(3) STATE GOVERNMENT FUNCTIONS- No tax shall be imposed under section 101 on State government functions that do not constitute the final consumption of property or services.

`(b) BUSINESS PURPOSES- For purposes of this section, the term `purchased for a business purpose in a trade or business' means purchased by a person engaged in a trade or business and used in that trade or business--

`(1) for resale,

`(2) to produce, provide, render, or sell taxable property or services, or

`(3) in furtherance of other bona fide business purposes.

 

Chapter 5 covers the requirements for certification of businesses, and covers the penalties for those involved in business to final consumer sales that do so without certification collecting and remitting that full NRST required.

 

`SEC. 502. REGISTRATION.

`(a) IN GENERAL- Any person liable to collect and remit taxes pursuant to section 103(a) who is engaged in a trade or business shall register as a seller with the sales tax administering authority administering the taxes imposed by this subtitle.

`(b) AFFILIATED FIRMS- Affiliated firms shall be treated as 1 person for purposes of this section. Affiliated firms may elect, upon giving notice to the Secretary in a form prescribed by the Secretary, to treat separate firms as separate persons for purposes of this subtitle.

`(c) DESIGNATION OF TAX MATTERS PERSON- Every person registered pursuant to subsection (a) shall designate a tax matters person who shall be an individual whom the sales tax administering authority may contact regarding tax matters. Each person registered must provide notice of a change in the identity of the tax matters person within 30 days of said change.

`(d) CERTIFICATES OF REGISTRATION- The sales tax administering authority shall provide certificates of registration to registered sellers.

`(e) EFFECT OF FAILURE TO REGISTER- Any person that is required to register and who fails to do so is prohibited from selling taxable property or services. The Secretary or a sales tax administering authority may bring an action seeking a temporary restraining order, an injunction, or such other order as may be appropriate to enforce this section.

 

---

`SEC. 505. PENALTIES.

`(a) FAILURE TO REGISTER- Each person who is required to register pursuant to section 502 but fails to do so prior to notification by the sales tax administering authority shall be liable for a penalty of $500.

`(b) Reckless or Willful Failure To Collect Tax-

`(1) CIVIL PENALTY; FRAUD- Each person who is required to and recklessly or willfully fails to collect taxes imposed by this subtitle shall be liable for a penalty equal to the greater of $500 or 20 percent of tax not collected.

`(2) CRIMINAL PENALTY- Each person who is required to and willfully fails as part of a trade or business to collect taxes imposed by this subtitle may be fined an amount up to the amount determined in accordance with paragraph (1) or imprisoned for a period of not more than 1 year or both.

`(c) Reckless or Willful Assertion of Invalid Exemption-

`(1) CIVIL PENALTY; FRAUD- Each person who recklessly or willfully asserts an invalid intermediate or export sales exemption from the taxes imposed by this subtitle shall be liable for a penalty equal to the greater of $500 or 20 percent of the tax not collected or remitted.

`(2) CRIMINAL PENALTY- Each person who willfully asserts an invalid intermediate or export sales exemption from the taxes imposed by this subtitle may be fined an amount up to the amount determined in accordance with paragraph (1) or imprisoned for a period of not more than 1 year or both.

`(d) Reckless or Willful Failure To Remit Tax Collected-

`(1) CIVIL PENALTY; FRAUD- Each person who is required to and recklessly or willfully fails to remit taxes imposed by this subtitle and collected from purchasers shall be liable for a penalty equal to the greater of $1,000 or 50 percent of the tax not remitted.

`(2) CRIMINAL PENALTY- Each person who willfully fails to remit taxes imposed by this subtitle and collected from purchasers may be fined an amount up to the amount determined in accordance with paragraph (1) or imprisoned for a period of not more than 2 years or both.

`(e) RECKLESS OR WILLFUL FAILURE TO PAY TAX- Each person who is required to and recklessly or willfully fails to pay taxes imposed by this subtitle shall be liable for a penalty equal to the greater of $500 or 20 percent of the tax not paid.

[tech30528]

The first sale I was refering to was business to private, the title conveyed to the partner personally, ostensibly for use as a personal dwelling. Criminal prosecution would be subject to proving the initial buyer's intentions. Good luck enforcing that. Glad to see you back, geez. You are, as always, very thorough. This is not an attempt at a gotcha game, I'm quite serious. I had already considered your points before asking you.

[ancient_geezer]

The first sale I was refering to was business to private, the title conveyed to the partner personally, ostensibly for use as a personal dwelling.

I see you don't figure on registering the title on that first transaction LOL.

By your specification, is that house has not been lived in but has sold by an business affiliate instead for an obvious profit. That first is a defacto business transaction and will be held so by the courts if you should try this little evasion tactic.

But it's your hide on the line not mine, so go for it. Who knows the state treasurer might not notice it when the title is proved for the real consumer of that home on it's actual retail sale. But I certainly wouldn't by my liberty on it.

Criminal prosecution would be subject to proving the initial buyer's intentions.

Yes for the jail term, however the civil side is by no means a matter of intentions, defacto result is sufficient there and preponderence of the evidence is all that is required for that side of the case.

However, looking at your specification of a house purchase for resale only, presented to a final consumer as not lived in. The intentions are more than apparent and will be to a jury, what you are forgetting is that final purchaser is on the hook for that additional $6k at least until he starts talking to the prosecution's investigators. Good luck.

Glad to see you back, geez. You are, as always, very thorough. This is not an attempt at a gotcha game, I'm quite serious. I had already considered your points before asking you.

Then you already had your answer. Obviously there is no more loophole there than there is for a traffic speed limit that is ignored when a cop isn't looking. If you're caught that's the breaks baby. The statute has it covered. If not, more power to yah. Government revenues and spending need to be trimmed, preferably by action of the electorate demanding such, but your informal way works well if you are willing to take a risk with at least three folks in on the shennanigans and that last one who is going to be looking after his own hide before you and your accomplice's in a fraudulent representation.

[tech30528]

The final buyer of this home is not led to believe the home has never been lived in. They have no liability at all. It's no different than the end of the year vehicle purchases by businesses for personal use and used as a business tax write off. At the dealership I work at, a contractor just bought a few trucks for his "business". One was a bright yellow S-10 Extreme. Certainly not a work truck, it was bought for his son's personal use. I doubt the IRS will be breaking down his door over it. Nor the resturaunt owner who bought his wife a new minivan. Although he has a removable placard to hang on the door advertising their business, you can bet it will never scratch the paint. These are examples of tax evasion tactics that are accepted under the current tax code, as there will be under Fair Tax. Any complex tax system invites evasion by those with the insight to find them and the balls to use them. Such a system also requires constant vigilance to thwart such attacks. The beauty of APT is that there are no such loopholes, and therefore no policing to watch it. While Fair Tax reduces, not eliminates, filing and oversight, it does not reduce involvement to the extent that APT does. The argument that the daunting 23% sales tax will be offset by the reduction in embedded taxes is also true of APT, like it or not. While I've heard the argument that APT cascading is excessive, I have seen no examples of the cascade effect vs. loss of embedded taxes. Don't get me wrong, Fair Tax does have its points, but it is no better a replacement for the current code than APT is without further investigation and refinement.

[PTBarnum]

Hi guys. Seems like old times again. Just thought I'd weigh in with a couple of observations. (Since I'm snowed in here in upstate NY today anyway). This discussion about taxing new houses under NRST points up a principle virtue of APT in that it is spread so wide and so thin as to virtually eliminate all such economic distortions. And another thought on the principle highlighted in Federalist 21 advancing that consumption taxes in effect seek their own level. By extension, with the 20th Century Keynesian practices and central banking, as well as global competition, the total percent of taxation is also natually limited, which is why supply-side tax cuts are used to ultimately increase and optimize the absolute amount of revenue. And as long as you have government with taxing authority, this natural limit is the only limit that will ultimately be adhered to.

[ancient_geezer]

And another thought on the principle highlighted in Federalist 21 advancing that consumption taxes in effect seek their own level.

ROTFLM(_|_)O!!!. somehow I suspect the founders did not have an "Automated" Payment Transaction tax on absolutely every economic transaction both consumption and production taxing everything repreatedly based on full value of every transaction in the economy no matter whether it is merely moving one's capital from one place to another or actually involved in trade, it all taxed. The perfect tax on all property, stealing the value of even ones savings and retirement investments all right beneath their noses.

Yep the perfect tax to sustain socialist government, out of sight out of mind, I do believe the old saying goes. Or is that, "there's a sucker born every minute."

Federalist #21:

"Imposts, excises, and, in general, all duties upon articles of consumption, may be compared to a fluid, which will, in time, find its level with the means of paying them. The amount to be contributed by each citizen will in a degree be at his own option, and can be regulated by an attention to his resources. The rich may be extravagant, the poor can be frugal; and private oppression may always be avoided by a judicious selection of objects proper for such impositions. "

 

And as long as you have government with taxing authority, this natural limit is the only limit that will ultimately be adhered to.

And only exists if the electorate can legitimately avoid the tax which they cannot do under a ubiquitous APT tax. Sorry you are as full of baloney as ever.

"Note that the BAD[Bank Account Debit, e.g. APT] tax is equivalent to a consumption tax, and income tax, an investment tax, a tax payment tax, and a capital turnover tax."
P.H. Albuquerque 2001

 

From APT's website:

In the words of:

Australia's Prime Minister John Howard, once referring to a proposal of substituting all taxes in Australia by a BAD tax, declared: "It would completely render comatose a workable financial system in a very rapid period of time. And in a global world in which we now live we'd basically be saying that we're opting out and going back to the jungle. I think, with great respect ot whoever is advocating it ... it's a crazy idea."
P.H. Albuquerque 2001

[PTBarnum]

Nice try, but I'm talking about real world economics and the effects of taxation on the national economy. All government is socialist, so let's just get over it. Our culture and institutions just haven't evolved to a true laissez-faire system. That being the case, taxes must be collected, and this in spite of any popular sentiments to the contrary. APT is the most efficient way to accomplish this in terms of it's effects on the private economy and the government's ability to collect necessary revenue. APT also greatly enhances our international competitiveness. With your insistence on transparency, you're fighting the last war. LBJ's "Great Society" and Jimmy Carter's "malaise" are things of the past. Competitiveness is the keynote theme of the ensuing information economy.

[ancient_geezer]

All government is socialist, so let's just get over it.

You get over it, I have no intention of supporting it.

That being the case, taxes must be collected, and this in spite of any popular sentiments to the contrary.

LOL, indeed, lets just go out an pillage the folks anyway.

APT is the most efficient way to accomplish this in terms of it's effects on the private economy and the government's ability to collect necessary revenue.

Not interested in any tax that is effecient for government to collect. Just means that the economy and the American people are more easily raped. No thank you.

The harder it is for government to raise revenue the more easily the electorate can hold government to its constitutional bounderies.

To remove perception of the tax burdens of the individual, is to remove the goad which assures accountability of government to the electorate. Federal tax rates are high and government grows ever larger because a majority of the electorate do not perceive proportionately the burden their demand for largesse imposes on the minority of citizens.

The siren call for representation without taxation is the formula that got us where we are at today. The ability to hide or disguise taxation from the view of large sectors of the electorate allows the Congress to get away with the creation of the evergrowing monster that it fosters.

A government which robs Peter to pay Paul can always depend on the support of Paul.
-George Bernard Shaw

Liberty and freedom have a price, responsibility. If that the perception of that price is avoided there are no brakes on the growth of government, the ultimate result is the end of freedom through creeping socialism.

Go pedal your snake oil elsewhere.

With your insistence on transparency, you're fighting the last war.

Visibility of cost to the electorate is the war.

LBJ's "Great Society" and Jimmy Carter's "malaise" are things of the past.

Sure it is,

As attributed to University of Edinburgh University History professor and Scottish jurist Sir Alex Fraser Tytler (1742-1813). by John Bagot Glubb :

"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largess from the public treasury. From that time on the majority always votes for the candidates promising the most benefits from the public treasury, with the results that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.

The average age of the world's great civilizations has been 200 years. These nations have progressed through this sequence:
from bondage to spiritual faith;
from spiritual faith to great courage;
from courage to liberty;
from liberty to abundance;
from abundance to selfishness;
from selfishness to complacency;
from complacency to apathy;
from apathy to dependency;
from dependency back again to bondage."

Them's as can't learn from history, are certainly bound to repeat it.

Competitiveness is the keynote theme of the ensuing information economy.

LOL, so you assure the government has the edge in competiveness for that marginal dollar. No thanks, that is just a faster way down into that ageold and well worn abyss.

"The American Republic will endure until the politicians learn they can bribe the people with their own money."
Alexis d'Tocqueville, The American Democracy (1841)

As always the same old fight, just a change of names to protect the guilty.

[PTBarnum]

Boy, you sure know how to go on a rant. You actually have a lot in common with the fictional character Don Quixote. It's a whole new world out there, and you just don't see it. I guess it must just be your destiny to sword fight with wind mills. One thing's for sure, the world is not going to change to accommodate your obsolete views. Oh, how I wish for your sake you could see past your self-imposed limitations. Anyway, tax law is made in DC, on their schedule. So lets keep the powder dry and see what develops. Somehow I feel confident that what is best for us all will be the end result. Good luck with your noble quest...

[ancient_geezer]

LOL, I don't worry about it, it's kind fun really.

As far as the world changing, well one just never knows. I remember a certain republic east of Europe that look like it was in for the long hall once too.

Nah, all I have to do look no further than Europe to determine what to expect from tax systems that hide the cost from the electorate and promise socialist freebees to all. No thank you, I'll go with at strong capitalist economy and visible taxation under the perview of the electorate anyday.

Goodnight.

[PTBarnum]

It's not our choice to make. I just don't think your version of this is going to fly in DC. Like it or not, the powers that be know how to tax and spend, and they aren't about to forget it. Let's just watch and see what happens. This year could be a watershed year for this issue. We'll know soon enough. And certainly if yours flies, I'll have to give you credit for getting it right. Fair enough?

[ancient_geezer]

. I just don't think your version of this is going to fly in DC.

Hmm, on the one hand I see a bill HR25, that has gained more that 50 co-sponsors in the the last session of Congress and introduction into the Senate with more coming on line as a consequence of current successes in the recent election.

OTOH hand, ........... oops no APT, and no support anywhere to be seen.

This year could be a watershed year for this issue.

Maybe, maybe not, though should be interesting for what it accomplishes in permanant rate reduction and setting things up for the essential pushes toword enactment of an NRST sometime in the next four years of this presidential term anyway.

. And certainly if yours flies, I'll have to give you credit for getting it right.

Don't see why since I don't predicate anything on what a particular session of Congress will or will not do.

I only work toward what should be done, and if and when the American people move towards critical mass in support of it, it'll happen out of their efforts not mine.

[tech30528]

Any word on what's going on with H.R.25 right now? I mean what's the progress? I haven't heard anything, thought one of you might know. Any changes made? Opposing plans? Maybe a date for the next step? I've been reading up on proposed Social Security changes, and wonder if they would go into effect at the same time. Fair Tax refers to Social Security only in terms of section 201 of the Social Security code. The Social Security plans all refer to payroll deduction. It seems the two should go hand in hand...

[bolivar5]

Amen to this geezer. I have researched this proposal and I really cannot find ANYTHING truly negative. The privacy advocates will staunchly ridicule it but, frankly the information they are worried about is for the most part already available about them so what are they so worked up about?

This plan will be a watershed proposal and will cause a tremendous amount of money to be reinvested and recycled many times and will only be a benefit to all U.S. citizens. The simple fact that we eliminate the IRS finally and forever is enough to make me cheer. The goons in black suits really make me nervous. Just let you goof on your return or make some other honest mistake in years past and they mercilessly pounce down on you like a cat on a mouse. You don't stand a chance and they LOVE to exert that power over the populace.

Some worry about privacy - the IRS is much more of a threat to you than the APT Tax would EVER be.

[ancient_geezer]

Any word on what's going on with H.R.25 right now? I mean what's the progress?

Just re-introduced into the current session of Congress a few days ago.

Any changes made?

No, wouldn't expect any until after hearings on it.

Opposing plans?

There are several competing proposals such as Armey/Spector Flat Tax, USA Tax etc. Haven't seen their re-intoduction yet.

Maybe a date for the next step?

That is up to the congressional leadership to set hearing dates and such, too early to know on that stuff.

Fair Tax refers to Social Security only in terms of section 201 of the Social Security code.

It funds Social Security from retail tax revenues repealing the current SS/Medicare payroll taxes, what more would you expect from a "Tax" reform bill?

[ancient_geezer]

Amen to this geezer. I have researched this proposal and I really cannot find ANYTHING truly negative.

I can. The APT tax hides the burden of excess government from the view of the electorate. All taxes in the end trickle down to individual citizens who ultimately bear the burden of the APT in lower wages, lost returns from retirement investments, and higher prices.

Merely hiding taxation from view or disguising its nature by taxing every movement of money and assets at a low nominal rate does not change the fact that govenment extracts over 30% relative to household income through consumer expenditures and savings and investments.

With the low visibility of the APT, the worst aspects of VATs and corporate taxation come to play in creating a money machine for government at the expense of the economy and welfare of the individual citizen.

Sorry I just don't go along with your rosy assessment of the APT. It is a formula for economic disaster and unbounded growth of government weighing heaviest on those at the bottom of the economic ladder.

The National Retail Sales Tax(NRST), of HR25, on the other hand provides the necessary visibility for the electorate to react to. Each citizen perceives the cost of government directly, and not camoflaged and embedded into inflated prices and lost wage increases. Furthermore relief from the tax is provided in a monthly demogrant to all legal residents that cover the NRST upto the HHS provertyline of expenditure. Savings and investments are not taxed under the NRST encouraging thift and promoting independance from government programs like Social Security.

All in all, I see a much better system in a National Retail Sale Tax as opposed to a system that hide the burden for the view of those who should be aware of what government is costing them.

[tech30528]

Thanks, Geez, I'll keep an eye out for that. Should be interesting to see how many are on board with it this time ( many more, I would guess). I still oppose your insistance that government will extract more than 30% relative to household income. I have yet to see any calculations that prove the excessive cascade effect mentioned so often here, or the hidden negative effects discussed here. As always, if those numbers could be presented I would be happy to check them out and cease this argument altogether. But honestly, this argument appears to be nothing more than paranoia and opposition based on whole hearted support of a competing plan (NRST). As I've stated before, Fair Tax, should it pass, would be a far cry better than what we have, I just don't think it goes quite far enough in avoiding evasion. While nowhere near as complex (and therefore porous) as our current code, it's complexity still lends itself to loopholes that by the very nature of capitalists will be exploited. As to your argument of excessive tax collected under APT, an adjustment to the rate would correct that as soon as accurate data is calculated. As always, thanks for your help.

[ancient_geezer]

I still oppose your insistance that government will extract more than 30% relative to household income.

The APT claims to be revenue neutral, that means the revenue collected will be equal to the revenue collected under the current system.

All taxes ultimately are incident upon the individual, either by increased prices, decreased wages, decreased returns on investments, or a combination of all.

Thus the average burden is calculatable knowing spendable income and total government revenue collected out of the economy.

The APT expects to be applied at both federal and state/local level thus the following Total tax as % of spendable income(NNP) applies.

 

refer Tax Freedom Day 2004 PDF http://www.taxfoundation.org/sr129.pdf

 

Total Effective Tax Rates by Level of Government Percent Net National Product(NNP)
Year	Federal	State	Total
1997	21.8%	10.3%	32.1%
1998	22.4%	10.4%	32.8%
1999	22.5%	10.4%	32.9%
20000	23.1%	10.4%	33.5%
2001	22.2%	10.5%	32.7%
2002 1	19.7%	10.2%	29.2%
2003 2	18.5%	10.1%	28.6%
2004 3	17.9%	10.0%	27.9%
Notes: Leap day is omitted to make dates comparable over time. Since depreciation is not available to pay taxes, GDP is an overstatement of spendable income for the purpose of measuring tax burdens. Depreciation is netted out of NNP. 0 Last year of Clinton administration when of HR25 rate estimated 1 Economic Growth and Tax Reform Reconciliation Act of 2001 2 The Job Creation and Worker Assistance Act of 2002 3 Job Growth and Tax Relief Reconciliation Act of 2003 Sources: Office of Management and Budget; Internal Revenue Service; Congressional Research Service; National Bureau of Economic Research; Treasury Department; and Tax Foundation calculations.

[ancient_geezer]

, I just don't think it goes quite far enough in avoiding evasion.

Evasion is not the issue we should worry about, unbounded growth of government at the expense of the economic health of the nation is.

But even as far as evasion and avoidence go, the big corporations will execute vertical mergers creating megalopolies to reduce their turnover, (i.e. the number of taxable transactions in their business) hence the tax incident on themselves, the little guy will simply head for the the underground cash and barter economy to avoid not the tax but the hassle and intrusive character of government that of necessity goes with any turnover tax. The response to the VAT throughout the EU and in South America with the Bank Account Debit taxes in driving the little guy underground is more than adequate evidence of that particular response yield evasion rates as high as 35% of GDP.

As to your argument of excessive tax collected under APT, an adjustment to the rate would correct that as soon as accurate data is calculated.

Revenue neutrality is all that is need to understand the burden on the citizen, which is shown above. Only people can pay taxes, business and market activities are merely mechanisms which are used by government to effect social and economic control and while collecting taxes from the people.

Sorry can't buy your APT at all, it puts too much capacity for unobservable mischief into the hands of the government bent on expanding it power.

[agincourt1415]

I know this is an old thread. But I like the APT TAX. The arguments against are stupid and weak.

Weak Argument A. Its a hidden tax, no you get a receipt at the grocery store or the atm or on a stock trade

Weak Argument B. The government will know what I spend my money on? What?

Weak Argument C. I prefer to pay 70 times more tax and hire an accountant to do my taxes.