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
How do you measure internal transactions vs external ones? If a company produces bolts internally instead of buying them, are the taxes different? Are taxes added to quality control transactions? Is sweat equity taxed? The whole idea seems like a method to sneak in a VAT along with an income tax. The paperwork would be overwhelming, at least compared to current methods.
does this or that argument mean that we should all continue to pay 70 TIMES more tax than we have to?
How do we pay 70 times less tax under APT?
Incidence of tax burden is not on who submits the check by law, it is a consequence of demand elasticities in the economy passing down to the various factors of consumer, laborer or capital investor/owner. We are all individuals competing and transacting in all markets directly and in our proxies of business.
The government's bill is paid by us all, how can the government survive on 70 times less revenues for the individuals making up the populace of the nation on which the incidence of all taxes must fall?
Such considerations have never stopped them in the past.
Sorry, I don't want the government tracking all transactions, especially in ways the common citizen cannot understand.
This is a poisonous recipe for neverending political and financial hanky-panky of the worst sort.
One tax; visible; at the retail level.
I assure you this proposal is DOA politically.
If we could get by with 70 times less tax (whatever that means), why not just reduce income tax rates now?
If it comes from UW madison, it's crap.
Free America!
Abolish the slave tax; the IRS and the IRC!!
Support the Fair Tax!!!
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I stopped reading right here. Talking about BIG BROTHER!
The government will know every single transaction each person makes, every dime they take out of their bank account!
I think this is the "best" idea to ensure FULL GOVERNMENT CONTROL OF EVERYONE.
Yes, it's sheer insanity...devious even, perhaps.
Also, as others pointed out, it would kill the economy, by punishing investment and moving of money.
Surely this group has better things to do...
Sounds like a good way to discourage people from using banks and encourage them to put their money in overseas accounts.
Foreigners with money here would also go elsewhere.
I just went to their website:
APT Tax stands for AUTOMATED PAYMENT of TRansaction Tax.
Even more insidious, than the payroll tax, in addition to being invasive and give direct control to the government over individuals.
With this, they might as well, just keep all the money, and give everyone a bowl of chili for lunch, and so on, because government knows best.
Plus you get to watch interest rates shoot up as banks try to persuade people to ignore that 5% banking penalty (2.5% on the way into your account, 2.5% on the way back out). What fun. Where do we sign up?
There seems to be a misunderstanding about the 70 Times figure. This comes form the fact that the APT tax base is approximately 70 times the current individual and corporate adjusted groo income tax base. 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.
>>>>With APT you have to stop and do the math. The answer to will a prescription drug bought by a poor person be taxed - the answer is YES - how horrible. But the $70 purchase will be taxed about 18 CENTS and NO FICA will be taken from his/her paycheck.<<<<
I'm certainly no economist, but I can see something very deceptive about this proposal. We all know that the consumer ultimately pays all taxes. We pay the taxes that the producers have paid all through the process of bringing a product to market through the cost of the item. It would be no different with this tax. So the $70 prescription you are talking about would have cost somewhere in the neighborhood of $10 today?
If your proposed tax would reduce my share of taxes by 70 times what I pay now, all those taxes I would no longer pay outright would have to be paid by some other means (since we know the government is not going to operate on 70 times less money). This means they would have to be paid by all the transactions made to produce the product I buy, which will be passed along as increased costs.
It may SOUND like I'm paying almost no tax, but my buying power would be no more than now, and perhaps even less. I don't see how this is better than an NRST, and in fact would be worse because even a very tiny tax increase would be added to every transcation made in producing a product and therefore increase the cost by many, many times the percent of the tax increase.
It doesn't matter how small it is, the implementation of it would put in place a horrible system of full government control.
I would also like to point out that the income tax, when first introduced was also miniscule. But once the system is there, all the government has to do is keep increasing it.
I would advise you to get some PR assistance, since you are failing miserably at offering any clear explanations that are convincing anyone. However, I know that wouldn't help. This proposal is a stinker.
FR is an opinion leader, especially in this subject area. If you can't sell it here, I assure you that you will receive no better reception in the broader fundamental tax reform movement.
Take the energy and resources and intellect you are expending and get behind the FairTax.
History of the 16th Amendment
by W. Cleon Skousen
http://www.wealth4freedom.com/16thHistory.htm
EXCERPT:
"When the first income tax was sent out to the people, the Congress chortled confidently that "all good citizen will willingly and cheerfully support and sustain this, the fairest and cheapest of all taxes." That was the cute little monkey part. After all, the first tax ranged from merely 1% on the first $20,000 of taxable income and was only 7% on incomes above $500,000. Who could complain?(Ed. note: In 1994 "dollars" that $20K is now over $250K and the $500K is today over $6 million!)
At first, scarcely anyone did. Little did they know that before the tinkering was done in Washington, this system would be described by many Americans as the most unfair and expensive tax in the history of the nation. Within a few years, it had become the principal source of income for the federal government.
In the beginning, hardly anyone had to file a tax return because the tax did not apply to the vast majority of America's work-a-day citizens. For example, in 1939, 26 years after the Sixteenth Amendment was adopted, only 5% of the population, counting both taxpayers and their dependents, was required to file returns. Today, more than 80% of the population is under the income tax.
Withholding Taxes
The collection process was greatly facilitated in 1943 by a device created by FDR to pay the costs of WWII. It was called "withholding from wages and salaries". In other words, the tax was collected at the payroll window before it was even due to be paid by the taxpayer. Economists point out that this device, more than any other single factor, shifted the tax from its original design as a tax on the wealthy to a tax on the masses--mostly the middle class. "
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