With the Transaction Tax,millions of transaction payments would be collected, and deposited in the US Treasury,each hour without ever being touched by human hands. Every time you would buy something – whether it was a sandwich or a second home – a tiny payment (0.35%) would be collected from you, and from the seller, and transferred directly to the US Treasury over our nation’s electronic banking network.
The Transaction Tax would completely replace income taxes, corporate taxes, excise taxes, payroll taxes, capital gains taxes and estate taxes. There would be no more tax returns, audits or April 15 deadline. Collecting the tax at the moment of a transaction would be simple and efficient. It would cut out all the opportunities for fraud, corruption and political influence. And it would free up billions of hours and trillions of dollars that we waste on tax compliance. Scroll down for more details.
Every individual, rich or poor, and every company, big or small,
would pay the same 0.35% tax on transactions.
What’s the Secret to The Transaction Tax?
Its the smallest tax possible.
Right now, our federal budget is funded solely from gross income – salaries, investment profits and business profits – minus deductions. That is only a sliver of our entire economy, yet it has to provide trillions in taxes every year. The natural result is high taxes. And because of these high taxes, we all try to shift our tax burdens onto others, hoping we aren’t the one stuck with the bill.
The Transaction Tax would reverse this vicious cycle and expand the tax base a hundred fold. All transactions – including trades in stocks, bonds, options and currency – would be treated exactly the same. With every sector of the economy contributing, and everyone pulling together, everyone’s taxes would be dramatically lower. And with low taxes, we would stop trying to shift our burdens onto someone else.
It treats all of us equally
Under the Transaction Tax, no individual or company gets special treatment through the tax code. Everybody contributes something to our government, our national defense, our social programs and paying off our national debt. And with everybody contributing something, we all would feel a lot better about paying our share.
And it rewards hard work
The transaction tax is not just a small tax, its also a flat tax. That means that no matter how much money you make, you will always pay the same 0.35% tax. You and Warren Buffet pay the same tax, and you both can chase the American dream and keep the rewards of your hard work. As you can see in the chart to the left, the Transaction Tax is very small and very simple to calculate.
It’s not regressive
The Transaction Tax is flat, but inherently progressive. How can that be? Because the wealthy conduct progressively more transactions and larger transactions. So, unlike a flat tax on income, the transaction tax does not shift the tax burden onto the poor or middle class. The poor will have to pay something, but it would be an extremely tiny amount. For example, for an American who earns $20,000 and spends $20,000 in a year, their transaction taxes would total $70.
The Transaction Tax is able to achieve something no tax system has been able to do yet. It has found a single universal tax rate that is naturally progressive. This is significant because when every American and every American company is paying the same tax, we know inherently that we’re all contributing equally.
How is the Transaction Tax calculated?
US transactions are estimated at $1000 Trillion annually, but we only use half that amount ($500 Trillion) in our calculations. Using 500 Trillion transactions as our base, we have calculated a transaction tax of .007 shared between buyer (.0035) and seller (.0035) to generate revenue of 3.5 Trillion. That would be enough to balance the budget for the first time in history. The Transaction Tax would cover our federal budget + social security + medicare + our debt payments.
Why use only half of US transactions? Until we run the transaction tax through sophisticated computer modeling and taxpayer trials, we cannot know its exact impact for sure. There will undoubtedly be shifts in the volume of transactions, both away from transactions that paid no taxes and towards transactions that once paid taxes of 15%, 25% or 35%. So we prefer to be very conservative, and not assume a base of $1000 Trillion. Ultimately, if transactions decline less than 50% or actually go up, the transaction tax rate will be even lower than 0.35%.
How would the system work?
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.