The Rampson FAIR TAX Plan

There are too many taxes out there! Americans end up paying 1/3 of their income in taxes each year. Not only is this a lot of money, the tax system itself is broken with confusing tax forms and rules that favor the "rich". There HAS to be a better way!

Introduction

Everyone wants the US Government to work more like a corporation. Corporations provide services, make profits and balance their books - much the same as the US Government. The main difference is that the US Government doesn't balance their books - and takes in too little "profit" (tax revenue).

So what would be a good corporation's business plan to use as a model for the US Government? Well, the US Government moves around a lot of money - so a banking (or credit card) company would make a good example.

Banks and Credit companies make their profit on the movement (flow) of money. Every time a customer accesses their services - they are charged a fee. Banks charge ATM fees, Debit card fees, etc. while Credit companies charge "swipe fees" and interest. What if the US Government could charge for using its currency?

This is called a TRANSACTION TAX. Basically it works like an ATM fee - every time you take money from your bank account - the government takes a percentage. It's that simple!

There are MANY benefits for having a tax like this. Corporations make MANY large money transactions - so they would end up paying the lions share of this tax (instead of ZERO like many corporations pay today).

In order to gain support for this tax the following laws would need to be enacted:

1. This is the ONLY FEDERAL TAX - all others would be eliminated. This is the one-and-only way for the US Government to raise revenue.


2. A Balanced-Budget Amendment would make sure that everything the US Government does is funded, and the Transaction Tax would automatically change to cover all debts. This means the tax would go up and DOWN, and it would be public knowledge when that happened i.e. Politicians could claim to have lowered your taxes - and they could prove it!

The Grumbles

There are a couple of issues that need to be explained up front before the entire transaction tax plan can be properly considered.


1. Fairness - Everyone has to pay their fair share of taxes, so it shouldn't matter WHEN those taxes are taken. Some people may think it is unfair to take taxes from their bank account, but taking tax from anywhere else requires voluntary, accurate documentation - such as tax forms - to be sent to the government, which then has to have a bureaucracy to handle them. This allows for cheating, which is a crime, and institutions such as the IRS need to be established to police these transactions.


2. Taxing Cash - Cash transactions will be taxed. Here is an example of a worker that lives day-to-day from his weekly paycheck. This worker cashes the paycheck at a bank, and the tax is paid by the company he works for (from their bank account). So the worker ends up PAYING NO TAXES for the cash. This certainly helps the poorer elements of society. A transaction tax is NOT REGRESSIVE! Also, the advantage of combating black markets makes taxing cash very important (Drug deals are taxed by default, for example).


3. Job Loss - People that work for the IRS or H&R Block could be left out of work when this transaction tax is implemented. Maybe they will just "shift" to new jobs that open up - IRS auditors/investigators become GAO auditors/investigators for Sarbanes/Oxley monitoring, H&R Block tax preparers become bookkeepers for all the new small businesses that are created, that need to keep accurate records for Sarbanes Oxley requirements.


4. Lost deductions - Hopefully the added income in Americans pockets make up for the wimpy 1/3 of their property taxes they get back. It *might* hurt the housing industry, but I doubt it. Land is a scarce resource that will always be in demand, plus people will have more money in their pocket to buy land. If there is a need to influence consumers purchasing habits (buy more houses!), then tariffs or price supports would be available for Congress to use.


5. Charity - Will people stop giving to charity since there are no more deductions? I doubt it, but certain things could be implemented to help charitable giving suggestions: Since charities don't pay any tax, their expenses will be lower. It may be possible to allow money to be sent from a bank account to the charity without applying the tax (PLEASE the ONLY LOOPHOLE in the transaction tax!). SUGGESTION: Credit card "cash back" programs are really kickbacks - which are/should be illegal, so allow it ONLY for charitable purposes. I have my Salvation Army Card - what's in your wallet?


6. Tariffs/License Fees/Price Supports/Rebates - The US Government can create other ways to generate revenue - but the limitation is that these can only be used to CHANGE BEHAVIOR - and not as a source of revenue. Tariffs are used this way (compensating for other countries' trading violations). You could levy a "Carbon Fee (Tax)" - but it would be used to change behavior to move to cleaner energy - and not to "fund" some program. This works both ways as the government could offer rebates for buying electric cars.

The Advantages of a Transaction Tax

There are so many, it's hard to list them all!

1. Not Regressive - The Poor i.e. ones that live (on cash) from paycheck to paycheck PAY NO TAX!


2. Enhanced Privacy - No reporting of income to the US Government is necessary.


3. Transparent - NO HIDDEN TAXES! The law states that there is one tax and the rate is public knowledge. This allows people to better plan their expenditures. All "special interest deals" would need EXPLICIT funding - no hiding of details in 10000 page tax bills.


4. Easy implementation - The transaction tax can be set up easily, and run in parallel with the other taxes as they are retired. Just set a low percentage for the tax initially to let people get used to it. The statistics gathered in this "test phase" will help determine the final tax rate.


5. The IRS is GONE! - No need for this outdated institution.


6. No more tax criminals! - Since the banks collect the tax, individual Americans will not be liable for uncollected taxes. Of course, banks could steal tax money, but I'm sure the government will keep a close eye on them.


7. Reduces "offshoring" - Any money leaving the country is taxed ON THE WAY OUT. Anyone bringing money into the US, would not be taxed. A win-win scenario!


8. Increases Foreign Investment - Capital (money) that comes into the country is not taxed.


9. Increases Exports - Goods leaving the country are not taxed - only money that leaves the country is taxed.


10. No more cash cheats - Since all cash is taxed, all cash transactions are no different than "other" transactions. No more advantage to "under the table".


11. Better Government - Americans can see when the tax goes up (or down) and what benefits they are receiving for that tax, and can use this information in their voting patterns.


12. Better statistics - The GNP can now be directly measured month-by-month.


13. A Balanced Budget - Balanced budgets could be attained since the assets and debits can be accurately determined, month-by-month.


14. Double Congress efficiency - Congress can now concentrate on debating spending programs. The money to pay for them is "automatic".


15. Less corruption - Lets face it, there are many loopholes in the current law that benefit some undeserving parties. Since the new tax is transparent it will be much easier to see where all the money goes. If Congress spends more, the tax rate goes up. Pretty simple.


16. Better health - Stress levels will almost certainly come down as Americans stop worrying about taxes. The same can be said for Congress.


17. Promotes Savings - Since only spending is taxed, there is incentive to keep your money "in the bank" and not pay tax.


18. Promotes Small Business - This tax makes it easy to start and run a small business, since there is NO overhead for tracking and sending money to Washington.


19. Cashless society - It's possible, with the infrastructure that will be set up to support the transaction tax.

Nitty Gritty Details

Here are some implementation details . . .

1. Don't tax credit card transactions
   - All money (payments) eventually has to come from a bank (or equivalent), so credit card transactions will be taxed eventually. Taxing credit card transactions would lead to "double taxation" when you paid the credit bill. Also this keeps the credit card companies out of the tax collection business.


2. Collectors Compensation - Since the banks (and brokerage firms) will collect the taxes, they need to be compensated. Possibly have them not pay taxes on interest payments, i.e. when a savings account gets interest once a month or when CD's pay interest.


3. Moving money efficiently - Certain transactions such as moving money from one account to another, where both accounts have the same taxpayer ID number, should not be taxed (unless the money leaves the country). Banks moving money from the Federal Reserve or to different branches should not pay tax on those transactions.


4. Cash issues - Since depositing cash one day, and taking it out the next creates taxation, there will pressure to not do so. There should be limits to how much cash you are allowed to have (hoarding). Cash to cash transactions (such as making change) should not be taxed. Crime might be expected as people hold on to cash, instead of depositing it, and thieves take advantage of the fact. Suggestion: Any time you are found with more than $25k in cash, it would be impounded and you could only get it back by depositing it into a bank account - which would put it back into the "taxation system". That's not too harsh of a punishment!


5. Charity - As mentioned before, all non-profit organizations should not be taxed. It is optional (and recommended) to let people donate to non-profits and not pay tax (or get a rebate or something).

Summary

The TRANSACTION Tax is basically a tax on the economy. Since each Dollar gets taxed every time it changes hands, the overall rate can be lower than with Payroll taxes.

I think it is clear that a transaction tax would have many benefits to the American people (and to Congress as well).