There would, however, be a benefit to the wealthy in that a transaction tax would eliminate the progressive income tax rates. The rich would simply pay their fair share based on what they spend and upon their monetary manipulations.
A transaction tax would be similar in some respects to a value added tax; however, it would apply to all financial transactions, including those involved in the production of all goods and services, not just in manufacturing, and it would be paid at every stage, not just at the end.
A tax on all transactions would also be fairer than a national "sales" tax, which would disproportionately target the poor in their non-discretionary purchases of essential food, clothing, and transportation. Without the ability to save, they would have to pay taxes on a far greater proportion of their incomes than the wealthy.
There should be a fair tax credit for those who choose to privately provide their family with private health and education services, and those taxpayers who are not on welfare (or living with their parents) and who are able to afford basic food and housing should also receive a tax credit for the average value of these necessities.
Money invested in Social Security, federally-insured savings accounts, 401(k)s, IRAs, and the earned interest should not be taxed until it is withdrawn and spent. Capital gains should not be taxed until they are realized and spent, and investments should not be taxed until they are sold and the proceeds are spent. Gifts should not be taxed to the donor, but to the recipient when the gift is spent.
The toll tax would operate much like the income tax wherein individuals and corporations would have to prepare an annual tax report, rather than as a sales tax where the revenue is collected at the time of the transaction. For most individuals, businesses and corporations the preparation of tax returns would be greatly simplified.
Let's say a married couple earns $100,000 of joint income and receives no government support. They could file a return setting forth their income and then deduct tax credits for providing their own housing and medical care, including Medicare payments, and further reduce their income by the amount paid into social security and into federally insured savings accounts. They could claim a tax credit if they sent their children to private schools, and they could further reduce the amount earned by what they gave away. Finally, they would deduct what they had saved during the year in approved accounts. When all the deductions, credits and savings are added up and credited against their income, the difference would be what they had actually spent for the year. That would be the amount taxed – at a very low rate!
There would also be great benefits to businesses and corporations. To the extent they are American owned and that salaries are paid to American citizens, businesses, corporations and other organizations should not have to pay a transaction tax on their payroll, as salaries would be directly passed through to their employees to spend (and to be taxed). Thus, if the stock of a corporation is owned 100 percent by American citizens, or other businesses or corporations that are in turn owned entirely by American citizens, the corporation should not have to pay any taxes on the salaries paid to American workers. Or, if there was a 50 percent American ownership, the corporation should only have to pay half of the payroll transaction tax.
The transaction tax paid on payrolls to American workers by foreign owners would be the price of their access to the services of our healthy and well-educated workers and to our free-market economy and system of justice.
Payrolls paid to foreign workers by American corporations would be subject to the transaction tax, as the money would not pass through into our economy. Wouldn't this policy slow down the current trend of outsourcing American jobs offshore to other countries?
Inasmuch as there is a movement of money when foreign imports cross our borders, tariffs could be replaced by the up-front collection of the transaction tax when foreign corporations transfer their products to their American subsidiaries or when they sell to American businesses. Imports in 2005 amounted to more than $2 trillion and exports exceeded $1.3 trillion. The movement of these goods into and out of the United States would represent a taxable transaction.
Foreign registration and ownership of U.S. patents, copyrights, and other legal protections should also carry a toll on all protected transactions, allowing non-citizens to share the cost of our courts to enforce their rights.
While a good case might be made for a few public policy tax deductions or exemptions, the final result should be a very broad-based, simple tax that benefits everyone. A transaction tax should be one that is fair to all, and its toll should be trusted by those who are most burdened by its payment.
Conclusion. Benjamin Franklin said that the only certainties following birth are death and taxes. Nonetheless, we do not have to willing endure corrupt government and unfair taxation. We, the ones who pay the taxes, must make the essential decisions about the methods of taxation and the level of payment. Otherwise, we live in slavery and our freedoms are illusionary.
William John Cox authored the Policy Manual of the Los Angeles Police Department and the Role of the Police in America for a National Advisory Commission during the Nixon administration. As a public interest, pro bono, attorney, he filed a class action lawsuit in 1979 petitioning the Supreme Court to order a National Policy Referendum; he investigated and successfully sued a group of radical right-wing organizations in 1981 that denied the Holocaust; and he arranged in 1991 for the publication of the suppressed Dead Sea Scrolls. His recent book, You're Not Stupid! Get the Truth: A Brief on the Bush Presidency is reviewed at www.yourenotstupid.com.
A great idea - I really think it could work. The technology is available to make it work. It would certainly go a long way towards forcing corporate investment in society.
Problem is, it would have to clear the corporate hurdle first, and that is simply not going to happen while corporate interests enjoy the political power they do.
Perhaps the way to tackle it is via commercial banking - banks may see their own interests clearly enough to support it.
A recent article pointing out the disparity between corporate and individual interests: click here Jane Smiley - "The fatal difference between corporations and people is that corporations are necessarily irresponsible. It's in the charter. They have to profit, while people have to weigh monetary profit against other forms of relationship and interaction."
by
cam (0 articles, 0 quicklinks, 0 diaries, 55 comments)
on Wednesday, January 24, 2007 at 2:28:29 PM
BTW - The taxes might discourage the flow of capital. You would probably need to implement something like Henry George's tax on land value to discourage corporate wealth from becoming landlord wealth.
by
cam (0 articles, 0 quicklinks, 0 diaries, 55 comments)
on Wednesday, January 24, 2007 at 2:53:35 PM
I understand your concept but have some problems with it.
First is your admiration for a corporate tax. Corporations do not pay taxes, even under your plan. To a corporation taxes are a part of the cost of doing business and those costs are passed along to their customers through the price of the product. So who are you taxing? The consumer. The difference is that you have "hidden" that tax by burying it in the price of the products or services.
Second is your lack of concern about taxing the same merchadise multiple times. It seems to me that taxing the same merchandise multiple times is regressive. Yes, it allows you to lower the tax rate, but it inflates prices unnecessarily.
I am a supporter of the FairTax (HR 25) and, although the rate is higher, does a better job of accomplishing the goal of funding the operations of our government in a fair and transparent manner.
by
Dewey715 (0 articles, 0 quicklinks, 0 diaries, 12 comments)
on Saturday, May 5, 2007 at 6:33:54 PM
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