APT Tax?

All the news that's new and approved. We want your opinion, no matter how wrong it is.

Moderator: EG Members

Post Reply
User avatar
psi29a
Godo
Posts: 5386
Joined: Tue Jan 11, 2005 2:52 am
Location: The Lonely Mountain
Contact:

APT Tax?

Post by psi29a »

http://www.apttax.com/index.htm
Is it possible to have a system of taxation which is simple, efficient, progressive, and revenue neutral replacing all those taxes listed above? As it turns out, Yes.

By capitalizing on financial data processing technology, it is possible to create a tax code for the 21st century-- one that is astonishingly easy for all citizens to understand, that is easy to administer and to comply with because it eliminates the need to file tax or information returns. The system, developed by University of Wisconsin Professor of Economics Edgar L. Feige, is known as the APT or Automated Payments/Transaction Tax.

You can find Professor Feige's original papers detailing the Automated Payment Transaction (APT) tax by clicking the links to the left. The papers describe a simple plan to replace our current complex system of federal and state income, sales, excise and estate taxes. It's not rocket science; it's actually just simple arithmetic.

In order to raise the same amount of revenue as our current tax system, a "revenue neutral" APT tax would impose a single tiny tax rate on each and every transaction in the economy. All deductions and exemptions would be eliminated. By declaring a "zero tolerance" policy for any exemption, we wipe out every special interest loophole that now riddles our overly complex tax code. Since the volume of all transactions is estimated to be 100 times larger than the current tax base, the flat tax rate needed to raise the same amount of revenues is just a hundredth of the current average tax rate of roughly 30%. So if transactions stayed at their current level, the APT tax rate would be three tenths of one percent (0.3%) on each transaction. Even if total transactions fell by 50%, the revenue neutral APT tax rate would only be six tenths of one percent (0.6%) split equally between the buyer and seller in each transaction so each would pay 0.3%. Feige details how the replacement of our current tax system with an APT tax could save the government and its citizens as much as $500 billion annually by eliminating the compliance, collection, enforcement and inefficiency costs of our current tax system. Additional savings would accrue society in general, which are impossible to compute. Just think of all those beautiful trees that will be left standing when we stop printing the 17,000 page Tax Code and the millions (maybe billions) of copies of forms with instructions still being used at both federal and state levels.

How would it work? Consider a family with an annual income of $60,000, paying $20,000 in interest and mortgage payments on their house and spending $40,000 on all other items. The family has total transactions of $120,000. Today that family would owe roughly $20,000 in total taxes. Under the APT tax, with a rate of 0.6% they would pay $180 (.3% x $60000) on their income receipts and $180 on their expenditures for a total tax of $360. Their employer would pay $180 tax on the income payment, the mortgage company would pay $60 on its receipts and the merchants receiving the family's $40,000 of other expenses would pay another $120 in taxes. In total, the government would receive $720. And all the taxes would be automatically assessed and paid without filing tax returns.

How then does the government collect enough taxes to pay its bills? Most of the revenues would be collected from the massive volume of stock and bond trades and foreign exchange transactions none of which are now taxed. One might be concerned that imposing taxes on these types of transactions would stifle economic activity in these critical areas, however, the tax is so small it would be dwarfed by the simple fluctuations in price that typically occur during the trading process. Although "day trading" and short term foreign exchange transactions will certainly decline, the reduction in these "hot money" transactions are only likely to reduce speculative market activity, thereby reducing the volatility of prices in these markets.

Although every voluntary transaction is assessed the same low tax rate, the APT tax achieves equity and fairness because the wealthiest portion of the population executes a disproportionate share of financial transactions, whereas the poorest members of society engage in relatively few financial transactions since they have so much less wealth to manage. So progressivity is achieved through the skewness of the tax base rather than through a progressive tax rate structure.

Practically speaking, how will the APT Tax work? Every bank, brokerage, or other financial account established by a person, corporation or other taxable organization will pay 0.3% on ALL funds moving IN OR OUT of that account. The tax would be automatically transferred to a federal government tax collection account in the same institution. This will be true for stock, bond, options, and futures traders and investors; foreign citizens, companies and governments exchanging their currency for US dollars; a couple buying a new car (no more 6% sales tax, instead 0.3% APT tax); and, a teenager buying movie tickets with a credit card. The movement of funds is taxed and collected immediately without recording who or what was the source of funds or the recipient. This automated system would totally eliminate the need for filing tax returns and information returns, freeing individuals and businesses of enormous costs of tax compliance and greatly reducing the government's costs of collection and enforcement.
Considering the tax season is upon us... I figured this to be an 'apt' article. :D
Sortep
n00b eater
Posts: 822
Joined: Sat Apr 30, 2005 3:14 am
Location: Somewhere

Post by Sortep »

that makes too much sense for government to ever consider... even though we supposedly staged a revolution due to unfair taxes... heh
Bow to Golbez
User avatar
psi29a
Godo
Posts: 5386
Joined: Tue Jan 11, 2005 2:52 am
Location: The Lonely Mountain
Contact:

Post by psi29a »

Even though it claims to be progressive, it seems more regressive. Another 'flat' tax where those who would gain would make sure to do larger transfer of money over longer periods of time.

So, the burden comes back down on the lower and middle class.
Sortep
n00b eater
Posts: 822
Joined: Sat Apr 30, 2005 3:14 am
Location: Somewhere

Post by Sortep »

of course a cool 20% income tax with no exemptions would probably work better
Bow to Golbez
User avatar
Brainpiercing
Crusher of Dreams
Posts: 1717
Joined: Tue Jan 11, 2005 9:29 pm
Location: somewhere far beyond

Post by Brainpiercing »

psi29a wrote:Even though it claims to be progressive, it seems more regressive. Another 'flat' tax where those who would gain would make sure to do larger transfer of money over longer periods of time.

So, the burden comes back down on the lower and middle class.
Well, as long as they move the same amount of money, where is the difference? To pay for something the amount of money moved would be the same as now, I don't see how they could just not move the money. Possibly people would start moving more cash around, because that way they only pay once (for deducting), although that doesn't seem fair.

However, a 0.3 per cent tax with no minimum flat charge won't do a lot to deter transactions, while it would certainly free up a lot of consumer money. Just think, in that example the family would have thousands of dollars more to spend, which would be a tremendous boost to the domestic market.

The trouble is, yeah, it's far too simple to ever be put into practice anywhere. Hoardes of tax consultants, etc. would be out of jobs because without a complicated tax system, they would be useless.(The same as lawyers - if laws were ever simple.)
Brainpiercing
"Beer cures poison" - (almost) Guts.
Image
User avatar
Albator
Hikikomori
Posts: 1226
Joined: Sun Nov 27, 2005 11:10 pm
Location: DC

Post by Albator »

What is interesting is how it is going to tax simple moves of bounds and stocks. Interesting way of having the hammer fall on people who actually make money out of thin air. Not that it would hurt them that much, but at least they will contribute to the war effort 8) .
Image
Post Reply