Automated Payment Transaction Tax. This idea is simple, elegant, progressive, and in-arguably fair...and since I've never met anyone who has heard of it, I wonder what I am missing.
Here are the basics - eliminate virtually every tax you can think of - income, estate, corporate, capital gains, fuel, sales - and replace it with a flat tax at a very small rate (.35 to .7 percent) on every electronic transaction. Every time the money moves, the government gets a cut.
Since this applies to everyone equally, it is impossible to argue that it isn't fair - and it would MASSIVELY shift the tax burden back where it belongs - on the 1%. Intrigued? More after the jump.
So here is how it would work - from http://www.apttax.com/:
Every bank, brokerage, or other financial account established by a person, corporation or other taxable organization will pay 0.35% 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 8.25% sales tax, instead 0.35% 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.
The author of this plan estimates that this system could save $500 BILLION ANNUALLY (yes you read that right) for the government and citizens by completely replacing the enforcement and collection of taxes.
So how would it work for people like you?
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 0.7% they would pay $210 (.35% x $60000) on their income receipts and $210 on their expenditures for a total tax of $420. Their employer would pay $210 tax on the income payment, the mortgage company would pay $70 on its receipts and the merchants receiving the family's $40,000 of other expenses would pay another $140 in taxes. In total, the government would receive $840. And all the taxes would be automatically assessed and paid without filing tax returns.
Sounds pretty good - but how would the government get its money? Here is the progressive part:
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.
I've been trying to find a problem with this system for a while, and I just can't come up with one. I'm hoping more eyes on it will either reveal the system's weaknesses, or give it the attention it deserves.