HR4646 Debt Free America

[lockmat]

This bill would basically eliminate the individual income tax and add a 1% tax on all transactions. What do yall think?

The term ‘specified transaction’ means any transaction that uses a payment instrument, including any check, cash, credit card, transfer of stock, bonds, or other financial instrument.

The term ‘transaction’ includes retail and wholesale sales, purchases of intermediate goods, and financial and intangible transactions.

Obviously this would bring more money in or else they would not be doing it. I just wonder how MUCH more it would have me paying. Of course, it would tax you more if you spend more, so those who are good with their money might see some savings.

As of now it is being "referred to committee."

http://www.govtrack.us/congress/bill.xpd?bill=h111-4646

[Original Timmy Chan's]

Does that also include a 1% tax on the transfer of cash into a bank account, or the transfer of cash between bank accounts? If so, you lose one of the benefits of saving money...

[TheNiche]

As of now it is being "referred to committee."

So, basically...it's dead. Good riddance, too, because that was a crappy proposal. Taxing the transactions of raw and intermediate goods shifts the tax burden away from large vertically-integrated companies and onto small businesses.

It's way easier just to tax finished goods and services at the point of sale to the end user. The costs would've gotten passed on to the consumer, anyway, but this way there aren't any inequitable market distortions and the consumer understands the true tax footprint.

A value-added tax is also a good way to go.

[lockmat]

So, basically...it's dead.

You mean it's not just the normal secondary phase?

This one, for instance, went through the same phase and is becoming law:

http://www.govtrack.us/congress/bill.xpd?bill=s111-3802

Edited October 19, 2010 by lockmat

[editor]

You mean it's not just the normal secondary phase?

This one, for instance, went through the same phase and is becoming law:

http://www.govtrack.us/congress/bill.xpd?bill=s111-3802

While it's true that every bill has to go through a committee, the phrase "it' been referred to committee" is usually a code word for "stuffed in the closet to die a slow, lingering death."

That said, I think the transaction tax has a couple of flaws. The biggest one is that it taxes the same item repeatedly.

Contractor picks an orange in a citrus field and sells it to the farmer - 1% tax.

Farmer sells the orange to the local co-op - 1% tax.

Co-op sells the orange to the local wholesaler - 1% tax.

Wholesaler sells the orange to a regional distributor - 1% tax.

Distributor sells the orange to a supermarket - 1% tax.

Supermarket sells the orange to a customer - 1% tax.

Now the orange has been taxed six times by the feds. Add to that state and local sales taxes! Imagine if it was made into juice, how much more it would be taxed!

The current system:

Contractor picks an orange in a citrus field and sells it to the farmer - not a retail sale, no tax.

Farmer sells the orange to the local co-op - not a retail sale, no tax.

Co-op sells the orange to the local wholesaler - not a retail sale, no tax.

Wholesaler sells the orange to a regional distributor - not a retail sale, no tax.

Distributor sells the orange to a supermarket - not a retail sale, no tax.

Supermarket sells the orange to a customer - add state and local sales tax here.

Also, I'm not sure what the legality is regarding the federal government taxing intrastate commerce. Hopefully there are some people here on HAIF who know.

[lockmat]

That said, I think the transaction tax has a couple of flaws. The biggest one is that it taxes the same item repeatedly.

I'm not sure it's flawed in their eyes. I think that's exactly what they want to do. They claim it will pay off the deficit in 7 years, which this is the only way they could do that AND pay for all their new social programs.

[editor]

I'm not sure it's flawed in their eyes. I think that's exactly what they want to do. They claim it will pay off the deficit in 7 years, which this is the only way they could do that AND pay for all their new social programs.

So what happens after the deficit is paid off? Does it go away, get reduced, or does the government just keep slurping up money?

[TheNiche]

So what happens after the deficit is paid off? Does it go away, get reduced, or does the government just keep slurping up money?

There have been periods in American history where the federal government stopped issuing debt. The lowest level of debt ever achieved was in 1835, at $33,733.05, or 2.3 cents per person. The government funded its activities primarily by taxing international commerce. Of course, at that time federal spending was almost entirely comprised of the military and administrative functions.

[lockmat]

So what happens after the deficit is paid off? Does it go away, get reduced, or does the government just keep slurping up money?

With the increase of social programs, it will probably have to be increased.

[RedScare]

I'm not sure it's flawed in their eyes. I think that's exactly what they want to do. They claim it will pay off the deficit in 7 years, which this is the only way they could do that AND pay for all their new social programs.

Do you think a $2 TRILLION a year taxing scheme will help the country during a period of near (if not outright) recession?

[lockmat]

Do you think a $2 TRILLION a year taxing scheme will help the country during a period of near (if not outright) recession?

Sorry, I couldn't give you an educated answer. I gather you don't think so.

edit: wow, if this is true, it's just crazy...

"The National Debt has continued to increase an average of$4.18 billion per day since September 28, 2007"

http://www.brillig.com/debt_clock/

Edited October 20, 2010 by lockmat

[RedScare]

Sorry, I couldn't give you an educated answer. I gather you don't think so.

edit: wow, if this is true, it's just crazy...

"The National Debt has continued to increase an average of$4.18 billion per day since September 28, 2007"

http://www.brillig.com/debt_clock/

Well, think about it. $2 trillion dollars each year would not be spent on goods and services while the debt is being paid off. Our $14 trillion economy would shrink by 14.3% overnight, as money normally spent on goods and services built and sold by Americans suddenly is paid in taxes. To put that in perspective, the huge recession involved a shrinking of the economy of less than 6% for a period of 6 months.

Keep in mind that the National Debt is not currently hurting the economy. The concern is that over time it will grow to unsustainable levels. The debt should be contained, but we don't need to crater the US economy to do it. In fact, all that extra debt goes to spending that grows the economy.

[TheNiche]

Well, think about it. $2 trillion dollars each year would not be spent on goods and services while the debt is being paid off. Our $14 trillion economy would shrink by 14.3% overnight, as money normally spent on goods and services built and sold by Americans suddenly is paid in taxes. To put that in perspective, the huge recession involved a shrinking of the economy of less than 6% for a period of 6 months.

Keep in mind that the National Debt is not currently hurting the economy. The concern is that over time it will grow to unsustainable levels. The debt should be contained, but we don't need to crater the US economy to do it. In fact, all that extra debt goes to spending that grows the economy.

The national debt subtracts dollar-for-dollar from the supply of loanable funds. That's money that needs a home. You might've obtained it from someone using a mortgage to buy your house or I might've saved money when a bank uses it to refinance my business. It's money that could put downward competitive pressures on credit card rates and auto loans.

Where there is a viable argument about government debt is that it happens to be cheap in spite of so many reasons that it shouldn't be. It's been that way for years actually, but seems especially true right now. One could argue that the low cost of debt makes for a good long-term deal for the taxpayer, but that argument only applies to government debt purchased by foreigners; otherwise the effect is merely a dollar-for-dollar transfer, not unlike a tax except for a differently-placed burden.

Personally, though, I kind of like that the Fed is instigating a currency war; I hope that post-election politics allow it to be adopted as a matter of fiscal policy as well. But yeah, after this stunt, don't expect much foreign interest in subsidizing our over-consumptive lifestyles.