By DV82XL, Section Commentary Posted on Mon May 21, 2007 at 11:41:51 AM PST
Is it possible to have a system of taxation which is simple, efficient, progressive, and revenue neutral replacing all current taxes? The answer, according to University of Wisconsin Professor of Economics Edgar L. Feige, as it turns out, is yes.
Feige believes that by capitalizing on financial data processing technology, it is possible to create a tax code for the 21st century that is easy to understand, that is easy to administer and is easy to comply with because it eliminates the need to file tax or information returns. The system, developed by him is called the APT or Automated Payments/Transaction Tax.
In short, the APT tax would impose a single tiny tax rate on each and every transaction in the economy. Since the volume of all transactions in most Western economies 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.
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.
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