The Transform America
Transaction Fee
A Presentation to the President’s Advisory
Panel on Federal Tax Reform
by
Jim Baker
Chairman, Baker & Company, LLC
Overview
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The Transform America Transaction Fee is a new
revenue generating idea that would collect a fee on
transactions regardless of payment method.
It would apply to retail and wholesale sales, business to
business purchases and financial or other transactions,
including intermediate interchanges, with payers
becoming liable for the fee at the point of control.
The Fee could be assessed as a percentage or on a
fixed, tiered, or progressive basis.
Potential exclusions include cash transactions under
$500, employee salaries/wages and savings transactions.
May 11, 2005
Transform America Transaction
Fee Presentation
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Major Features
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Simplicity---the Transaction Fee eliminates the federal
tax system as we know it—income, payroll, corporate
profits and capital gains---thereby drastically reducing the
burden and cost of compliance in a transparent.
Fairness---the Transaction Fee proposal shares the
burden widely, including capture of underground activity
and foreign transactions---resulting in rate of 0.4%,
achieving revenue neutrality based solely on the
transactions that move through the Federal Reserve.
Flexibility---the proposal allows for variation in rate
structure and applicability, thereby providing a
mechanism to achieve policy goals, including
encouraging homeownership and charity.
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Fee Presentation
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Major Features
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Economic Impact---Promotes long-run economic growth
by lowering tax and compliance costs, while allowing
policy makers flexibility through variation in fee rate and
applicability.
The proposal will:
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Motivate firms to undertake projects and workers to supply
labor.
Discourage short-term trading in favor of long-term
investments.
Decrease the burdens on small businesses, allowing these
entrepreneurs---the life blood of our economy---to focus on
the identification and satisfaction of customer needs.
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Fee Presentation
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Conclusion
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The Transaction Fee holds tremendous promise for
achieving the goals of the President’s initiative.
Importantly, the methodology proposed for its
implementation reflects a thoughtful approach that would
allow for the resulting policy to have mechanisms in
place. to address national priorities.
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Transform America Transaction
Fee Presentation
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