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'Tax Everything' tax would bring in $4.4 trillion
Posted By Drew Zahn On 10/26/2010 @ 9:38 pm In Front Page | Comments Disabled
U.S. Rep. Chaka Fattah, D-Pa., has a plan for eliminating the multitrillion-dollar national debt: Tax everything.
Earlier this year, Fattah introduced H.R. 4646, the “Debt Free America Act,” which would impose a massive new tax for a period of seven years, while the national debt is being paid off. And once the debt is paid, the bill would eliminate the individual income tax, supplanting it with the new, “transaction” tax instead.
Specifically, H.R. 4646 would levy a 1-percent tax on every transaction of any kind that uses check, cash or credit cards (with a path in place for also taxing stock transfers), whether done at the bank, grocery store, nail salon or even through the Federal Reserve.
In other words, if a man deposits his paycheck into the bank, there would be a 1-percent tax levied on the “transaction.” When the same man then withdrew the money through an ATM, there would be another 1-percent tax. When he spends the money to have his car’s oil changed, there would be another 1-percent tax, and so forth.
And though the bill’s language currently excludes transactions involving stock, the exclusion can be waived if the Treasury secretary recommends waiving it.
Not only consumers would pay the tax, however, but also banks when transferring money, businesses when purchasing supplies and when paying employees, and so forth. Any time money changes hands, someone pays the tax.
“There is no question Congress must begin to make some hard choices now,” Fattah’s website declares in advocating the measure. “If Congress fails to act, inflationary pressures triggered by staggering debt will create economic conditions unlike anything ever experienced in the history of this country, including the Great Depression.”
Fattah adds in a statement introducing the measure, “The scope of this challenge requires bold and fresh thinking, but it can be done. … In order to avoid a financial crisis of epic proportions, Congress must take decisive action.”
According to an analysis by attorney Lanny Davis published in The Hill, there was $755 trillion in total transactions in the U.S. in 2008, $443 trillion if exempting stock transactions. Using 2008′s numbers, then, Fattah’s proposal would constitute during its first seven years – less a tax credit the bill includes for those making less than $100,000 annually – a $4.43 trillion tax hike, or roughly 30 percent of the nation’s gross domestic product.
Fattah has claimed such a tax is not only necessary to avoid a mounting debt crisis, but would also bring in so much money it could eventually replace the income-tax system, fund universal health care, support public schools and more:
“When enacted, the transaction fee I am proposing will generate sufficient revenue to maintain a fiscally responsible budget and allow the federal government to meet its financial obligations, while paying down and ultimately eliminating the oversized national debt,” Fattah contends.
According to the specific language of the bill, the tax “is intended to raise sufficient revenue to eliminate the national debt, which was $10.6 trillion in January 2009, during a period of 7 years and to phase out the income tax on individuals.”
The current national debt exceeds $13.6 trillion.
Out of the annual, multitrillion tax bounty it proposes, H.R. 4646 returns to taxpayers a tax credit equal to 1 percent of an individual’s adjusted gross income for those making less than $100,000 annually or more than $250,000 on a joint tax return, with lessened tax credits upon a preset ratio for higher earners.
The bill further creates a “Bipartisan Task Force for Responsible Fiscal Action,” which is charged with analyzing federal deficit spending and making legislative recommendations.
Finally, the bill eliminates the individual income tax beginning on Jan. 1, 2018.
Fattah has introduced similar measures in years past, seeking only a feasibility study on the proposal to be conducted by the U.S. Treasury as part of his 2004 “Transform America Transaction Fee” bill.
At the time, Fattah’s website boasted, “The proposed transaction-fee-based system would generate revenues equivalent to current collections from all federal taxes, while conceivably supplying additional income. The excess funds would serve to eliminate the current national debt, provide universal health care, support an equitable public-school finance system, and fund economic development in urban and rural areas.”
Failing to gain even a single cosponsor, Fattah introduced a similar measure in 2005, 2007 and 2009. The 2007 bill gained one cosponsor, Rep. Brian Baird, D-Wash.
The current Debt Free America Act, which calls not for a feasibility study but full implementation of the tax itself, has been referred to the House Committee on Ways and Means without any cosponsors.
Rep. Peter DeFazio, D-Ore., and Sen. Tom Harkin, D-Iowa, had been falsely rumored to be cosponsors because of their proposals that also taxed “transactions.” DeFazio’s and Harkin’s plans, however, only levied a 0.25-percent tax on securities and commodities as a way of recouping the costs of Wall Street bailouts.
“I do not support Rep. Fattah’s H.R. 4646 because it wrongly targets all financial transactions, rather than just focusing on the Wall Street speculators that got us into this economic mess,” DeFazio told Brooks Jackson of FactCheck.org last month. “An average American making normal day-to-day transfers of money should not be taxed on those transactions.”
Fattah hails from the predominantly Democratic and urban district that includes portions of North and West Philadelphia and is listed by the Democratic Socialists of America as one of 70 members of the U.S. Congress who are also members of the organization.
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