"Lanny Williams" <lanny[at]loxinfo.co.th> wrote:
- quote -

<OP SNIPPED> Just thought I would add my two cents worth. Without
- quote -

These payments are taxed under my proposal if they involve a
third-party. Moving money from one bank account to another
at the same bank does not trigger the Payment Tax. If the
money goes to another bank, then the Payment Tax would be
due. Is this more of a "problem" than taxing corporate
profits?

- quote -

If people want to send cash through the mail to avoid a 1%
tax, God bless them. I don't think this is a realistic
objection since the tax avoidance would pale in comparison
to current rates of tax avoidance because of one simple
fact. 1% is much lower than 35%, 25%, 15.3%, 15%, or even
10%. Will there be some tax avoidance? Sure. Will it make
a real difference? No.

- quote -

If your transaction involves a bank, then you won't be able
to hide it absent a (foolishly) criminal bank
co-conspirator. If you spend lots of time trying to avoid a
1% tax, I believe you would be less well off than simply
paying it. That's the beauty of it. People will risk jail
time to avoid a 35% tax. Will they do it to avoid a 1% tax?
I don't think so.

- quote -

Maybe the Payment Tax needs another name, but any deposit
into a bank would definitely be taxable under the system I
envision.

Thanks for the helpful analysis. No theory advances much on
compliments alone.

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"Lanny Williams" <lanny[at]loxinfo.co.th> wrote:
- quote -

These payments are taxed under my proposal if they involve a
third-party. Moving money from one bank account to another
at the same bank does not trigger the Payment Tax. If the
money goes to another bank, then the Payment Tax would be
due. Is this more of a "problem" than taxing corporate
profits?

- quote -

If people want to send cash through the mail to avoid a 1%
tax, God bless them. I don't think this is a realistic
objection since the tax avoidance would pale in comparison
to current rates of tax avoidance because of one simple
fact. 1% is much lower than 35%, 25%, 15.3%, 15%, or even
10%. Will there be some tax avoidance? Sure. Will it make
a real difference? No.

- quote -

If your transaction involves a bank, then you won't be able
to hide it absent a (foolishly) criminal bank
co-conspirator. If you spend lots of time trying to avoid a
1% tax, I believe you would be less well off than simply
paying it. That's the beauty of it. People will risk jail
time to avoid a 35% tax. Will they do it to avoid a 1% tax?
I don't think so.

- quote -

Maybe the Payment Tax needs another name, but any deposit
into a bank would definitely be taxable under the system I
envision.

Thanks for the helpful analysis. No theory advances much on
compliments alone.

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This makes perfect sense to me. Circumventing it should not
be all that difficult. And just like all other taxes, only
those who can least afford to pay them will be unable to
avoid them.

Very small businesses will be unaffected. They will pay
their employees and their vendors in cash. The increase
in robberies of delivery truck drivers will be just like
other federal initiatives that pass costs down to local
jurisdictions.

Large businsses can just start paying their employees
monthly, bi-monthly, quarterly with an internal cash
advance system.

But I am very pleased that that is NOT referred to as
a Tax Simplification System when it is just an
introductory form of the dreaded value-added-tax (VAT).

I am trying to figure out how this will make it through
either House of Congress.

Dick

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"Ralph Bristol" <rbristol[at]cox.net> wrote:

- quote -

Ralph, you share two attributes of my father. Same first
name, and you both pointed out the similarity the Payment
Tax has to the Value Added Tax. This might be the most
problematic of the objections I have heard so far. I am not
properly equipped to analyze the effect on prices and
profits a 1% Payment Tax would have if it is applied to the
entire production chain, but that never stopped me before!

If a product has less than 10 intermediaries, with steadily
increasing transfer prices, then the final good would have
less than 10% tax embedded in it, even if the Payment Tax is
applied across the board. Just to use an example, if the
prices are 1,2,3,4,5,6,7,8,9,10, then the final product has
$0.55 of Payment Tax embedded in it, or 5.5%. This doesn't
seem unreasonable to me, considering the VAT rates in
Europe.

To get the ball rolling on implementing the Payment Tax, I
would recommend having it at a very low (one basis point or
1/100 of 1%) rate initially so that we can study how it
affects the production chain. Even at that low rate, I
estimate the Payment Tax would raise $10 billion annually.
This is based on the $66.7 trillion figure from the Fed
study, plus taxing many transactions that weren't included.

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"Arthur L. Rubin" <ronnirubin[at]sprintmail.com> wrote:
- quote -

There are clearly ways to avoid the tax. Barter and
cash-cash deals being among those ways. I don't see those
as deal- breakers.

I have wrestled with the idea of only taxing Payments that
involve 'economic substance'. My current thinking is that
it opens up a can-of-worms, and then require a higher tax
rate than 1%.

Clearly, taxing transfers from one account to another if it
involves switching institutions would have several
side-effects. One would increase the stickiness of assests
within an institution. Another would make chasing marginal
returns uneconomic. There are probably more, but we need to
balance these side-effects against the crazy side-effects
created by our currect IRC.

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The problem with your proposal stems from the fact that the
majority of business transactions are "intermediate" in
nature. Thus any product originates in the mining or
agricultural sector & moves through potentially many
manufacturing, distributing, and retail companies before
being purchased by the final user. Your simple one percent
transactions tax is subject to "cascading," and the actual
rate (as a percent of the "final" sale) will depend on the
degree of integration in the various sectors each commodity
passes through. It is to avoid this cascading that all VATs
(Value Added Taxes) must allow deduction or crediting of all
previously-paid taxes. That's why their rates have to be so
much higher than your one percent!

Ralph Bristol
Green Valley, AZ

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Albert T. Gerra wrote:

- quote -

IMHO, it's a bad idea. Unless modified, it will tax
transfers between one deposit account and another (a
transaction with no economic substance), will tax
repayments, (loan repayments, credit card repayments -- I
think we've just killed the credit card industry), and will
NOT tax barter.

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Albert T. Gerra wrote:

- quote -

Just thought I would add my two cents worth. Without
studying the proposal in any depth, I see at least two
problems.

First, what happens to businesses that transfer money
between bank accounts? For example, a corporate
headquarters transfers money to a branch or subsidiary to
cover expenses. Or, when a company transfers money to
imprest type accounts, such as payroll, etc.

Second, it seems to me that this approach encourages people
to do all their business in cash. If I collect cash from my
clients and pay my bills in cash, I would escape the tax
entirely. Doesn't seem fair to me.

You say that it taxes transactions that are impossible to
hide but, except for major corporations and the like, most
of us probably can hide a lot of transactions. Could be a
lucrative business helping people do so, too.

The basic problem, as I see it, is that not all deposits to
bank accounts represent "payments" and the bank has no way
to know whether any specific deposit is such a payment.

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans

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I am working on a new tax idea for submission to the
president's tax commission, and I was hoping to get some
feedback here. I have more information up at:

http://www.paymenttax.info

but it is still a work in progress. The best way to contact
me is to use the form on the website, or this direct link:

http://www.paymenttax.info/feedback.htm

The idea is to tax the widest possible set of transactions
that are essentially impossible to hide. This enables the
rate to be very low. I use an initial rate of 1% because it
is a round number, but it is not set in stone.

I call it the Payment Tax because all payments are taxed at
1%. Every time money changes hands, the beneficial
recipient of the money would be required to pay 1% to the
government. An exception is if banks are routing money
through the system to a final destination, then only the
final destination would pay the tax.

Typically, the financial institution holding the account to
which the payment is sent is actually responsible for
calculating and remitting the tax, so most people would
never have to worry about the mechanics of paying the tax.
I would also exempt smaller cash-cash transactions to help
simplify things, and also to give a break to lower income
people.

This is a pretty radical idea, but I haven't had anyone poke
major holes in it yet. I have submitted an op-ed piece to
the Wall Street Journal discussing this, but I have not
heard back from them yet. I have also sent the idea to
Martin Feldstein at Harvard, Glen Hubbard at Columbia, and
Ben Bernanke at Princeton.

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