Have you ever heard of Congressman Chaka Fattah from Pennsylvania? He is a senior member of the House Appropriations Committee. This committee is responsible for setting spending priorities for over $1 trillion in annual discretionary funds. If you visit his website, you will see that under his current congressional initiatives, he is sponsoring proposed legislation to eliminate the national debt, reduce the national deficit, and reform the current tax system.
It is titled the Debt Free America Act (House of Representatives Bill 1125). It was proposed in March 2011 and has been referred to the House Ways and Means Committee and also to the Committees on the Budget, Rules, and Appropriations. The measure calls for a dedicated penny fee on every dollar transacted in the United States. In addition to eliminating the national debt, the bill provides the framework for fundamental federal tax reform by eliminating the federal personal income tax and the Alternative Minimum Tax (AMT) 10 years after the billâs implementation. We donât hear much about this proposal these days, because we are in an election year. I suspect we wonât hear anything about it until after the November elections.
Letâs take a closer look at the details included in proposed H.R. 1125. Following is an extract from the proposal: âThere is hereby imposed on every specified transaction a fee in an amount equal to 1 percent of the amount of such transaction. The term âspecified transactionâ means any transaction that uses a payment instrument, including any check, cash, credit card, transfer of stock, bonds, or other financial instrument. EXCEPTIONS: The term âspecified transactionâ shall not include (A) any transfer between accounts of the taxpayer, and (B) any deposit into a personal account of an individual. The term âtransactionâ includes retail and wholesale sales, purchases of intermediate goods, and financial and intangible transactions.â
A âpenny feeâ does not initially sound earth shattering until you consider that it is a penny on every dollar you spend! That is a dollar for every $100 you spend. For example, a monthly mortgage payment of $1,000, becomes $1,010. Now, if they eliminate the Federal personal income tax, that isnât a bad deal. However, even if they are successful in eliminating the Federal income tax, we would have to wait 10 years! Thatâs a huge number of pennies we will have to pay. Such a fee is a flat tax since it impacts everyone equally. Of course, the more you spend, the more you pay, even if you pay in cash!
The other aspect of such a âtransaction taxâ is that it becomes a tax on a tax. When wholesalers purchase goods for resale, they pay the tax and it becomes part of the cost that gets passed on to us as consumers. We pay the âtransaction taxâ again when we purchase the goods retail. On the positive side, wouldnât it be nice if our children could live in America debt free and not have to pay any personal Federal income taxes?
Keep those letters coming, folks. Send your questions and ideas to: The Frugal Forum, P.O. Box 693, Huntley, IL 60142, or, by email to: thefrugalforum@gmail.com.
