[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1601 Introduced in House (IH)]
109th CONGRESS
1st Session
H. R. 1601
To require a study and comprehensive analytical report on transforming
America by reforming the Federal tax code through elimination of all
Federal taxes on individuals and corporations and replacing the Federal
tax code with a transaction fee-based system.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
April 13, 2005
Mr. Fattah introduced the following bill; which was referred to the
Committee on Ways and Means
_______________________________________________________________________
A BILL
To require a study and comprehensive analytical report on transforming
America by reforming the Federal tax code through elimination of all
Federal taxes on individuals and corporations and replacing the Federal
tax code with a transaction fee-based system.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Comprehensive Transform America
Transaction Fee Act of 2005''.
SEC. 2. FINDINGS.
The Congress finds the following:
(1) An effective stimulus plan meets the criteria of job
creation, fiscal responsibility, fairness, targeting of unmet
needs, tax reform and revenue sharing.
(2) The current tax structure creates economic distortions
that limit growth and job creation.
(3) The estimated cost of compliance to taxpayers is five
billion hours and approximately $200 billion.
(4) The tax code produces inefficiency in revenue raising
that forces the nation to struggle unnecessarily under the
burden of unequal and inadequate systems of public education
and health care, a crumbling physical and social services
infrastructure, and a crushing national debt.
(5) Implementing a transaction fee will provide the
structure to maintain current expenditures on defense-related
activities without sacrificing expenditures on additional
important national priorities.
(6) Restructuring the tax code will promote economic
prosperity.
(7) Replacing existing Federal taxes with a fee on
transactions eliminates systemic inefficiency that plagues the
current tax code.
(8) Economic analyses have estimated a transaction fee
would allow businesses to undertake projects that are not
profitable in the current tax system, and workers would be more
willing to supply labor.
(9) Responsible tax reform is necessary for all to enjoy
financial security, economic prosperity, educational
opportunities, and affordable health care.
(10) Therefore, the Department of the Treasury shall
prepare a comprehensive analytical report to achieve these
stated goals.
SEC. 3. STUDY ON THE IMPLEMENTATION OF A TRANSACTION FEE.
(a) In General.--The Secretary of the Treasury shall conduct an in-
depth study on the implementation of a transaction fee in the United
States. In particular, such study shall include a comprehensive
analytical report of the proposal outlined in subsection (b) (as well
as an implementation/action plan) to replace all existing Federal taxes
with a per transaction fee based on the value of the transaction.
(b) Transaction Fee Proposal.--
(1) In general.--The fee under the proposal would apply to
all non-cash transactions (including checks, credit cards,
transfers of stocks, bonds, and other financial instruments)
and all high-dollar cash transactions.
(2) Potential exclusions.--The fee would not apply to--
(A) cash transactions of less than $500,
(B) salaries and wages by employers to employees,
and
(C) transactions involving individual savings
instruments through financial institutions.
(3) Cash withdrawals from financial institutions.--The fee
under the proposal would apply to cash withdrawals from
financial institutions and be set at a rate that is either
double or higher than the standard transaction fee.
(4) Fee rate.--
(A) In general.--The fee rate is set at a level
sufficient to generate revenues equal to revenues under
the Internal Revenue Code of 1986.
(B) Other potential uses of fee.--The fee rate
could be structured to cover 1 or more of the
following:
(i) A national debt reduction plan
requiring elimination of the current national
debt of $7.7 trillion over a period of 10
years, with equal annual payments.
(ii) A Federal revenue sharing program
providing funding to States to support 50
percent of the K-16 education costs of each
State which agrees to adopt an equitable public
school finance system.
(iii) A plan to meet the promised levels of
certain provisions listed under the National
Security Intelligence Reform Act of 2004
(Public Law 108-458), including those sections
related to air cargo security (subtitle C of
title IV of such Act), detention bed space
(section 5204 of such Act), and border patrol
agents (section 5202 of such Act); to create a
dedicated funding stream for port security and
improvements at levels recommended by the
United States Coast Guard; and to increase
expenditures for first responder grant programs
funded under the Department of Homeland
Security.
(iv) A Federal program providing quality
health care insurance coverage (for the current
estimated 45 million uninsured Americans).
(v) An increase in the military basic pay
rate to a level comparable with that of Federal
civilian pay, considering, but not being
limited to, the following criteria: age,
education, skills, years of service, and
responsibilities.
(vi) A Federal revenue sharing program
supporting community and economic development
investments in new markets (rural and urban
areas) at a level equal to 10 percent of
current Federal tax revenues.
(vii) A plan to increase the pay for
National Guard and Reserve soldiers to that of
active duty military for periods of extended
deployments abroad.
(viii) A Social Security and Medicare
solvency plan ensuring that revenues continue
to exceed expected outlays.
(5) Progressivity.--The base standard transaction fee shall
not be greater than 1 percent for all noncash transactions
under $500. If more revenues are needed to meet the
requirements of paragraph (4), the Secretary of the Treasury
would calculate the minimum level of progressivity required to
cover these costs. This progressivity factor may include--
(A) a higher transaction fee for all transactions
above $500, and
(B) a progressive schedule of rates to tiered
ranges of transactions above $500.
(6) General provisions.--
(A) Liability for fee.--Persons become liable for
the fee at the moment the person exercises control over
a piece of property or service, regardless of the
payment method.
(B) Collection.--The fees will be collected by the
seller or financial institution servicing the
transaction.
(c) Report of Study.--
(1) In general.--The results of the study shall be
submitted to the Congress by the Secretary of the Treasury in a
comprehensive analytical report, detailing--
(A) the methodology employed in the calculation of
the fee rate,
(B) the factors considered in assessing feasibility
of the proposed revenue generating system and the
weight applied to each, and
(C) the portion of the transaction fee attributable
to each of the programs identified in subsection
(b)(4)(B) and the methodology used to calculate each.
(2) Other requirements.--The study shall (in the following
order)--
(A) compute the fee needed to meet current revenue
generation,
(B) compute the fee needed to meet revenue
neutrality and generate additional revenue to support
the program described in subsection (b)(4)(B)(i)
(relating to national debt reduction plan),
(C) compute the fee needed to meet revenue
neutrality and generate additional revenue to support
all the programs described in subsection (b)(4)(B), and
(D) determine the utility of pegging changes in the
transaction fee schedule of rates to the rate of
inflation.
(3) Comparative analysis.--The study shall include a
comparative analysis of the existing revenue-raising system
versus the proposed fee-based system on economic behavior. The
study shall include an analysis of effect of the 2 systems on--
(A) job creation,
(B) economic growth,
(C) consumption,
(D) investments, and
(E) savings levels.
(4) Types of transactions.--The study shall include a
broad-based examination of all types and categories of
transactions, including information on frequency and value of
transactions in each category.
(5) Impact of exemptions.--The study shall examine the
impact of the transaction fee exemption for all cash
transactions under $500.
(6) Program operations.--The study shall provide
instructions on program operations, including--
(A) transaction fee collection,
(B) transaction fee implementation, and
(C) transaction fee compliance, enforcement, and
administrative costs.
(7) Distortions.--The study shall include an analysis,
prepared by the Secretary of the Treasury in consultation with
the Secretaries of Commerce and Labor, offering methods of
preventing and relieving potential distortions among economic
sectors created by the implementation of the transaction fee.
The study shall also include an analysis of the feasibility of
temporarily (for a period of not longer than 1 year) reducing
the fee rate (as otherwise determined in subsection (b)(4))
applicable to an economic sector if such sector is experiencing
pronounced economic distress.
(8) Fee as tool of fiscal policy.--The study shall assess
the transaction fee as a tool of Federal fiscal policy,
including an impact analysis on the elimination or retention of
existing tax expenditures, incentives, penalties, and credits.
The study should also research and comment on options for
rebating citizens currently not subject to Federal income taxes
or other current aspects of the Federal tax code including, but
not limited to--
(A) the earned income credit,
(B) the alternative minimum tax,
(C) the child tax credit, and
(D) the deduction for mortgage interest.
(9) Impact of fee by income levels.--The study shall
include an assessment of the impact of the transaction fee by
quartile income levels.
(10) Implementation plan.--The study shall include a
detailed action plan on how best to implement a transaction fee
in the United States and shall include information on timeline,
agency reform, potential pertinent regulatory issues, and type
of congressional action needed.
(11) Internal revenue service.--The study shall--
(A) assume the transition and grandfathering of all
existing personnel of the Internal Revenue Service,
(B) examine elements of the current Internal
Revenue Service needed to administer the transaction
fee, and
(C) examine the feasibility of modifying the
overall mission and jurisdiction of the Internal
Revenue Service from one focused on tax law application
to one focused on uncovering waste, fraud, and abuse
throughout the Federal Government.
(d) Due Date.--The report of the study shall be submitted to the
Congress not later than 1 year after the date of the enactment of this
Act.
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