What is The Payments Tax?
The Payments Tax Changes Everything
The problem with the current U.S. tax system is that it primarily taxes one source: income. The income of everyone in America represents only a third of 1 percent of all payments in the economy. Corporate payments are even less.
A Better Way
A more efficient approach would be to tax the transactions in our economy by a much smaller amount. The movement of goods and services can be tracked through transactions exchanged every year in the financial sector, but most are not taxed. These payments totaled more than $5,000 trillion in 2015, and are largely invisible to ordinary Americans.
By contrast, when national income is taxed (about $16 trillion), it must be taxed at an average of 25% to fund the $4 trillion federal budget.
Today, a single person making $100,000 a year pays more than $31,000 in taxes.
With a Payments Tax, instead of paying over $400 in taxes on $1,000 of income, a worker would only pay $1.
Their total income tax would only be $100, and this rate would still be enough to balance the federal budget.
Instead of sending payments to the Treasury Department, the money collected would effectively be deleted from the
supply. In a slow economy, money taken from the economy in a Payments Tax would decrease.
Thus, any spending that exceeded the amount of money removed by the Payments Tax would serve as a stimulus, warming up the economy.In an over-heated economy, the amount of money taken by the Payments Tax would increase and cool the economy.
Consumer spending would go up, as would GDP. Businesses would have more money to hire and grow, as they would not be burdened with corporate or FICA taxes. And, there would be no national deficit.
Foreign corporations and individuals would want to invest in the U.S., resulting in more economic activity – and more payments. The Payments Tax would save Social Security, providing the funds needed to guarantee retirement for all.
How It's Collected
A Payments Tax is paid only on the receiving end of transactions. For example, when a check for $1,000 is deposited into a bank account, the bank would automatically deduct the standard 0.1% tax on payments and credit the account holder with $999.
There would be less incentive for individuals to try to avoid paying taxes, given the low rate. With an income tax, taxes might take 40% of earnings today; the Payments Tax is tiny in comparison.
Income taxes are to a glass of water what the ocean is to transactions
At the very low rate of a tenth of one percent (0.1%), a Payments Tax would eliminate the need for personal and corporate federal income taxes, Social Security taxes, Medicare taxes, capital gains taxes, estate and gift taxes, and even excise and customs taxes.
A rate of 0.1% also would eliminate the need for state income taxes, property taxes and sales taxes.
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