The Business Transfer Tax for Comprehensive Reform of the Federal Tax Code

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The Business Transfer TaxforComprehensive
Reform of theFederal Tax Code

• Presented by
• David A. Hartman
• The Lone Star Foundation
• 10711 Burnet Road, Suite 330
• Austin, Texas 78758

Phone [phone]
Website lonestarfoundation.org
Fax [phone]
Email dahartman_at_hartman-llc.c
om
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Recommendation For Comprehensive Reform of the
Federal Tax Code by Adoption of the Business
Transfer Tax (BTT)

• A Subtraction Method Value Added Tax (VAT)
• Consumption Based by Expensing Fixed Investment
• Border Adjusted by Taxation of Imports and
  Crediting
• of Exports
• Replaces Three Quarters of Federal Taxes
• Supersedes all Income and Wealth Taxation
• (other than Individual Social Insurance Taxes)

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The BTT Base is Determined
for Commercial Activities All
Revenues less Export Sales less
Purchase of Goods Services (Including
Fixed Investment) plus All Imported
Purchases equals BTT BASE for Governments
Not-For-Profits All Employment
Expenses plus All Imported
Purchases equals BTT BASE
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The BTT Supersedes the following Federal Taxes

• Individual Income Taxes
• Corporate Income Taxes
• Employer Social Insurance Taxes
• Estate and Gift Taxes
• Custom Duties

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BTT SINGLE TAX RATES
Tax Revenue Neutral 17.0 BTT Tax Burden
Neutral 18.2 BTT
Note Both Rates Provide Found Money From
Taxing Net Foreign Trade 18.2 provides funding
for transition or deficit reduction at the
present tax burden on U.S. Citizens.
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The BTT Prevents Regressivity

• Provides rebates to all citizens of the BTT tax
  on
• Family based poverty level income
• Charitable giving
• Home mortgage interest
• Taxes income above poverty level proportionate to
  consumption
• Terminates Capped Employer Social Insurance
• (but Retains Federal Match of Individual
  Contributions)

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MISCONCEPTIONS ABOUT THE BTT

• Border Adjusted Taxation via the BTT is NOT
  Protectionism It Only equalizes the Competitive
  Hurdles for U.S. Producers.
• VAT Taxation was NOT the Cause of Runaway Welfare
  Spending in Europe It was Due to Adopting VAT
  Taxes In Addition to Rather Than Replacement of
  Income Taxation As Proposed for the BTT.
• Border Adjusted Taxation is the Only Realistic
  Basis for Equalizing Prices to End the Trade
  Deficit Hemorrhage and the Manufacturing Crisis.

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• ECONOMIC PROBLEMS Addressed by BTT REMEDIES
  
• ? The Manufacturing Crisis ? Border Adjusted
  Taxation
• ? Saving for Investment Deficit ? Consumption
  Taxation
• ? Outsourcing of Services ? Border Adjusted
  Taxation
• ? Relocation of Corporations ? End Corporate
  Income Tax
• ? Declining Labor Incomes Share ? Exempt
  Investment for Growth
• ? Increase Growth of all Incomes ? All BTT
  Remedies
• ?Terminate Complex and Inefficient ?Simple,
  Broadest Base for Lowest Income Taxes
  Rate BTT
• (See Appendix for Details)

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APPENDIX
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APPENDIX AThe Manufacturing Crisis

• Foreign Producers are More Competitive than U.S.
  Producers Due to the Price Advantage of Border
  Adjusted VAT Taxes. (see EXHIBIT A-I A-II)
• Manufacturing has declined more than 50 as GDP
  from the Mid-Sixties to present. (see EXHIBIT
  A-III)
• Since 1998 alone the Manufacturing Sector has
  terminated 20 of its employees its worst
  layoff since the Great Depression. (see EXHIBIT
  A-III)
• The U.S. now produces only 2 of every 3 of
  goods consumed. (see EXHIBIT A-IV)
• NAM has cautioned that the decline of
  manufacturing risks loss of critical mass.

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FOREIGN VAT TAXATION
EXHIBIT A-I
Standard VAT RATE EU-15 Countries,
Average 19 China 17 Canada 15
Mexico 15 30 OECD Countries 18 Or
border adjusted tax equivalent (Source EU-15
and OECD Data, Misc. Websites)
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EXHIBIT A-II
COMPARISON OF U.S. VS. FOREIGN VAT ADJUSTED
PRICES FOR COMPARABLE COST PRODUCERS(Assumes
Average OECD VAT Rate)
DAH/LSF/5-05
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EXHIBIT A-III
DAH/LSF/5-05
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EXHIBIT A-IV
DAH/LSF/5-05
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APPENDIX B EFFECT OF THE MANUFACTURING CRISIS ON
U.S. EMPLOYMENT

• The Average Hourly Real Wage of Production
  Workers, has Declined 13 since 1978.
• (Source 2001Statistices for All
  Manufacturing, Census Bureau)
• The Displacement of Manufacturing Employees to
  Highly Price Elastic Employment in Services has
  Contributed to Stagnation of Income for 90 of
  U.S. Employees. (see EXHIBIT B-D)
• This Income Stagnation Coincides with both the
  Production Gap and the Preceding Adoption of
  Foreign VATs that are a Principal Cause. (see
  EXHIBIT A-IV)
• Progressive Taxation as Measured by the Income
  Tax Share Top 10 of Incomes Appears to
  Negatively Effect Incomes of the Other 90 due to
  Real Incidence of Capital Taxation on Labor. (see
  EXHIBIT B-I)

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EXHIBIT B-I
DAH/LSF for
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APPENDIX C OUTSOURCING OF SERVICES

• The surplus in Services is Declining due to
  flight of Corporations to Foreign Tax Havens with
  Territorial Corporate Taxation, and Outsourcing
  of White Collar Services Abroad
• (See EXHIBIT C-I)

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EXHIBIT C-I
DAH/LSF/5-05
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BTT ADVANTAGES OVER ALTERNATIVES