The Transform America Transaction Fee

1
The Transform America Transaction Fee

• A Presentation to the Presidents Advisory Panel
  on Federal Tax Reform
• by
• Jim Baker
• Chairman, Baker Company, LLC

2
Overview

• The Transform America Transaction Fee is a new
  revenue generating idea that would collect a fee
  on transactions regardless of payment method.
• It would apply to retail and wholesale sales,
  business to business purchases and financial or
  other transactions, including intermediate
  interchanges, with payers becoming liable for the
  fee at the point of control.
• The Fee could be assessed as a percentage or on a
  fixed, tiered, or progressive basis.
• Potential exclusions include cash transactions
  under 500, employee salaries/wages and savings
  transactions.

3
Major Features

• Simplicity---the Transaction Fee eliminates the
  federal tax system as we know itincome, payroll,
  corporate profits and capital gains---thereby
  drastically reducing the burden and cost of
  compliance in a transparent.
• Fairness---the Transaction Fee proposal shares
  the burden widely, including capture of
  underground activity and foreign
  transactions---resulting in rate of 0.4,
  achieving revenue neutrality based solely on the
  transactions that move through the Federal
  Reserve.
• Flexibility---the proposal allows for variation
  in rate structure and applicability, thereby
  providing a mechanism to achieve policy goals,
  including encouraging homeownership and charity.

4
Major Features

• Economic Impact---Promotes long-run economic
  growth by lowering tax and compliance costs,
  while allowing policy makers flexibility through
  variation in fee rate and applicability.
• The proposal will
• Motivate firms to undertake projects and workers
  to supply labor.
• Discourage short-term trading in favor of
  long-term investments.
• Decrease the burdens on small businesses,
  allowing these entrepreneurs---the life blood of
  our economy---to focus on the identification and
  satisfaction of customer needs.

5
Conclusion

• The Transaction Fee holds tremendous promise for
  achieving the goals of the Presidents
  initiative. Importantly, the methodology
  proposed for its implementation reflects a
  thoughtful approach that would allow for the
  resulting policy to have mechanisms in place. to
  address national priorities.