The Transaction Fee

The National Foundation for the Treatment of Pain

“The Transaction Fee”

A Radical New Solution for Taxation in the United States

Joel Simon Hochman MD

Executive Director

January 3, 2008

The designers of the Constitution of the United States were neither naïve nor stupid. Their insights were monumentally brilliant and created an approach to government that became the ideal and model for modern democracy. Nothing subsequent, since 1783, has surpassed its wondrous wisdom and extraordinary vision.

Concerning the creation of any federal tax on individuals (and by modern implication – corporations) the Constitution contained a guideline that was astonishing in its simplicity and awesome in its power. The Constitution simply stated that, “no federal tax may be imposed upon individuals unless it is based upon a census.”

This requirement was hardly the result of circumstance, accident or whimsy. Rather it was extraordinarily prescient. It anticipated the manipulation of taxation by special interests though political privilege and simply eliminated the possibility. Through this simple requirement, it provided that a tax on individuals (and in our modern age, corporations), could only be imposed by 1) calculating the total cost of government and 2) dividing that cost by the total number of individuals - established by a census. In other words, any burden of taxes was to be equal for all. No privilege could be allowed. No loopholes were permissible. No tax privilege could be lobbied through the Congress. No legislator would have tax privileges to sell to special interests. Taxation could only conform to the ideals of our democracy.

Using the smokescreen of “the need to pay off the costs of World War I”, Woodrow Wilson’s administration completely subverted this Constitutional safeguard with the passing of the 22^nd Constitutional Amendment, which eliminated the census requirement. In a stroke, tax privilege and the sale of privilege by congressional politicians, were created. The result now, in 2008, is a current tax code that is thousands of pages in length, is complex beyond the grasp of any ordinary person, is criminal in its manipulativeness, has created a nightmare for the citizenry every April 15^th, and empowers the government to demand that every citizen reveal every detail of their income and expenditures and assigns agents of the government to surveil, phone tap, spy and record every detail of every citizen’s life.

Without a doubt, the drafters of the Constitution must spin in their graves like turbines because of this. Considering that our revolution was fought over a tax on tea (imposed without representation) our current system of taxation makes the tyrannical aspirations of King George III look like the totalitarian ambitions of Boy Scouts.

The TRANSACTION FEE provides a complete solution to this historical blunder and national folly.

The Transaction Fee

The United States Department of Commerce routinely tracks more than 80 economic activities.. Simply stated, the sum total of all economic activities could be defined as the Gross National Economic Activity.

ITEM	AMOUNT
Domestic Income and Product	$13,194,700,000.000
Private enterprise	$5,814,500,000.000
Personal Income and Outlay	$10,983,400,000.000
Government receipts and Expenditures	$3,934,800,000.000
Foreign Transactions	$2,159,000,000.000
Domestic Capital transactions	$18,488,000,000.000
	$54,574,400,000.000
US Purchases of Foreign Stocks and Bonds	$5,862,690,000,000
US Sales of Foreign Stocks and Bonds	$5,573,268,000,000
Gross Foreign Purchases of US Long term Securities	$10,142,132,000,000
Gross Foreign Sales of US Long term Securities	$9,324,271,000,000
Gross Foreign Purchases of Marketable US Bonds and Notes	$10,958,869,000,000
Gross Foreign Sales of Marketable US Bonds and Notes	$10,794,226,000,000
US Stock Market Sales Annually	$51,000,000,000,000
NASDAQ	$12,400,000,000,000
US Bonds sales-annual	$25,200,000,000,000
	$141,255,456,000,000
TOTAL of all Transactions	$195,829,856,000,000
Transaction Fee Computation	2.07%
(US Budget/Total Economic Activities)
$3.95 trillion/ $ 195.830 trillion

The Transaction Fee is defined as: The ratio of the total cost of government - divided by the Gross National Economic Activity. This ratio, converted into a percentage, would be essentially 2%.

The Transaction Fee would be a fee of 2.5% [1] imposed on every economic transaction, payable at the time of the transaction. All transactions by business, institutions, government, corporations, would be paid immediately to the Internal Revenue Service. All transactions between individuals would be recorded on a triplicate form obtained from the US Postal Service. Each triplicate form would be identified by a unique identifier number. Every transaction between individuals would be recorded on this form. The fee due would be sent, with one copy of the form, to the Internal Revenue Service. The other two parts of the form would be retained by the two parties to the transaction. No personal identification would be necessary on the form. For purposes of possible audit, all copies would be retained by the parties for a period of five years. The new role of the Internal Revenue Service would be to receive the Fees paid by all. Additionally, the IRS might investigate, through conducting “stings”, the possibility that some people, of criminal persuasion, might be stupid and venal enough to try to avoid paying the trivial fee.

No annual tax return would be necessary. All other forms of taxation will be eliminated. No surveillance, investigation, reporting or governmental taxing activity would exist. No deductions, exemptions, special privilege, inducements, incentives, etc. will exist. The tax code will be approximately one page in length. Payment of the Transaction Fee will become so inconsequential as to make payment to support the cost of government trivial for all citizens and entities. All other forms of taxation will be eliminated in a stroke.

Wealth will be maximally generated and encouraged. Inheritance will no longer become the affair of any governmental agency. The burden of paying for government will again become completely democratic, as the more any individual or entity transacts, the more total fees they will pay. Conversely, individuals with less income and fewer transactions, will pay proportionately less.

Lastly, because of the absolute desirability and unmatchable advantages of the Transaction Fee system, every person of means throughout the world will want to maintain their assets and conduct their business in the United States, guaranteeing the economic health of our country in perpetuity.

The only liability connected with the Transaction Fee System is that the implementation of the scheme will have to be phased in over a three year period, because implementation will immediately increase the income and cash available to all citizens by at least 33% (by eliminating W-2 tax withholding from paychecks). The potential for severe economic inflation because of this will have to be avoided by phasing in the Transaction Fee system. One third of the population, randomly selected, will begin the System each year, until, after three years, all citizens utilize it.

The Transaction Fee is a radical solution to taxation that conforms entirely to the vision of the framers of the United States Constitution, is trivial in amount, and therefore the only form of taxation that is legitimate in our democracy. It permanently eliminates tax privilege[2], tax complexity, and the sale of tax privilege by the Congress and its members, terminates a major share of the activities of lobbyists, and frees the people from the current, shameful and intolerable tyranny of taxation in the United State.

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So, Mr. Obama, here you are. Here is your radical solution for making America the nation our founding Fathers intended. Its time has come and you have the opportunity. Forget incremental change, temporizing hearings, compromise, negotiation, committee reviews, lobbyist input, trade group whining and waffling, yammering and dissembling. Simply propose the System to the people as part of your platform of radical change to fix our Nation. The People will go to the streets and to the barricades to support you. It is obviously the completely right thing for Democracy. (And anyone who opposes it will obviously be a foe of the People and an enemy of a democratic nation.)

By the way, Mr. Huckabee has recently started proposing a flat tax, but not based upon all transactions. Consequently his tax rate would be in excess of 25%! (and is both totally unnecessary and unacceptable.)

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[1] This rate is calculated from data reported for 2006 by the U.S. Department of Commerce. For the sake of discussion, the actual rate of 2.009 % is increased to 2.5%. The additional revenue this will generate - $400 Million/year - should be earmarked for the elimination of the federal debt and for the establishment of an operating reserve for the federal government.

[2] The legislation of a simple federal law, making it a criminal offense for any Congressperson to vote on any issue related to which they have received a political contribution, would eliminate the purchase of influence. It would not prevent contributions to support the political careers of politicians. But it would make it a crime to attempt to influence legislature through such supportive contributions. Such a law would actually protect politicians – as they could accept contributions but refuse to have their vote influenced - by explaining that for them to vote on legislation that was related to the interests of the contributor would be a felony.

Letter to President Obama

Joel Simon Hochman MD

Psychiatric Medicine since 1970

Pain Management since 1990

1714 White Oak Drive

Houston, TX 77009

(713) 862-9332 voice (713) 862-7677 FAX

jfshmd@gmail.com

July 29, 2009

President Barack Obama

The White House

1600 Pennsylvania Avenue

Washington, DC 20500

Dear President Obama:

I am writing to offer this physician’s views on National Health Care.

I have been a physician for 43 years. I participated in Medicare and Medicaid for 32 years, until 3 years ago. I opted out when I could no longer put up with pennies on the dollar for my services, endless paperwork, the constant threat of "investigation" by ambitious bureaucrats who cared absolutely nothing for the patients, and the endless, mindless, requirements, regulations, audits, and registrations.

At the same time I bailed out of all HMOs, physician "panels" and quit accepting insurance assignments. I told my patients I would do everything I could to help them get whatever reimbursement they could battle out of their insurers. I pointed out that I was now of an age when I could no longer be sure I'd live long enough to see any money from their insurer. Not a single one of my patients had any problem with my decision. Every single one (including the Medicare and Medicaid patients!) stayed with me and became self-pay, and happily so in exchange for my deep dedication to their well-being. I still battle with insurers to obtain "prior approval" of their medications. What a joke! Imagine having to argue with a high school graduate that the prescription you wrote was medically necessary (do they think I write prescriptions for a lark or as a hobby? Right!)

We all know that there is an inherent conflict of interest for insurance companies in health care. Insurance companies are about making money (by loaning it out at interest), and paying health care benefits takes money away that they'd rather keep to loan out. So they spend hundreds of millions figuring out schemes to deny, delay, defer or reduce the benefits they have to pay. They are NEVER going to get right with the patients. The conflict of interest is irresolvable. They have NO business being in health care. Knowing that is why they are spending hundreds of millions lobbying to keep a strangle hold around the throat of health care. I say this is the opportunity to rescue Health Care from them.

Everyone is sick of them, doctors AND patients. The insurers already admit that almost $.33 of every dollar spent on health care goes to insurance company overhead. But when one gets under the skirts of the big insurance company corporations, one finds that the story is far more egregious. When one includes all the special commissions, bonuses, golden parachutes, corporate perks, privileges disguised as business expenses (corporate jets, political contributions, lavish board meetings and management retreats, billion dollar corporate facilities) one discovers that the actual “overhead” of health care corporations approaches 70%!!

Further, objective examination of the “investment” activities of these corporations reveals that they are generally financial calamities. They invest in the projects of their golfing buddies, country club cronies and good old boy networkers. It doesn’t matter if the investments are doomed from the start. The insurance companies then need only to go to their State Insurance Commission (members appointed from the same clubby network by Governors to whom they have made tax-deducted contributions) and cry crocodile tears about their operating losses. Their Commission buddies then hold their tear-stained hands and reassure them that things will be all right. They simply need to increase their rates and premiums to make things work again for the next year of mismanagement. Having no alternative option, consumers bear the additional burden.

So, the point I want to make is that when it comes to government run Health Care, and Health Care ravaged by corporations – “A POX ON BOTH OF THEIR HOUSES!”

To be constructive, it is abundantly clear to any objective observer that TWO goals must be achieved to save Health Care in America and to provide it equitably to every citizen.

First, balance must be established in the world of corporate health care insurers. Currently there is NO true competition in the industry. There is not 5% difference in the premiums or practices of the major insurers. On the golf courses and in the privileged retreats of these self-declared entitled elite they plan and conspire. Thus they all pursue the same strategies and policies – to charge basically the same premiums, to cherry-pick the public, to deny, defer, delay and reduce health care insurance benefits - and to maximize the profit from health care insurance premiums. Only when there is a REAL source of competition, such as from the Government-sponsored alternative you have proposed, will balance and genuine competition occur. Only when the private corporate insurers have to really compete, will they.

The second goal has to do with the government sponsored alternative. If it is a governmental bureaucracy, peopled by career bureaucrats, it will fail utterly. The sad reality is that when people work for the government they rarely have the same values and goals of people who work in the private sector. Career workers in government conform to the institutional imperatives of governmental agencies – not making waves, conforming to the political priorities of the moment, making their bosses look good, staying within budget, hanging in there for 25 years to get to retirement, with benefits. They have no desire or need to provide services or compete for consumer satisfaction. When confronted with pleasing management or pleasing the consumer, choosing the latter is the kiss of death for a bureaucrat. And the culture of bureaucratic institutions is not likely to ever change (and certainly not in just eight years of your administration).

To succeed, the second goal must be to create a governmental alternative insurance for health care that is truly consumer oriented. That can only be achieved by creating a semi-governmental entity – where the executive level of management is appointed, with consent and advice of the senate, but in which the employees are private sector people – whose professional and career success depends on efficiency, intelligence, objectivity, and maximum service to the consumer.

Currently we see a feeding frenzy of “swift-boat” propaganda. The insurers (and Big Pharma) are spending tens of millions of dollars on fear-based propaganda to try to sabotage the reform of health care. They know that they must succeed in this if they are going to be able to continue the rape and pillage they have so long enjoyed.

We only need to look at the debacle of the “Part D” medication benefit of Medicare to see what unfettered corporations will do. Let me be specific:

1. 64% of all prescriptions physicians write every year are written for “off-label” indications. Example: The most commonly prescribed preventative for migraine headaches is Topirimate (Topamax). However, the only FDA approved indication for Topamax is seizure control. The Part D Medicare law specifically states that Insurers do not have to pay for any prescription that is written “off-label”. So, the law effectively allows insurance corporations to NOT have to pay for 64% of all the prescriptions written every year.

2. The second most commonly prescribed category of prescriptions written every year is for benzodiazepine medications (Valium, Klonopin, Xanax, etc.) Under the Part D Medicare medication law, NO INSURER has to pay for ANY benzodiazepine prescription! (Saving them hundreds of millions of dollars, the cost of which is transferred to Medicare patients.)

3. By law, under the Part D Medicare Medication Act, Medicare CANNOT negotiate with any drug manufacturer over the price of medications. This guarantees that every Medicare beneficiary (53 million of them) MUST PAY RETAIL for all of their medications (the very same drugs, from the very same manufacturers, cost 40% less in Canada.)

4. After insurers pay for approximately $3,000 for medications, the next $3500 must come directly out of the Medicare beneficiary’s pocket (retired people on fixed incomes who then have to choose between the medications they need and buying food.) If half of the Medicare beneficiaries reach the “donut hole”, this relieves insurers of having to pay 25 million X $3500/year in benefits ($87.5 Billion).

5. Insurers, under Medicare Part D, with a stroke of Mr. Bush’s fountain pen, gained additional income of 53,000,000 X $35 per month ($22.26 Billion per year, guaranteed).

If corporate insurers and corporate drug manufacturers are allowed to write the National Health Care Insurance legislation (as they did with Medicare Part D) you can absolutely guarantee that the corporate party will go on. We spend approximately $3 trillion dollars a year on health care. The REAL overhead insurers suck out of this is from 50 to 70%. That is $1.75 to $2.45 TRILLION a year to the insurers. That is why they are in a Swift-boating frenzy to sabotage an alternative.

So, Mr. President, I'm hoping that you are the guy I thought you were when I voted for you. Forget politics, compromise, and the middle way. Just do the right thing. Tell the people the truth. Don’t be distracted by the fear-mongering propaganda (“government takeover of medicine; take your doctor away from you; rationing of health care; Socialized medicine; etc., etc.”) Just tell the people the facts and the truth, and be clear in the two essential goals for a successful National Health Care Plan. Don't apologize for it either. Just tell them it's the right thing to do and your principles just don't give you another choice! We'll all respect that (and screw the insurance companies AND the bureaucrats).

J.S. Hochman MD

Executive Director (for 11 years)

The National Foundation for the Treatment of Pain

www.paincare.org

Psychiatrist in Private Practice for 39 years.