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.