American
Exchange Tax
A new solution to make the fairest,
easiest to manage, and most accurate
U.S. taxing system in history.
By Kirk Lancaster
The American Exchange Tax
Completely Eliminates:
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Before you read
the plan for the American Exchange Tax, you should know
this system of taxation would not require a cash-less society.
Reading through the American Exchange Tax and following
examples, you may think, "wait a minute, he's talking about
taking away cash and having a digital currency!"
Rest assured, those who want to keep the following money habits may continue to do so once we implement the American Exchange Tax:
Granted, there is going to be change to the way paper money is printed and managed, but we'll get to that later. |
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And here it is,
in three paragraphs, the proposed law that would
replace thousands of pages of the current U.S. tax code
and make April 15 just another day: The American Exchange Tax Every time a U.S. dollar is exchanged between a buyer and seller (payer /recipient), Federal and local governments get an immediate American Exchange Tax from the transaction, equally from both parties involved in the transaction. There are two
anonymous taxpayers in the exchange -- the
person who pays the U.S. dollar AND the person who receives the
U.S. dollar. |
How does it work?
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American Exchange Tax in Action For the following examples, I'm using an easy tax rate of 10% per individual and 20% on the total exchange, which should actually be a good rate to shoot for. Note that federal and local governments will set tax rates based on real-time need. Every Dollar Counts I grab a $1 soda at my local store. I swipe my debit card.
I paid $1.10 out of my bank account, the merchant took in $.90, Uncle Sam made $.10, State/Local Gov made $.10. The merchant and I split a 20% tax burden, and have immediately paid our taxes in full. Notice that the banks become the tax collector, not the merchant. Since banks are already set up to transfer money so easily, and they are already tightly regulated by the government, this makes the most sense. Billy Bob's Bait Box doesn't have to be a tax collection expert, just a tackle selection expert. |
The American Exchange Tax is:
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American Exchange Tax in Action Local,
State and Federal I live in Florida. I find an antique ring on eBay for $1000, located in New York. I pay online with my debit card; my bank sends $1000 to the seller's bank account, $50 to the federal government and $50 to my state and local governments in Florida. I paid 10% tax on dollars I spent. The seller's bank receives the $1000, pays out $50 to federal and $50 to the seller's state and local governments in New York. He paid 10% tax on dollars he received. In this exchange, notice the buyer's local government and the seller's local government each gets the benefit of its own citizen making an exchange with the American Dollar. American
Exchange Tax in Action Redefining
Tax: A neighbor down the street has a Jeep for sale for $10K. I write him a check for $10K (knowing that I must have $11K in the bank to cover my 10% taxes). He deposits the check into his bank account, my bank account sends the money over (and then sends 5% to fed, 5% to local... you got that by now, right?) His bank sends his taxes, so he keeps $9K, I spend $11K, and the government makes $2K. This is not double taxation on that Jeep! This is taxation on the FREEDOM OF ENTERPRISE. My neighbor has something I'm willing to buy, and it does not matter whether it's new or not! My neighbor is the rightful owner of the Jeep, and I want to become the rightful owner. Our federal and local governments have served
us well to protect our ability to make this exchange with U.S.
Dollars.
American Exchange Tax in Action Taxing
Everyone Who Trades Timmy slips into the U.S. without going through appropriate channels. This makes Timmy an illegal alien. But he finds work, works hard, does a good job and earns $500 per week. Every Friday, Timmy's boss hands him a check for $500. Timmy takes his $500 check to a bank to cash it. Timmy does not have a bank account because he does not have the credentials to open one. He gives the teller the check, the teller sends 5% to fed and 5% to local, and gives Timmy $450 in cash. The boss' bank also sends the government $50 for this exchange (employers do have to pay the tax when "buying" services from their employees, and employees have to pay tax for receiving the payment). This week, Timmy's sending his take-home earnings of $450 back to his mother in his home country. In order to do so, he must go to a bank and wire the money to her in Guatemala. In this case, Timmy's exchanging a dollar for foreign currency, which is just like any other exchange. $22.50 goes to the fed, $22.50 goes to local, and $405 worth of Quertzels goes to Momma. Whether Timmy spends that cash in America or sends it home in the form of his country's currency, he will generate a total of $145 in U.S. taxes, which is 19% of what he earned by providing a service. Speaking of 19%, now's a good time to point out that if the tax rate is set at 10% per individual, 20% per exchange... each individual tax payer would have a total tax burden of 19% on what we earn in U.S. dollars if we spend those dollars under the same tax rate. And we do this whether we're working for money or selling a used car for money.
The American Exchange Tax will:
American
Exchange Tax in Action Taxing Illegal Trade Bob is selling Don a package of street drugs for $100. With a few keys punched on a mobile phone, Don transfers $100 to Bob's bank account. Taxes are paid too, of course; when money exchanges hands, taxes get paid. Period. Note something else about this transaction: since there is only drugs at the illegal transaction, and no cash, there is less likely of a chance for robbery or violence. While you may not care whether drug dealers and buyers kill each other, it would help our system (and innocent citizens) to wipe out that element of violence in the drug trade. Also note that a drug exchange COULD use cash, which would still be taxed as explained in a moment...
Obstacles Facing the American Exchange Tax: |
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American Exchange Tax Some Quick
Explanations Privacy We would have to pass a law that goes along with the American Exchange Tax that the U.S. government would not have access to citizens' individual transaction records at their bank accounts. A citizen could use their bank records to prove they did or did not make a certain purchase in a court of law, but prosecution could not. As a matter of fact, with some creative software, the banks could ensure that your records only show the cash and taxes that come in and out of your account... not where or to whom you gave your money. The New Cash Cash in the new American Exchange Tax is the only element that adds complexity, and to some, impossibility. It is true that if we went to a totally digital system, life would be even easier. But I realize there are too many American Citizens who would not vote for a cash-less banking system. Oh, and there's one other little problem. We've been printing cash at will for the past several decades, and since it's the world's reserve currency, that's sure to cause a few problems too. But that's what our mission is, to find the economists and leaders who can fix the problem of our flawed currency and tax system. Let's start by describing current cash, which demonstrates the need to implement three new kinds of "printed cash money." Current Currency:
You'll have 3 options: Cash Certificates, Cash Tickets and Cash Cards. Cash Certificates For those who hold cash notes in their home or safety deposit box, they can have US Currency printed exclusively for them. Basically like little billfold-size stock certificates. These Cash Certificates can be tendered at any American bank, but ONLY by the owner. In other words, it looks almost like a money order, and you would be required to show ID spend it as cash. If your Cash Certificate(s) were destroyed in a fire or stolen, you could have it (them) replaced for a small fee. Cash Certificates are also what foreign banks will use for their dollar reserves. Cash Tickets Complicated, but for those who must have "legal tender for all debts, public or private," here you have it. You "buy" cash tickets from your bank account, meaning you pay $110 for a $100 in cash tickets. Since your tax burden is covered on withdrawal, you only have to give a $1 cash ticket for a $1 soda. Here's the kicker... Cash tickets are very anonymous, but they also expire 30 days beyond withdrawal. Why? So that at some point the bills must be deposited to a bank account and taxes paid again on those dollars. Cash Cards "Same as Cash" plastic is already around. They are "filled" with the amount you pull from your bank account, and you pay your tax immediately at the time you fill up the cash card. Example: Purchase a $1 drink with a $10 cash card, and $1.00 is pulled off the card at the register. The tax was paid at the time the cash card was withdrawn. Examples of this kind of card would be gift cards. And of course you can use debit and credit cards. Bartering is not taxed. If it becomes an issue, such as large companies bartering millions of dollars worth of goods and services, we'd have to look at corporate regulation of bartering. Let's hope they regulate themselves. Gifts Only the gift-giver pays the tax on a Cash Card (or Gift Card). Let's say you're giving your child $100 as a gift. Your bank account applies $10 for your taxes when you withdraw the Cash Card (or buy the gift card from Target). When your child swipes the cash card (or gift card) at the register, only the amount of the sales price is deducted from the card. Banks as the Tax Man They're already huge, they're already tightly regulated, they already have the people, processes and technology to manage tax revenue. Their reward: they don't pay taxes. Why the American Exchange Tax is a better idea than the Fair Tax. The main problem I have with the Fair Tax is that makes it unappealing to buy new stuff. You can buy used stuff all day long (like $40K cars or boats) and not pay taxes. Silly to me. By the sheer volume of daily exchanges of the U.S. Dollar, we're generating much more revenue (in more palatable portions) than we ever could on new goods. I also hate that whole "pre-bate" idea in the Fair Tax. Property Taxes I claim this would eliminate property taxes because it makes it completely possible due to the high volume local governments will generate from the exchange tax. Remember the example that your local government gets its due whether you're buying downtown, online or in Greece. Also, because you're paying tax on every transaction associated with your home cost -- yes, including mortgage payments, utility bills and trips to the hardware store -- your property will generate plenty of tax for your city and county. Deductions Since we would not be filing any longer, there would be no such thing as deductions. But some who fall under a certain income bracket could apply for a tax free bank account. A tax free bank account provided to the poor would mean that the poor person or family would be able to receive income tax-free until they reach a certain level of transactions (income.) Non-Profit orgs would have a special account that would not tax donation from the donor nor the recipient. Tax-Free "Holidays" There will be four (4) tax-free periods per year (quarterly) in which exchanges will be tax-free for 76 hours. These will be great sales days for your company!These tax-free days will also give you a chance to pay debt payments -- such as mortgage or credit card payments -- quarterly in advance to save taxes. Retail Refunds One reader noted that he would be taxed twice if he had to return a purchase. This would be easily adjusted by having a return variable for the transaction, which refers back to the original transaction, and the bank refunds all taxes paid.
In closing, let's remember a few things you have to do (extra work you have to do, really) to abide by our existing tax system:
and of course I could go on with the RIDICULOUS, COMPLEX TAX WEB WEAVED OVER THE PAST 60 YEARS. Let's use technology and common sense to relieve America of our tremendous tax burden. Not the burden to pay taxes, but the tremendous (and unequal) burden to manage tax payments. Then we'll tackle the even bigger issue of how our taxes are spent!
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copyright © 2008, Kirk Lancaster