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Doc:

First let me state my agreement that APT benefits individuals at all income levels substantially. That said it still leaves the question of income equality begged. APT does nothing to deter ever increasing wealth; in fact it exacerbates the issue. If we assume the average of 30% total tax outlay by individuals, all taxes included, then the family with $100,000 of income will receive an annual increase of $30,000 due to the tax relief. If we assume that they spend their entire income then the APT tax offsetting those savings will only be $600. A net increase in income of $29,400. Another family with $5,000,000 of income, assuming that 30% savings, will receive an annual increase of $1,500,000. Assuming that this family spends all their income, a daunting task if merely in consumption, their APT tax would only be $30,000, a net income increase of $1,470,000. Percentage wise everyone comes out equal. In terms of asset acquisition, competition in the marketplace for basic necessities and investment opportunities for even greater wealth accumulation, the higher income family has jumped light years ahead.

If we further assume that both families invest their increased income and liberally assume a 10% annual rate of return on those investments (much more likely for the higher income family), then the $100,000 family receives an additional $2,940 of annual income and the wealthier family receives an additional $147,000 of annual income. The APT tax consequence on these earnings is minimal, $9 and $441 respectively. Ignoring the likelihood that the marketplace will seek equilibrium with these discretionary income increases and eventually return us to the status quo, the ability for the higher income family to acquire an even greater share of the national wealth is clear and this is not a scenario that bodes well for our society in general. It, at best, leaves us at parody with our current status; at worst, it brings us ever closer to a hard class structure, where those of wealth are even further removed from those who must work for a living.

Of course the, supposedly, progressive nature of APT kicks in and we assume the wealthier family will increase their transaction volume, thereby increasing their taxes under APT. A realistic assumption, especially since the APT tax is insignificant enough to offer no deterrence to further wealth accumulation, but this increased activity will be focused on securing more income, which just makes the snowball bigger. If we could assume that the additional wealth inuring to the already wealthy would be employed to create more, and better paying, jobs for the rest of us, then the concept has merit. The globalization of business and investment opportunities, coupled with the failure of trickle-down economics to effect that stated goal, suggests that the increased wealth will do little to improve the lives of those working for a living.

Enough of the individual.

Now one cannot argue that strictly at the receipt and expenditure level APT effects great tax savings to businesses (corporate or otherwise). If revenue neutrality was not an issue, this fact alone would have all business folks standing in line to sign up. But since revenue neutrality is at the foundation of APT viability (notwithstanding rubicon's inability to grasp the concept) then there must be additional revenues created to reach revenue neutrality. These additional revenues would come from taxing those, essentially, balance sheet only transactions, which are not currently subject to taxation. I would agree, and have stated the same, that asset turnover rates cannot reach the levels necessary to achieve revenue neutrality on an individual company basis. If that is true on an individual company basis then it follows that in the aggregate the same would be true. The only possible offset to the aggregate premise would be those businesses, and individuals, who currently pay no income tax or pay at a rate that is less than the APT rate will provide. This is not a large population and includes those businesses currently operating at a loss. When considering the savings from SS/Medicare for the employer share, at max 7.65% of wages and salaries paid, only adds to the shortfall of revenue neutrality - all my examples were only comparing against federal income taxes. The true savings rate is far less, as a percent of payroll, due to the cap on SS wages and the exemption from SS/Medicare taxation for group health insurance premiums, health savings plans and 401K deductions. I would agree that the SS/Medicare savings would benefit all companies including those operating at a loss or marginal profitablilty in helping offset the impact of APT. The net real benefits would depend on the ratio of wage expenses to total expenses, proposing one more inequity in the fairness of APT across the commercial spectrum.

The compliance savings at the individual business level is nebulous. Some larger firms have dedicated tax departments who devote most of their time to taxation issues. Smaller firms and even some larger ones have minimal to zero personnel specifically involved in taxation matters. Those firms involved in international business activity would still need their tax departments, perhaps somewhat reduced, and initially all firms would be inclined to keep their tax experts to find ways to avoid taxes under APT.

Now, if you have a business with huge revenue and huge expenses that exactly offset - there would be no tax under the current system. Yet under APT there would be a substantial tax that would be extracted from each debit and credit as they happened so no big residual liability would be there at the end of the year.

Is this another of those appendectomies to vasectomies examples? If there is no tax under the current system, there will be no big residual liability at the end of the year, under the current system. Most businesses where APT or the current tax system would be significant, plan well enough that when the tax liability occurs is of little consequence. Could it be that a tax system that does not require me to plan ahead is a good thing?

Every tax system has winners and losers none is perfect, not even APT.

As I have pointed out, the current tax system is generally fair and equitable across the board for businesses because it taxes only profits. I'm sure there are some inequities but far fewer than would exist under APT.

I have already expressed my agreement about turnover rates. The issue, again, becomes how do we achieve revenue neutrality? To the extent that speculative investment activity is curtailed, and day trading is generally speculative, APT provides a social betterment. The same effect can be achieved with a much less invasive change to the current system.

You claim that revenue neutrality will be achieved by a huge increase in transaction activity, from within and without. This presents a dichotomy in that Dr. Feige asserts a transaction decrease in arriving at his calculation of an APT tax rate. The argument that revenue neutrality is a static goal and that once attained future actions will occur to greatly increase tax receipts is a little specious. If Dr. Feige is correct, and I believe he is, that upon implementation of APT, transaction activity will decline, then it seems to follow that future transaction activity will be particularly predicated on avoiding the increased tax implications. Admittedly, many of these initial decreases will be in transactions that have no profit relevancy other than an aspect of efficiency. There are many others that have a relevance to profits, such as your "parking" example and all these might be put on hold until an assessment of taxation impact is determined. Many businesses using overnight, minimal interest rate returns via "parking", are doing this with huge volumes of dollars from which the aggregate returns are not peanuts. Once the impetus shifts to reducing transactions, more and more alternatives will pop up and even if revenue neutrality is achieved at a point in time, it could quickly begin falling short. If transaction deductions begin pushing Dr. Feige's 70% reduction the APT limit is reached and it's flexibility going forward is severely impaired.

The infusion of foreign investment creating additional transaction activity is a "Field of Dreams" approach. It might happen but if it doesn't we are left with a calamity. You, as an MD, have credentials and education that are reasonably portable, why are you not seeking to move to a country with less abhorrent tax structures? There are so many variables in considering investment, especially forming a new business, in a foreign country that the decision will not be made purely on a perception of a new seemingly cheaper taxing scheme.

Were it not for the rate limits on APT viability, revenue neutrality would not be an issue.

You can isolate specific examples and ascribe them "minority" status but at some point you have to add all those minorities together and compare them to the total to determine the affect and the equity of APT. It is not sufficient argument to list them individually as minorities and disregard the negative aspects of APT as it might apply to a collection of minorities.

Lastly, I will mention as I and others have discussed APT with owners and officers of domestic and international businesses as well as many individuals -- they quickly make an assessment that, ON BALANCE, APT is far in their favor. Now granted they are not out in the streets shouting for change ----- yet. That is our daunting task to bring APT to the public forum.

I have expressed before that I can understand business folks, especially, and even more so individuals, quickly accepting APT as in their favor. Most individuals, when viewing APT from a personal perspective, will likely stick to their quick assessment. Business owners and officers, upon further research and thought, might decide that their initial thoughts were too hasty and in retrospect might begin to find the same limits and faults that I have pointed out. Probably a good thing since it keeps them out of the streets. In reality one has to look at the times; the mulitple venues of discussions regarding tax reform; and the phenominal success the Fair Tax people have had in securing supporters; and it is hard to come to any other conclusion than, for the professional and executive groups, APT appears to generate little long term interest. I do fail to see why any business executive, wearing his executive hat, would not favor the Fair Tax over APT simply because it removes all tax liability from businesses. Add to that fact, just a cursory review will provide a myriad of loopholes for business executives to avoid personal tax liabilities under the Fair Tax.

All in all, APT deserves a close look, but since it does nothing to solve income inequalities on the one hand and creates even more on the other, it would seem a close look is all it should get.

rubi:

In your inimitable fashion you misconstrue facts; must be an intuitive thing.

I am not against free enterprise capitalism per se. I am against unbridled wealth accumulation where the less fortunate are shut out of the game, even to the point that they can't make a decent living no matter how hard they work.

Find some other reading material.

rubi:

If you had read some of my posts you would be aware that there are many who have considered an automatic tax system. It is not a new idea, nor is it peculiar to Dr. Feige. My reading of Alf's (perhaps not a misnomer) patent claim is not for any specific software but rather for his idea. Apparently there is a patent type available that does not necessarily estop anyone from using the idea. He is merely trying this as an avenue of promotion. His theory is that if a patent is listed everyone will take notice. A fool and his dreams are seldom parted. His machinations have little to do with free enterprise. My understanding is that he seeks no rewards, at least no monetary ones from this patent attempt.

Alf's arguments, selling points, echo most of those found here. He also has become enrapt with the seeming simplicity of the collection process blurring his vision of the inequities and unfairnesses of the concept. He, as many of those here, also fails to correctly guage the impact of behavioral changes which will result from such a massive change to the tax model.

No doubt we are going through transformative times. Unfortunately, between our growing income inequality, our increasing fascination with obscure, invisible financing products, and globalization, we are transforming ourselves into a second rate economy. Currently we are well on our way to being only a consumption market. A market feeding the wealth of the world by our insatiable desire for "stuff" to buy and use. We seem to have lost our desire to "make" more "stuff".

The failing in the "new" algorithm is that those with a greater propensity to consume are seeing their means of consumption dwindling. It is interesting to me that most of the argument about globalization, free trade, is surrounding the issue of jobs lost to overseas. These arguments are on both sides. Some suggest that shifting production overseas has cost tens of millions of jobs. Others, many of them experts in economics, maintain that direct job losses to overseas production are minimal (probably the more accurate observation). To me the bigger issue, and one seldom posited, is that the balance of trade deficits paint a picture of consumption of more and more "stuff" that is not produced in the US. If we are buying more "stuff" produced outside the country it follows that our production capacity, within the country, is, at best, underutilized. This underutilization means fewer jobs at all levels: Fewer jobs for unskilled workers; fewer jobs for skilled/semi-skilled staff and administrative support; fewer engineering jobs; fewer management jobs; fewer executive jobs (maybe not a bad thing); worst of all fewer accounting jobs. To state the obvious, fewer jobs means less or lower incomes, means less spending, means eventual implosion of the dream.

Since you love my ramblings - although you exhibit an inability to follow the continuity of thoughts - let me recap a brief history. All the data available shows wages stagnant or declining for most wage earners over the last 30 years, in real terms, not nominal terms. Consumption levels have been maintained or grown over that period by population growth and credit. Credit cards, once a mark of distinction, representing a well managed personal financial history, are now as plentiful as grass. Most families have multiple credit cards, even some whose personal financial habits would, years ago, have denied them access to any form of loans or credit. Many folks use one credit card to pay the monthly payment on another one. Those who own homes, with the seemingly neverending growth in housing prices, were able to periodically refinance their mortgages or obtain home equity lines to consolidate all their credit card debt and, momentarily, create a dearth of unsecured credit. Voila! They now have resources available for more consumption, continuing the dream. We have been living this cycle for the past few decades and it has bode our GDP well. Alas, the current dilemma is bringing the collapse of the circle. Much like a real ballon we have blown air and blown air into it until it has burst. Scrambling as they may, the Fed(all the king's horses and men) are having a difficult time putting Humpty together again.

These problems far exceed any fix a "new" taxing scheme will provide. APT would portend that the elimination of taxes from the masses will solve many of these problems. There is some validity to that in the short term. Keep in mind, however, that when you are unemployed with no income you have zero tax liability, save some sales and property taxes. By any author's admission, APT or any other transaction based taxing scheme, is years away from implementation and our problems are real today and the snowball is picking up speed.

Currently those with the resources to alter this downward spiral are not interested in the welfare and future of our culture. They spend their time and money seeking ever more money, and globalization has opened a world full of investment opportunities in lower cost venues. The advent of free trade has greatly mitigated the risk of loss of capital in these venues providing more impetus. The idea that lower taxes will create a huge return of capital investment to US shores is, either a failure to understand the views and habits of capitalists or the inability to understand the impact of lower costs, especially labor costs, and lesser regulation, in the grand equation of profit growth. On the flip side, I will readily admit that raising taxes, especially progressively, could drive a greater movement to overseas investment and profits. This points out even further that taxes and taxing systems are not the answer. The answer lies in a return to the dream of 200+ years ago. A return to the idea that it is the welfare of society, ours, that is tantamount to our continuation. The current course, with its everwidening wealth gap, is heading us for a society that preceded 1776. A society lurking back to confines of the original settlers to our shores fraught with a ruling aristocracy. It might be best for you to read some books on self-help farming and buy some land.

Transformation is a good thing only when it is moving us forward as a people. It is detrimental if it only moves forward a select few. In the entire history of mankind, one man's blessing has often been another man's curse.

One could only hope that you would revisit the lessons of our founders and the great thinkers of that time and the great thinkers of prior centuries that fed their ideas. If done diligently you might discover the fact that societies that prevail are cohesive societies, not those of loose knit individuals all seeking power and control.

Doc:

Didn't mean to be unappreciative of your comments. After the pounding I take from rubi your posts are like a breath of fresh air, even though sometimes sprinkled with hallucinogenic microdust. Though somewhat thorough most of your arguments fall far short of compelling - oh why can't I be more demonstrative? Let me try again, it would seem a compelling argument would need no strengthening. Damn, I'm still just missing it.

I have worked all my life on trying to be more assertive. Try as I might, I can't seem to get over the hump. For years I was concerned that my career path would be bound to the diplomatic corps.

Slightly would seem a timid adjective for expressing differences among the three automatic payment proposals. Alf is looking at a rate range of 3 - 5%. His taxable base is altered significantly, although it gets muddled when he tries to explain it. If your 1.2% upper limit is correct based on the reasons for the limit, Alf could be in deep doo-doo.

Congressman Fattah, haven't looked at his latest iteration, seems to want to build in many of the tax deductible items currently existing. He and Alf would create a far more complicated algorithm to be used in processing and would tend to leave the door open to many other adjustments and finagling. The circle fights hard to remain unbroken.

Far be it from me to cast aspersions on any PhD.

My personal observation is that in assessing the attributes of any particular group of humans, they seem to fall into a normal Bell Curve distribution. There was a time when PhDs were few and they generally typified a highly knowledgeable group some light years ahead of the rest of us. In the evolution of education, with more and more universities offering PhD programs - could it be the profit motive? - their numbers have increased dramatically. No doubt all should gain a degree of respect and admiration for the effort alone. Many of them remain stalwarts of brilliance. But I can also see that Bell Curve distribution where we have many who are outstanding, a great many who are bright but mediocre, and some who are skilled in the absorption of knowledge and directing it toward the requirements to achieve the designation, but, when left to the dynamism of reality, often fail to apply the wisdom of the many thinkers they studied along the way.

The same Bell Curve theory could be applied to the group when querying the impact of money and power. Likely there is more skewing in that analysis, but given human frailities, one cannot overlook that, in almost any theoretical endeavor, it takes little in the way of modification to spin for the one with the biggest bucks. But, hell, what do I know?