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Doc:

Your comments regarding the dialogue here are right on point. Even though I'm sure that I am not one of the targets of your comments, I hope those others pay attention. Oh ok; My used car salesman comments may be below the belt. Were I inclined to drift into the level of crude, uncivil commentary that you mention, rest assured that I would never say anything over the internet that I would not say face to face. That is assuming that my opponents are not 6'5", 280 lbs.

It would appear that verbosity is a contagious disease transmittable over the internet. I hope you took a breath somewhere in between.

Though APT seems far favorable to the Fair or Flat tax plans, in and of itself that statement says little since neither of those is gaining much ground either. Not only would a study of this nature be very expensive and take a long time to complete but one has to remove the peel from the banana before eating it. Once you begin to expose the frailties and, yes, even inequities of APT it becomes necessary to ascertain whether fixes to some of those would severely effect the benefits of APT as proposed. You can minimize the questions raised here as 1% issues but they are serious issues because they strike at the heart of many historic premises of taxation. It would also be preferable from an integrity standpoint to come up with something better than a 1% designation. That is a rhetorical device designed to minimize the arguments against and render them superfluous. In fact, in toto, they might be closer to 10% or even greater and all require a close look to examine the full socioeconomic impact.

It would seem to me that it is incumbent on the author to examine the effect to his proposal should many of the concerns be seen to require workarounds in final legislation. Dr. Feige's proposed handling of cash will not fly politically. It creates a tremendous burden on the poor and in that respect is terribly regressive. How would he propose to deal with legislation that allowed cash transactions to be subject only to the .3% tax when leaving and entering the banking system. Minor on its face but leads to abuse in the bigger picture. As his proposal now stands he adds a significant cost to those businesses dealing in cash, vending machines being the most apparent.

Vertical integration to avoid cascading and barter may be less of an issue from a legislation standpoint if politicians are willing to live with those as legitimate tax avoidance mechanisms. The tax consequences could be significant but productivity might be enhanced.

There is very likely to be strong disagreement to taxing charitable contributions. The same for deposits to savings accounts. Though a "tiny tax" it will be viewed by some as a deterrence to savings; not a good thing. The shift from exempting mortgage interest payments from taxation to taxing them will create a bevy of naysayers. Taxing borrowed funds will be resisted by those who must rely more strongly on credit flows.

Retired fixed income citizens who now pay no tax due to the size of their retirement earnings would be subject to taxes under APT. For many of these a few hundred dollars in taxes a year could be hardship.

Taxing corporations with losses will create a huge area of disagreement. If APT were currently in place GM would have incurred another $250 million in losses for the quarter and that's just the P&L side. Balance Sheet taxable transactions would increase that amount, perhaps exponentially. In the current system they would be getting tax refunds to mitigate the losses. Raises the question of how do we deal with open deferred taxes and pending carryforward/carryback tax issues at the time of transition. This whole issue goes far beyond tax planning. You can do all sorts of things with journal entries and a set of books, cash flow is an entirely different matter. Sorry but rebates are not a viable answer because they come after the fact. If a startup company cannot make payroll this week, knowing that they'll get a rebate at the end of the year doesn't help much.

Rebates and all those other special needs proposed to be handled through spending legislation are going to make a dent in IRS savings. There will need to be paperwork filed to substantiate valid claims. Some agency is going to have to accumulate and analyze that paperwork to ascertain validity and compliance. Again the poor, assumedly the recipients of most special payments may find an increase in paperwork rather than a reduction. Auditing of those kinds of claims will be necessary.

All the various tax avoidance and abuse schemes that have been discussed here will require new legislation with a system to assure compliance and to determine avoiders/abusers.

Investment banks and brokerage houses will mount legions of lobbyists to negate or minimize the effects on their world. Charitable foundations will seek tax exemption. Do churches stop passing the collection plate every Sunday?

All these questions and many more both mentioned here or unforseen at this point really require planning before we even get to the actual machinations of the viability of the actual dollar volume of transactions and testing the proposed system of collection.

The APT concept is predicated on being implemented as laid out. That will not happen. It is politically impossible without tweaking and altering similar to Rep. Fattah's proposed legislation. Once the changes commence the simplicity of the collection process gets encumbered a hundred fold (my own rhetorical math).

I am not one who believes that companies will move offshore, I agree with your rationale. I have argued and do believe that businesses will seek to do more financial transactions overseas to bypass APT collection. unless we can get agreement with mainstream foreign banks to supply the necessary information it will be hard to determine tax liability in those cases.

The tax will be passed through, you can't seem to get your arms around thinking in the aggregate. Sorry, was that crude? For larger corporations there is just too much money on the table to just take it away from profits. The stockholders will scream. Will market conditions affect a price increase, possibly, somewhat, but highly unlikely since price inelasticity will expand for products across the board. On a per unit basis the increase won't be that much anyway for many companies but they will all seek price increases. Take it to the bank. Don't forget your .3 % tax on it though.

It should be clear looking at the oil companies that corporations know no limits when it comes to profits.

Economic theory is based on historic behaviors. You are drastically altering the base of those behaviors. If anything Keynesian theory will be strengthed and Monetary theory will be minimized. Look at the second quarter effects of the tax rebate. Did the extra cash not flow to increased spending? Give me a little break here guys. Inflationary pressures will be a problem.

I laid out early on that many accountants won't be affected at all because GAAP acccounting will still be necessary. Those heavily involved in taxation will suffer and seguing that high earning expertise to similar pay will not be easy for many. It is another huge issue. Whatever advance notice you give you will have folks in their 40s and 50s that don't have the time left to shift professions and make a comparable living.

Were that life was as simple as an economic formula.

Most of the issues mentioned here can be addressed in another economic paper, with a little objective thought. To add these to a study burdened with the informational collection problems necessary to completely prove revenue neutrality, is folly. It will add years to the study process with all the to and fro necessary to settle some of these issues. The upshot will be an alteration to APT as proposed and that opens Pandora's Box.