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The President's Advisory Panel on Federal Tax Reform and the proposals I submitted to the Panel

As a novice to the workings of the Government sponsored Advisory Panel, I naively assumed that merely having a great idea for tax reform would be enough for immediate enthusiastic support from experts in the field of taxation. I could not have been more wrong. Experts in any field of expertise are the guardians of the Status-quo and are highly critical of anything that differs with their set of by them adopted beliefs and they will defend those beliefs against any interloping ideas that differ with their expert beliefs. The President established the "President's Advisory Panel on Federal Tax Reform". The Advisory Panel is to make its recommendations on or before September 30th, 2005. Don't hold your breath however, because the Advisory Panel consists completely of "experts" that will most likely defend the Status-quo against anything that strays too far from their beliefs. Most likely absolutely nothing will happen other than minimal tinkering with the existing 17,000 page tax code monstrosity we call our income tax system. It will have been a complete waste of effort of hundreds of citizens who submitted their comments and recommendations to the Panel and of all the efforts that went into this process. I wasted a few days, plane fare, hotel and meal charges to attend a two day public hearing of the Panel in Washington D.C. on May 11th and 12th, 2005. It was not a complete waste because I became educated in the way things work in Washington, or rather how they do not work. On balance it was worth the trip for me. I have learned that only a concentrated "marketing" effort of Automatic Tax with the support of a well organized grass roots organization will ever accomplish some sort of real tax reform. I hope that I am completely wrong in my assessment of the panel members and that there will be among them a couple of courageous people that can break ranks with the impenetrable "fortress" of expert lore.

Advisory Panel



The disappointingly mostly empty forum (apathy of the public)


Reporters taking notes, me smiling toward the camera



All the millions of people in the United States were invited to send suggestions for tax reform to this panel. Under 3000 suggestions were sent to the Advisory Panel. I flew to Washington DC and attended the 2 day, May 11 and May 12, 2005, Public Hearings of the Advisory Panel and I was totally disappointed how few people had come to attend the hearing at which several proposals were verbally presented to the Panel of experts who were to find the best proposals among the 470 submitted. My proposal was not selected for verbal presentation, most likely because the office staff of the Advisory Panel that was in charge of the selection process was more comfortable to only invite their colleague experts to verbally present their tax reform proposals. My Automatic Tax is too far removed from what experts are familiar with and comfortable with. I asked one of the people there to take some pictures (at the Department of Transportation in Washington D.C.). Here are 3 pictures from the Public Hearing May 11 and May 12, 2005
.


The Panel accepted additional submissions of opinions until September 30th, 2005 at which date the Panel was to make its recommendation to the Secretary of the Treasury and to the White House. The date for final recommendations was postponed to Nov.31, 2005. The recommendations were unimpressive and amounted to no more than tinkering with our disgusting 65,000 page Federal Income Tax Code. I expected no more than such depressing embarrasment. This is not something the White House will be able to do anything with.


I submitted my comments to the Advisory Panel's 2nd and 3rd requests for comments. The submissions appear below. Some refinements and improvements have since been made by me. I submitted the comments respectively on April 26, 2005 and on June 10, 2005. I hope that this proposal may have another chance to somehow get on the radar screen of at least some more courageous members of Congress, but I am not holding my breath. Later I chose to name my new tax system Automatic Tax and that name change is reflected in the modified submissions below.

Proposal to Replace the existing Tax System
Submitted to President’s Advisory Panel on Federal Tax Reform

North Hollywood, California, USA April 26, 2005

Submitted to: comments@taxreformpanel.gov

  • Submitter: Alf Temme
  • Organization: www.Automatic Tax.com
  • Date of submission: April 26, 2005
  • Contact Information:
  • 8137 Lankershim Blvd
  • North Hollywood, CA 91605
  • Ph: (818) 787-6460
  • Email: info@Automatic Tax.com

Category of submitter: Business owned by Alf Temme since 1963.

One page Summary:

I have named the tax method of this proposal “ www.Automatic Tax.com ” It not only will replace the Federal Tax but also can be a single tax collected to replace many or all other taxes combined at State, County and Local levels of government. It further has Universal application in many other modern economies/countries and I will submit it for their consideration as well. Whichever country adopts the Automatic Tax.com first will have the pole position in being the World leader in this new economic breakthrough tax revenue generating machine.

Some of the main advantages of this Automatic Tax.com proposal are:

  • It can be fully “road tested” for its efficacy prior to enactment into law.
  • No record keeping required for individuals and businesses.
  • No tax forms to be filed for individuals and businesses.
  • No audits ever needed for individuals and businesses.
  • Minimal collection cost, lower than any other form of taxation.
  • Will save US economy over $900 BILLION per year (current 2005 dollars).
  • Tax rate changes are easily implemented to make the tax revenue neutral.
  • Can respond to regulate inflation rates resulting from seigniorage.
  • Can combine into a single collection Federal, State, County and Local taxes.

I have submitted the Automatic Tax reform proposal in the form of a 92 page utility patent application, submitted to the US Patent Office on April 1, 2005 (Not an April Fools joke). Not that I have any expectation that there will ever any personal monetary benefit gained by me from such a patent. The benefits for the total population will be very impressive however. I chose the form of a patent application for a very specific purpose, namely it forced me to make a proposal that follows the requirements for a utility patent in that a patentable invention MUST have UTILITY. A patent application can not be written in the form of philosophical scholarly musings, it MUST WORK and it must have immediate practical application. This Automatic Tax proposal is fully fleshed out in detail so that it can be taken to the legislatures for a vote on a test implementation that would determine the exact tax rate for the Automatic Tax required to replace the Federal Tax and the possible combined single Automatic Tax rate to include taxes at State, County and Local levels as well. Automatic Tax also has a superior feature over other tax reform proposals in that it can be gradually implemented over 10 to 20 years so that it will largely avoid the economic and political trauma that would be created during implementation of other tax reform proposals. When the Federal Government has implemented Automatic Tax then the constituents of lower levels of government would bring enough political pressure to bear on their State, County and Local governments to adopt Automatic Tax.com

The Request for Comments by the Advisory Panel is only aimed at Federal taxation, all references to eliminating and replacing with Automatic Tax other taxes in this reform proposal are only left in by me to stimulate this Panel’s interest in cleaning up at the same time the rest of the tax mess and administrational burden on all citizens at all lower levels of government as well .The references to other than Federal tax may be ignored by this Panel in evaluating this proposal.

TOO GOOD TO BE TRUE?

If this would really work we would have heard about it years ago? Not really, because the Automatic Tax form of taxation can only be done in countries having a highly modern electronic transaction enabled banking system. This form of tax collection would not have been easily implemented even just a few years ago. Today all needed electronic banking facilities are already in place, ready for swift implementation of this tax reform plan. Going with the times, you should not attempt today’s tax reform with yesterday’s technologies and ideas.

Respectfully,

Alf Temme, small business owner since 1963

Proposal description:

The Request for Comments #2 (April 5, 2005 – April 29, 2005) mandates a page limit of 10. In this case where a fully descriptive and detailed 92 page tax proposal already exists (at www.Automatic Tax.com ), it is like re-writing a musical symphony with full orchestration by eliminating 89% of its notes and instruments . It leads to a very disjointed piece of music only for drums. I will try my best.

The Advisory Panel requests as follows:

I.Description of Proposal .

Proposals for comprehensive reform should include a description of the design of the proposal's components, including the following:
  • the tax base (income, consumption, hybrid)
  • exemptions, deductions, credits and exclusions
  • tax rates
  • distribution of the tax burden (including provisions for low-income individuals);
  • treatment of charitable giving
  • treatment of home ownership
  • collection methods and
  • treatment of businesses

The tax base
The total of fund transfers within an economy forms the tax base of the AutomatiTax. Fund transfers are monitored at entry into the banking system and exit from the banking system. There are three distinct categories of fund transfers:

Money Transfers associated with production and consumption of goods and services.
An Automatic Tax rate of 5% for these transactions will create revenue in excess of all forms of taxation combined at Federal, State, County and Local levels of government ( excluding property taxes and energy taxes). This 5% transfer tax could be an incentive for vertical integration in certain large manufacturing industries but in general a 5% tax will be outweighed by the vast advantages and greater efficiencies of outsourcing.

Money transfers that take place purely as a result of the exchange of financial instruments/assets.

Exchange of financial instruments/assets from one holder of the assets to another holder does not create value and does not add to the standard of living, yet this category of fund transfers associated with financial instruments/assets constitutes the vast majority of the total monetary value of money transfers, estimated at over 85% of money movement. The vast majority of this financial instrument money movement is involved in arbitrage transactions. It has been variously deemed desirable to somewhat temper this sort of manipulative arbitrage trading by legally restricting the practice. The easiest way to temper the practice is by applying a very small tax on this sort of transactions. This Automatic Tax proposes to initially apply a minute percentage of tax such as less than 0.01% and gradually increasing the percentage over time and monitoring the volume of the manipulative trading practices to where they will have decreased to an acceptable level while still maintaining a healthy liquidity in those financial instrument markets (bonds, stocks, commodities, mortgages, leases, etc.). Less than 10% of the total Federal revenue is expected from these initial over 85% of monetary value transactions the total volume of which is expected to drop substantially after this very small tax has been applied.

Money transfers that take place where money stays in the same hands and merely moves from one account into another account.

This form of fund transfer does not create value either and will be completely exempted from taxation by way of special handling and coding at the bank level or by way of refund request.


Every fund transfer is processed for taxation at its entry and exit points to the banking system
by deducting from the transaction value an equal percentage at entry and exit points. The banks at either end of each transaction collect data about the geographic nexus of both transacting parties so as to be able to credit the appropriate tax jurisdictions other than the Federal Tax jurisdiction if the Automatic Tax were to be taken optimum advantage of to not only collect Federal tax but also collect most other taxes at all lower levels of government at the same time. The taxes collected by the banks in this manner are transferred electronically to the Federal Tax jurisdiction and to all other included tax jurisdictions having nexus to the transactions.

Exemptions, deductions, credits and exclusions

The Automatic Tax (full 92 page proposal) provides for exemptions via special coding for electronic reading of specially for exemption pre-authorized transactions and for exemptions that can be authorized after special handling for a refund request to the central revenue collection authority (IRS could remain in that function at the Federal level of taxation). Certain transactions (for example those exceeding certain large monetary value) are transacted at lower tax rates. Financial market trading transactions are taxed at extremely low tax rates as to preserve healthy market liquidity. No other special exemptions, deductions, credits and exclusions are allowed under the Automatic Tax.

Tax rates

Tax rates are as discussed above. An initial 5% total tax on all money transactions with underlying transactions for goods and services with half (2.5%) collected by the banks on either end of the transaction as outlined in the full 92 page Automatic Tax disclosure. This tax rate will result in total revenue far exceeding current revenue received from all revenue sources at all levels of government (excluding property taxes and energy taxes). The tax rate can be adjusted and fine-tuned to be revenue neutral before implementation and full switch-over to the Automatic Tax after first conducting low cost “road testing” of this proposed tax system. The beauty of the Automatic Tax is that it offers the opportunity of “road testing” while maintaining the current awful taxation fully intact. This safety aspect of the Automatic Tax reform proposal makes it inherently more “saleable” to the general public and the various legislatures as well, because we humans are a very stubborn race that is very resistant to change of any kind. We will vehemently defend any bad system if we have suffered it for a long enough time. We do that because we prefer the evil we know over the promise of something we are not certain of, even though the promise sounds like a great improvement. The “selling” of a new tax reform idea must include incentives for the public and congress to overcome their natural aversion to change. This Automatic Tax requires far less courage from lawmakers for enacting it into law and for implementation when it first can be proven completely safe for “human consumption” and when the tax rate can be nearly precisely determined after a low cost test that is funded and authorized by congress. The tax rate can be set to where the tax is exactly revenue neutral.

Distribution of the tax burden (including provisions for low-income individuals).

The Automatic Tax very precisely follows Adam Smith’s 4 maxims for taxation. In the matter of “distribution of the tax burden” Adam smith’s maxim #1 applies:

“The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state”.

The Automatic Tax accomplishes exactly the desired effect of “nearly as possible” by the very fact that “the poor” will transact money movements that are as “nearly as possible” matched to their low-income status and therefore contribute far less revenue, but exactly proportionate to the lower total value of money movement transacted. The fact that they are contributing the exact same percentage of tax as everyone else elevates them to equal respectable status as everyone else in society and does not degrade them to second rate citizens as is true in our current income tax system. There are no tax related provisions with the Automatic Tax for relief for low income individuals. Such special relief can be provided, if deemed appropriate, by way of special grants through enabling legislation. The wisdom of such special grants is very much in question according to my www.UniversalDemandLaw.com . The better solution for relief is the vast improvement of the total economy by lifting the heavy yoke (joke?) of current taxation schemes off its shoulders. The very low-income individuals are also more likely to transact money movement with cash currency by which they are not subject to the Automatic Tax and thereby gain some of this “relief” by way of a small edge of making fewer transactions subject to the tax deduction.

Treatment of charitable giving

The Automatic Tax has incorporated in it (see 92 page full disclosure [Para 121] through [Para 134]) a fantastic improvement for charitable giving that will result in vastly reduced fundraising costs by the charitable organizations (a cause for unemployment for many of the salaried people associated with fundraising efforts) and a vastly increased net result funding for those charitable non-profits. In short, Automatic Tax has an allocation of a percentage of the tax (a proposed 10% of the total tax) to be earmarked for charitable giving by the tax contributing bank account holders. Bank account holders will be able to attach to their bank account special electronically readable codes that instruct the allocated charitable percentage of tax collected to be disbursed to the charitable organization(s) of their choice. As mentioned earlier, the Automatic Tax has incorporated in it a lot of aspects that make it very much more “marketable” to the public and legislatures alike. It does not make sense to make tax reform proposals that cannot be “sold” to the public and the legislators. Charitable organizations have massive support among the public and they also have massive lobbying power with legislatures. It is therefore very unwise to make tax reform proposals that do not incorporate offset provisions for the tax-free status and tax deductible provisions enjoyed by charitable organizations under the current income tax system. The Automatic Tax has incorporated in it a very powerful and attractive offset provision for charitable tax exempt organizations that will greatly enhance the money donations received by them. Most other tax reform proposals totally abandon the charitable organizations and leave them dangling in the wind. That fact alone will never get those tax reform proposals through congress. Churches, Red Cross, United Way, March of Dimes, this foundation, that foundation . . . they will never let it happen to lose their tax advantages they currently enjoy. So the Automatic Tax will offer all the non-profits vastly greater advantage than they have currently. The Automatic Tax is their ally and is deserving of their strong support. Where does all that extra money for the non-profits come from? It comes from the savings in the cost of fundraising efforts and the greater certainty for taxpayers to contribute by way of coding their bank accounts with instructions for payment of charity allocations within the collected tax.

Treatment of home ownership

The provisions associated with home ownership for interest write-off and capital gains allowances when selling a home under our current totally sick income tax system are amply offset by the Automatic Tax reform proposal by the fact that there is no capital gains tax component and there is a vastly reduced transfer tax on large money transfers of incrementally larger monetary value. The total tax amount paid on total money income by a wage earner or salaried person under the Automatic Tax is exactly 5% and no more of total money deposits (or whatever exact tax percentage is determined to be appropriate after “road testing” the Automatic Tax). That is a very low percentage as compared to the percentage of income paid in income taxes by the average home owner under the current income tax system.

II.Impact of Proposal Relative to Current System .

The description of the tax reform proposal should include an explanation of how it compares to our existing system in terms of the following factors:

Simplicity (including transparency and stability)

  • Fairness
  • Economic growth and competitiveness
  • Compliance and administration costs
  • Simplicity (including transparency and stability)

The Automatic Tax is exceedingly simple in that it requires no record keeping and tax filing for individuals and 90% of businesses. It is also totally transparent in that it is a very straight forward percentage deduction of tax from money transactions as described above. Stability is extreme in that this system is very little affected in terms of total revenue collected during economic downturns and upswings. Our current income tax is completely the opposite in terms of simplicity, transparency and stability.

Fairness

The Automatic Tax is extremely “fair” in that it extracts taxes in amounts that are completely commensurate with the receipts of money by all individuals and businesses alike. Wage/salary earners will actually experience no taxation at all on their wages/salaries because their paychecks can be made out with the net wage amount shown in the usual place on the check and a 5.3% employer tax contribution shown in a separate place on the check which amounts as nearly as possible the 5% tax deduction on the net wages plus the 5.3% employer tax contribution. This method of writing out paychecks (described in more detail in [Para 115] of the full 92 page tax reform proposal) projects the appearance of the employer paying the tax instead of the employee. Again this provision of how to make out wage checks is not meant to underestimate the intelligence of the wage earner but to make the tax system more transparent and win the public’s sympathy for this tax system by clearly displaying the exact amount of the tax that the wage earner contributes to the public coffers through his/her employment. It is another “marketing” tool for the Automatic Tax to “sell” this tax reform proposal to the public and the congress as well.

Economic growth and competitiveness

The Automatic Tax reform proposal was totally conceived with economic growth and competitiveness in mind. The current income tax system has an enormous stifling influence on economic growth because it discourages young people to start small businesses of their own on account of the daunting amount of record keeping required by the current tax system and the risks of violating any of the massive provisions in the complicated tax codes. Taxing agencies have forced a lot of employers out of business and continue to do so. That has a very stifling effect on the enthusiasm of people to go into business for themselves. The Automatic Tax has absolutely no record keeping requirements for individuals and 90% of businesses, which includes of course 100% of all small businesses and upstart businesses. Competitiveness is very much stifled by the current system of taxation in that it drastically reduces the productivity of small business owners by way of record keeping requirements. That time is sorely needed for more productive purposes in their small businesses (I know firsthand from 42 years of toiling with tax related recordkeeping by myself and with my wife. I could have used all that time much more productively). Productivity will also be increased in small and large businesses alike by eliminating all current tax provisions that influence purchasing decisions for capital equipment and influence the making of other expenditure decisions on account of tax write-off provisions that may delay or advance the time when such expenditures are made. Such current restrictions on business decisions influence productivity and competitiveness. The Automatic Tax has no such productivity and competitiveness restricting aspects that force businesses into making strange decisions.

Compliance and administration costs

This is where the Automatic Tax outshines any other tax proposal of my knowledge (and that knowledge has grown substantially during the process of my tinkering with ideas concerning taxation since 1975). The compliance under the Automatic Tax is estimated to be near the 99% mark with less than 1% expected cash currency transactions that have no nexus to a bank at either the payer side or the recipient side of the transaction. From various estimates regarding the average rotation cycles of cash currency in circulation it is expected that the number of circulation cycles of cash will be fewer than 3 before the cash hits a bank at the recipient side of a transaction. The average amount of money involved per cash rotation cycle is vastly smaller than the average money transaction by other means. Another cause of non-compliance will be the settling of accounts between two very large businesses that both have bank accounts outside the country in which they conduct business and in which they are required to pay their taxes by way of money movement transactions. These attempts of tax evasion can only be made by very large businesses and in large amounts because the extra inconvenience and offshore facility requirements do not make sense at smaller amounts of money transactions. The fact that such transactions will be made punishable by large fines or worse will make these illegal transactions extremely unattractive, specially since two very willing conspiring partners in such transactions are needed and they run the risk of being ratted out by any one of their employees. Such illegal transactions are also made much less attractive since transaction amounts of large monetary value are taxed by Automatic Tax at a lower than standard 5% rate.

III. Transition, Tradeoffs and Special Issues.


The description of the tax reform proposal should include an explanation of any special issues or considerations, such as the tradeoffs that would be required, favorable/unfavorable treatment of particular industries or sectors within the economy, or the impact of transition from our current system to the proposed system

Transition

When a proposal for tax reform guarantees great simplification in revenue collection, record keeping and administration through the new method of taxation, it will at the same time create massive unemployment in all job categories and businesses that owe their existence to the great complexity and unneeded burdens created by the current method of taxation. It is an enormous problem that must be recognized and the solution for which must be incorporated as a very important part of any tax reform proposal that promises simplification. Since most so-called tax reforms in the past have often only complicated the current taxation methods, they actually accomplished to increase employment in the tax related job sectors so that the unemployment issue never came to the fore. Most other highly touted so called “improvements” to the present method of taxation were on the order of a change in the font size and wording on the 1040 form or some such minutia that would rate with an earthquake of Richter scale ONE. The Automatic Tax promises to shake the economic landscape at Richter scale 9 and the massive destruction of jobs in the employment sector with nexus to taxation must be addressed by a special branch of FEMA tasked with disaster mitigation, preparedness, response and recovery planning during a transition plan that will need several years of massive funding authorized by congress to aid the tax related employees in transition and attrition financed out of the windfall billions of reduction of government administration costs associated with the Automatic Tax and an initially slightly higher Automatic Tax rate during the several years of transitional support required for the tax related unemployed. Click on “Implementation” at the Automatic Tax website. Hope you have the time to study Automatic Tax provisions relating to international and important internet trade in the full text 92 page proposal.

Respectfully submitted,

Alf Temme
==========================================


Subject:
Request for Comments #3, Business Submission
Date: June10, 2005

Submitted to:
comments@taxreformpanel.gov

 

Submitter: Alf Temme
Organization:
www.Automatic Tax.com
Date of submission: April 26, 2005
Contact Information:
8137 Lankershim Blvd
North Hollywood, CA 91605
Ph: (818) 787-6460

Dear Chairman Mack, Vice Chairman Breaux, and members of the panel,

Following are my observations from, and comments about the Public Hearings on May 11 and May 12, 2005. I flew to Washington in hopes of presenting my fully “fleshed out” completely new tax system named Automatic Tax. It is an exceedingly simple tax that would save the USA economy $900 BILLION per year (2005 dollars). According to the Advisory Panel’s staff member, Ms.Altshuler, this tax proposal merits attention, but was overlooked in the selection process for verbal presentation in front of the Advisory Panel. Instead of presenting the tax proposal Ms.Altshuler allowed me to hand out short introductions of this tax proposal to attendees at the Public Hearing. I owe Ms.Altshuler my gratitude for this. It gave me an opportunity to learn more about the unfounded concerns “experts” have with my tax proposal so that I was able to reflect on those concerns and am now in a position to address them here (“cascading taxes” and “border neutral”). In addition I learned what the proposals were that had the most support from the public and I learned what type of proposals the experts on the Advisory Panel were most and least intrigued with.

The more I see of other tax reform proposals the more I like mine
First I must report that the more I heard about and listened to other tax proposals, the more I became impressed with my Automatic Tax. So typically subjective of me, but for good reason, because my tax proposal solves most of the problems that the other proposals do not and it has none of the flaws that the other proposals have. The main reason for the greater perfection of Automatic Tax.com is that I closely followed Adam Smith’s four maxims on taxation. It would be wise to follow the maxims on taxation proposed by Adam Smith in his “Wealth of Nations” published in 1776. The framers of the Constitution paid attention to “Wealth of Nations” in Article 1, Sections 8 and 9. These maxims are perfection or near perfection in guidelines for taxation, and not following them just because they are over 225 years old is shear arrogance or ignorance of those who would attempt to create a new method of taxation. The current systems of taxation in most countries were obviously created in ignorance of Adam Smith’s maxims or as a result of plain arrogance. It is difficult to decide which country deserves the grand prize for having the worst tax system in the World, but the United States certainly has a shot at it with its 17,000 (9 million words) income tax code monstrosity.

Adam Smith’s 4 maxims on taxation:

1. The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.
2. The tax which each individual is bound to pay ought to be certain, and not arbitrary.
3. Every tax ought to be levied at the time, or in the manner, in which it is most likely to be convenient for the contributor to pay it.
4. Every tax ought to be so contrived as both to take out and to keep out of the pockets of the people as little as possible over and above what it brings into the public treasury of the state.


Why follow these maxims that are over 225 years old? Surely we must have advanced in knowledge in all these years and must be capable of better? If a person in 1776 were to have conceived of the maxim for a perfect ball bearing to have perfectly round hardened steel balls, what arrogance would it be to try to deviate from that maxim by ignoring the need for hardened steel and perfect roundness. Oval or out of round lead balls certainly would not do
What I observed during the May 11 and May 12, 2005, Public Hearing is that all the speakers and the members of the Panel should become persuaded that it takes hardened balls of steel and a perfectly rounded approach to get a bearing (on the otherwise intractable problem of taxation).
All proposals made to the Panel and all comments submitted, except one, have either totally or largely ignored Adam Smith’s 4 maxims. The result is imperfect bearings. Our current tax system is a monstrous large bearing that runs on balls of dung with sand as lubricant. No wonder that the wheel of our economic fortune is grinding to a halt.
Most of the proposals and comments submitted to the Panel would wish to improve on our current system by replacing the dung balls with plastic balls or even lead balls and maybe change the grade or coarseness of the sand used for lubrication. A lot of the presenters had a vested interest in the sand business. Some of the proposals are for scrapping the whole bad bearing and replacing it with a brand new one with oval steel balls or round balls of less durable lead or plastic.


Automatic Tax.com
My Automatic Tax follows Adam Smith’s 4 maxims on taxation as closely as possible and it takes the fullest advantage of modern electronic technology and practices.
Here is what is so important in following Adam Smith’s 4 maxims on taxation:


1. The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.
2. The tax which each individual is bound to pay ought to be certain, and not arbitrary.


Maxims 1 and 2 deal with dignity and justice and fairness in taxation. There is dignity in the paying of tax by “the poor”. In most current tax theory it is held that poor people belong to an underclass that is in need of special treatment and cannot function as respectable full function citizens that actively contribute to and participate in the financial support for the running of their own country. That sort of thinking gave rise to the notion that only tax payers should have the right to vote. It is a total lack of understanding of taxation to believe that excluding “the poor” from this or that tax makes them exempt of taxes. Under all systems of taxations “the poor” pay taxes embedded in every product or service they buy exactly in proportion to their spending. The exclusion of “the poor” from certain taxes is arbitrary and the establishment of “tax brackets” is not only arbitrary but also out of proportion with the revenue they enjoy. The concepts of current tax theory are in total violation of Adam Smith 1 and 2 (AS1 and AS2). Automatic Tax is in total concert with AS1 and AS2.

3. Every tax ought to be levied at the time, or in the manner, in which it is most likely to be convenient for the contributor to pay it.

This AS3 means that a tax is levied with the least amount of inconvenience to the tax payer. Need I say more, there is zero inconvenience for the tax payer with the way in which tax is paid under Automatic Tax.com. Some of the proposals submitted to the Panel are reducing the inconvenience somewhat or a great deal, but none reduce it to ZERO.

4. Every tax ought to be so contrived as both to take out and to keep out of the pockets of the people as little as possible over and above what it brings into the public treasury of the state.

This AS4 means that the total direct and indirect cost of paying and collecting the tax should be as small as possible. The direct and indirect cost and burden on the total economy and society as a whole cannot be expressed in money alone, but could be as much as $900 billion or more. The direct and indirect cost of collection for Automatic Tax.com is less than $50 billion.

A word about “cascading taxes” and “border neutral” taxes.
When critiquing my Automatic Tax during the May 1 and May 12, 2005. Public Hearings some of the featured speakers pointed out that it was not a workable tax system because it would cause “cascading taxes” and it would be an impediment to exports of products because it was not “border neutral”. Not knowing what this shop jargon meant I nodded wisely and took notes. Meanwhile I learned that both of these allegations against Automatic Tax are nothing more than hogwash as applied to Automatic Tax.

Cascading taxes
The term “cascading taxes” apparently refers to a tax upon a tax. Automatic Tax charges a tax at every step in a manufacturing process or any process that requires the transfer of money from one party to another. As such there would be a tax upon a tax at every step of the process whenever money changes hands. It would then make a product or service more expensive at every step in the process and make it less competitive. The experts who criticize Automatic Tax for “cascading” make it appear that other forms of taxation do not suffer from this apparent malady. They totally ignore the fact that, under all systems of taxation, taxes are embedded in any transaction at any stage of a manufacturing process but they are hidden taxes in the form of taxes on wages and other such taxes that the seller compensates for in the selling price by increasing that price. There is no method to compensate for “cascading” other than ultimate subsidizing by way of a roughly estimated tax refund or other outright subsidy. The best subsidy everyone gets under Automatic Tax is the total elimination of the work burden and cost associated with current taxation schemes.

Border neutral
Border neutral is just another term for a concern of export impediment for products on account of taxes applied to the products during their manufacturing process. A blatant export credit or export subsidy would solve the problem but it would be more obvious to other countries that might complain about subsidizing exports. So, every country has adopted a policy of doing this intricate tinkering with disguised indirect export subsidies and all the time assuming that the other countries are stupid enough not to notice the games that are being played. The best way to become highly competitive is to unburden your own economy from a very labor intensive and otherwise costly tax system by adopting Automatic Tax

Economic consequences of drastic changes
There are dire economic consequences in replacing an existing tax system with another that promises to be much less costly in administration and collection. For example Automatic Tax promises to reduce the direct and indirect taxation in the United States alone from $900 billion to $50 billion. This in effect means that it will eliminate the jobs of people who collectively now earn $850 billion dollars. That promises a lot of unemployment and an extremely hard blow to the economy as a whole. My Automatic Tax proposal compensates for that by proposing a very long period of transitional financial support for as many as ten years or more for all the people who have lost their jobs. The cost for this transition will be paid by the government out of the savings on administration and excess taxes collected. Another consequence of Automatic Tax that is fully taken care of is the loss of favored tax status by charitable organizations. Under Automatic Tax it is provided that charitable organizations are not only compensated for the loss of favorable tax status but will actually find that their incoming revenue will be sharply increased while their cost for fundraising are sharply reduced. (making for an additional loss of jobs that will be compensated for a number of years by the government).

Since submission to the Panel, I have made modifications to the implementation of Automatic Tax to where it can be gradually implemented over a period of 10 to 20 years starting with a 0.1% Automatic Tax rate the first year with subsequent increases of 0.2% to 0.5% per year as follows:
The best feature for any tax reform proposal is that it provides a "painless" transition from the existing tax sytem to the new proposed tax reform system of taxation. The Automatic Tax can be phased in at 0.1% for the first year. The federal tax revenue can then at the same time be reduced by the same amount collected through the 0.1% Automatic Tax. The objective will be to reduce the 17000 page long Federal Income Tax Code by as many pages as is possible to bring about the reduction in revenue that will match the revenue collected through the 0.1% Automatic Tax. Let us assume that the Federal Tax code can be reduced by 500 pages on account of the 0.1% Automatic Tax. The following year the Automatic Tax can be raised by an additional 0.3% and additional pages of the income tax code can be eliminated to approximately offset the tax collected through the additional 0.3% Automatic Tax. This process can be continnued with 0.3% Automatic Tax increases for each following year with matching decreases in the total taxes included in the current income tax code. This method of phasing the Automatic Tax in and phasing the current income tax out is completely transparent and predictable and will cause the least amount of economic surprise and disruption. This form of phasing Automatic Tax in is far less risky to legislators because it cannot create a large unexpected economic impact from one year to the next.

Additional benefits of Automatic Tax
The additional benefits of Automatic Tax are many, but some merit special mention. This tax idea is suitable for adoption by all other countries and they would benefit equally and the seamless alignment of tax systems between countries is easy and perfect. No need for special tax treaties between countries. If one country gains an advantage over another country for exports of products it can easily be adjusted by adjusting import duties or by giving or withholding export subsidies. After a few decades of playing those kind of games, it will eventually become clear that an increase in efficiency in ones own country is the best way to have a lasting competitive edge and to increase the living standard.

The bottom line
The bottom line for Automatic Tax is that it will increase efficiency and productivity enormously and that it is the only system proposed that follows the best principles for taxation ever proposed. A further observation is that nothing in the way of tax reform will happen as long as tax experts and lobbyists are in control of the process of devising a new tax code for the USA
Some other minor country will be first in adopting Automatic Tax.com and others will follow slowly. Wouldn’t it be fun if the United States would lead with tax reform in the World and all benefits accruing from that leadership position. I am actively spreading the word on Automatic Tax.com with advertisements in nationwide magazines. I will concentrate on small countries with my promotion, but I have not completely given up on the idea that there might be a sincere desire by the White House and the Advisory Panel to find the best substitute for our current taxation at all levels of government, federal, state and local. Small and large business will flourish and private citizens will breathe a sigh of relief.