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Following is a short introduction to Automatic Tax

1. Automatic Tax will replace all taxes at all levels of government ( Federal, State, County and Local) and replaces all of them together with a simple financial transaction service fee of 5% or less (this already sounds impossible but it is true).

2. This service fee collection process does not require any accounting or keeping of records because it is entirely electronically collected through the banking system. Banks will deduct 5% from all deposits made and will credit the bank accounts with the remaining 95% of the deposit. All the electronic equipment and most of the software is already in place at banks so that this system could be implemented at any time without much extra expense and preparation.

3. To prevent massive sudden unemployment in tax related jobs  the tax will be gradually phased in over a period of 20 years. The tax will be phased in starting with a 0.1% rate the first year and increasing by 0.25% every following year. All the current taxes at all levels of government will be gradually phased out over the same 20 year period by gradually decreasing their tax rates with the total amount collected by this Automatic Tax. The exact rate of Automatic Tax needed to replace all those other taxes will be known more precisely after the first year of collecting 0.1% Automatic Tax. By simply multiplying the amount collected by 50 will reveal whether my calculation is correct that 5% will collect taxes in excess of the amount needed to replace all the other taxes.

4. No tax returns ever have to be prepared or filed. Nobody will ever be subject to audits. Banks will have government supervision (as they have today) and they will be amply rewarded for the tax collection function and the keeping of good records.

5. The only taxes that will remain are property taxes and energy taxes for primarily regulatory reasons (more about this elsewhere on this website).

6. This new system of taxation fulfills the only function any tax system should, namely to collect tax revenue at the least cost and least inconvenience. A tax system should NEVER be used as a manipulative tool with which lobbyists can buy favors from politicians to satisfy the economic and political objectives of the special interests they represent. Those efforts of corruption and collusion with politicians are twisting tax systems around the World into the extremely costly and inconvenient tax mess we are suffering. The United States 17,000 page 9 million word Federal tax code is most likely the grand prize winner for the most complicated, costly and wasteful tax system of them all. The reason for being the grand prize winner is that the United States is the largest economy in the World and so much more can be stolen from it through the lobbying efforts of the Special Interests and the politicians that will .

7. The direct and indirect cost of the US Federal tax alone is estimated at $900 BILLION 2005 dollars. Add to that the direct and indirect cost of collection and administration of the remaining 30,000 taxing authorities (State, County, Local Municipal). Automatic Tax will cost a maximum of $25 billion to collect and administer for all taxes it will replace.

8. There are specific exceptions to the tax. All transactions between bank accounts owned by the same account holder are exempt. All transactions involving financial instrument trading such as  international currency trading, bond trading, stocks trading, commodity trading etc. are excluded from this tax. For all other cases with merit for tax exemption can be submitted in the form of petitions for tax exemptions to special State administered tax refund offices.

If we want to improve the way we collect taxes in all countries around the World, we first have to establish some general rules and objectives for taxation in general.

Most people have opinions about what taxation should accomplish, but there is where the problem starts. Many of these opinions differ a great deal and are in conflict with each other. In other words, we have no consensus on what taxation should accomplish, because most people have a whole list of things that they expect taxation to do for them and for others.

In order to have a reasonable chance to be able to replace the many idiotic tax systems in all countries on Earth, we must first try to agree that taxation has but one single purpose and nothing else, namely to collect sufficient revenue with which the various governments at all levels of jurisdiction can meet their financial needs to govern.

For that purpose I have created the 10 tax commandments   that must be followed when creating any system of taxation. I created this Automatic Tax system of taxation with these rules as guidelines and the result has been beyond my greatest expectations. Simple, comprehensive and easy to implement and administer.

It would not mean much if this proposal were merely better than the more well known tax proposals like the FAIR TAX and the FLAT TAX. Those two proposals identify most excellently what is wrong with our current system but do not come up with much of a solution.

Proponents of both of these more well known tax proposals should have a long and hard look at this Automatic Tax and switch their support to it if they like it better than their own, because Automatic Tax is truly far superior to any and all other tax reform and tax replacement proposals I have knowledge of.

Like many other tax proposals Automatic Tax will spell the end of the dreaded IRS with its 17,000 page,  9 million words insane tax code. It is a tax replacement proposal that sounds too good to be true, but not only is it true, it is ready for immediate implementation.

Nothing will happen however, as long as "we the people" are complacent and do nothing and are convinced that the "special interests" have more power than we have and that they will be able to maintain things exactly as they are. Cast your vote for Automatic Tax. Give us your opinion and suggestions for promoting this idea.

Automatic Tax is similar to a credit card users fee. It is the simplest solution to replace all current forms of taxation at all levels of government (Federal, State, County, Local) with a single 5% users fee for using the monetary system created, regulated and controlled through the government. This transfer fee is automatically collected by the government through the same banking system it already controls and regulates now. It is similar to the 2% or 3% credit card users fee that is collected by credit card companies for using the services provided by credit card companies. 

No more accounting and record keeping for tax purposes. No filing of any tax forms. No audits of any kind and no more government intrusion into our private lives.

I am the manufacturer of a
product  that sounds too good to be true and here I am, the same manufacturer, proposing a system of taxation that sounds too good to be true as well. My name is Alf Temme and my hobby is tilting at government windmills. Email alf@400a.com

What can a manufacturer possibly know about taxation? Shouldn't members of Congress, tax experts and professors of economics know more about taxation than a manufacturer?

Congress had its chance

Let's face it, we have left taxation up to members of Congress for a long time. They were assisted by tax experts and professors of economics and look what they came up with over the years. All they created is this dumb and very costly 17,000 page Federal Income Tax code with 9 million words of incomprehensible nonsense that costs the United States economy about $900 billion per year (2005 dollars) in administration, collection, accounting, filing, auditing, prosecution and additional unproductive and counterproductive efforts to evade, avoid and minimize taxes. Add to that the costs of administration and collection for all the other, over 30,000, taxes at State and local levels of government (yes, believe it or not, in addition to the dreaded IRS and 50 State taxing agencies, there are over 30,000 additional taxing authorities with many costly employees at lower levels of government for counties and cities, that make the lives of business owners a bit more difficult every day with forms and regulations and of course tax collections).
 

My simple thoughts
So, I thought, that if I were to apply to taxation the same manufacturing economies that I use in manufacturing, that I might be able to create a very simple and economical system of taxation that raises, with a single, automatically collected 5% transaction fee, all the revenue needed to replace the current taxes collected by the IRS and all the other 30,000 tax jurisdictions combined. 

Too fantastic?
It sounds too fantastic and it also sounds that if such a thing would be possible that many other people would have thought of it before and it would have been implemented a long time ago. But that is of course the usual reaction from people when they hear of a new invention that puts to shame all old insights with brilliant and seemingly obvious simplicity. The fact is that simplicity is often much more difficult to create than complication. Complication is far easier to create. Just look at the ease with which our legislators complicate our lives. They should be ashamed and they should consult with manufacturers rather than University Professors for simplicity, innovation and efficiency.

Those tricky politicians
It also sounds that, if it were even possible, that such a simple transaction fee would have to be at a very high percentage rate to replace all those other taxes combined.  Because, lets face it,  those tricky politicians are nickling and diming us to death with all those different smaller taxes, because they do not dare to put all those smaller taxes together into a single large tax for fear that it would reveal the over 50% combined taxes the average citizen is paying on income. The politicians fear that combining all taxes into a single larger tax would cause tax riots and tax revolutions. They might be right.

Surprise, 5% will do it
But, surprise, surprise, because after over 20 years of research and toil, I exceeded my wildest expectations and created a simple method of taxation that virtually eliminates all the cost and unproductive work associated with current methods of taxation. And the tax rate is a very low 5% (likely even less), so that the work and methods to avoid and evade this tax are hardly worth the effort and the risk of criminal prosecution for tax evasion and avoidance. 

Free enterprise and competition
The profit motive and competition dictate that a manufacturer must always use the most economical, least labor intensive methods to do a certain task in the process of manufacturing a product. Manufacturers that do not employ the most efficient and most effective methods of manufacturing will be run out of business by their competitors. That is how free enterprise and competition create better products and services.

Governments have no competition
Unfortunately, governments rarely face competition, and in the few instances where governments do face competition,  they play dirty and change the rules in the middle of the game. Governments have never even conceived of, or tried to find, a system of taxation that will use a very small tax rate on a very broad tax base.

The purpose of taxation
The only purpose of a system of taxation is to collect revenue to pay for government services, or at least it should be the ONLY purpose.  Government officials and politicians have become extremely confused and are sidetracked in allowing tax systems to become very corrupt vehicles for the pursuit of economic and political objectives promoted and lobbied for by special interests. In addition politicians use www.incorrectlogic.com by thinking that they can take from the rich and give to the poor via twisting of the tax laws. They do this in hopes of being able to bribe "the poor" into voting for them. The only thing they accomplish with these ill advised schemes is creating class strife and class hatred. Nice going guys.

The end of corrupt tax legislation
This corruption and collusion is facilitated by politicians of all stripes and persuasions who accept "election contributions" (read bribes)and all the special tax favors they deliver in payment for those bribes are unfortunately paid for by all tax payers and the entire United States economy that now becomes less competitive in the Global market place. This very expensive and corrupt income tax system costs us, the public, around $900 billion per year (2005 dollars). That amounts to a healthy $7500 per family per year. It is about time to end this corruption and collusion with a system of taxation that takes advantage of modern efficiencies such as is done by manufacturers in making products and by service providers in delivering services.

To fully understand how a good system of taxation should function and what it must accomplish, you should read 10 Tax Principles next.



Please read as much as your attention span will permit and be so kind to give me some feedback and ideas on issues you think have been overlooked and possible improvements to this tax at alf@fastexercise.com (my name is Alf Temme).

A word of advice: Do not jump to conclusions too fast (such as: "Cash transactions will skyrocket" or "This tax will not help the poor because it is not a Progressive tax" or "This is a cascading tax, a tax upon tax upon tax at every successive level of trade and that will make products exceedingly expensive" or "This tax will create vertical integration in businesses" or "This tax can still be circumvented by this, that and the other method" tell me the method and I will explain why this tax is better for "the poor" less prone to tax evasion and tax avoidance than current methods of taxation ).

A word about taxation in general:
As mentioned above, the sole objective and function of any tax system should be to generate and collect revenue at the least cost and least inconvenience and in amounts sufficient to cover all government operating expenses and special budget requirements. Contrary to that single simple objective taxation has deteriorated into extremely costly and exceedingly inconvenient systems that often do not even cover the budget requirements of the governments they are expected to serve. Very busy and small minds on opposite ends of the political spectrum have selfishly used taxation for their own economic or political objectives with total disregard to the damage they create to the overall economy and the financial burden they create for each and every citizen.

The general fallacy of taxation as presently practiced by most governments, lies in the disastrous philosophical notion that taxation should be used to pursue economic and political goals and to manipulate economic and political outcomes. Since there are so many divergent political and economic objectives, philosophies and theories, taxation has become an economic and political football that is kicked into all different directions that are entirely unpredictable and make long-term economic planning near impossible for individuals and businesses alike.

The result is an ever changing variety of different very expensive and inconvenient systems of taxation that often do not even meet the budget requirements of the governments they serve. In addition these tax systems are completely unpredictable because they undergo changes whenever special interests are able to persuade the legislatures to incorporate their economic or political objectives into the tax codes. As a result the ever changing tax codes become increasingly more complex, less effective and more costly to the entire economy. The economic cost of these complex and unpredictable systems of taxation result in lower standards of living for all people (rich and poor alike).

FLAT TAXES are not a new concept. However this latest proposal named "Automatic Tax is ready for prime time because it is the absolute least expensive and least inconvenient tax system ever proposed.

Automatic Tax fulfills the only objective that any tax system should, namely collecting, at the least cost and the least inconvenience, sufficient revenue to satisfy the total budget requirement of government. Economic and political objectives are largely excluded by Automatic Tax and those objectives can be addressed as a separate issue by way of giving or withholding outright or conditional grants. Special interest lobbyists can concentrate their self-serving efforts on lobbying for special grants instead of doing what they are doing presently, namely distorting and twisting and corrupting our systems of taxation into shamefully expensive and complex systems of taxation like the United States income tax code of 17,000 pages and over 9 million words. Shame on the members of Congress. How dare they allow such collusion and corruption to take place while impoverishing the whole Country in the process. Making the poor poorer and making the rich poorer as well.

After reading the following short introduction, see what you think of this excellent fully automated Automatic Tax system. Pay special attention to the true objective of a tax system and do not be sidetracked by the often persuasive socialist and capitalist diversions that will complicate tax systems and make them vastly more expensive. Let's concentrate on satisfying budget requirements and expose the other economic and political objectives from the special interests as the fallacies and frauds they most often are. Please email me feedback so that I may learn of your insights or lack thereof and your suggestions for improvement and criticisms as well. My name is Alf Temme and I am a manufacturer. Email me at alf@FastExercise.com

The most often voiced criticisms against Automatic Tax are:
Many kind and well meaning socialists lament the fact that this 5% flat tax is not a progressive tax. They want to use the tax systems to pursue their political agenda and to right, what they perceive as, social wrongs. Well meaning socially thinking people are of the faulty opinion that progressive taxation will help poor people who are at the bottom of the economic ladder. Progressive taxation instead of helping people, it actually harms poor people in more ways than one (explained on my separate website www.ProgressiveTaxation.com ) . In their misguided designs to use taxation as a tool to right the perceived social wrongs they have helped to create a 17,000 page tax code that neither satisfies the main objective of collecting adequate revenue but costs the total United States economy $900 billion in waste of money and effort. These undoubtedly well meaning socialists will even refer to progressive taxation as being FAIR taxation, implying of course that anything but a progressive tax, would be UNFAIR. Progressive taxation means that it will tax poor people at a lower percentage rate (as a percentage of their income) than people higher up the economic ladder. The tax percentage rate rises progressively in relation to the rise in income. Strangely, paying an equal percentage rate, or FLAT TAX, is seen as UNFAIR. So any form of flat tax is opposed by these nice well meaning socialists. What is even worse in their view is that a flat tax actually might turn out to be regressive, horror of horrors. Regressive taxation means that poor people wind up paying a larger percentage of their income in tax than rich people do.

It takes a bit of explanation to get "experts" in the socialist camp of political leanings to understand that their view of economics, and specially as pertains to taxation, is severely flawed. Worse yet, that as a result of their socially well meaning but flawed theories, they are creating greater poverty (in terms of money and also mind) among the poor and it creates a lower standard of living for everyone, rich and poor alike. Fact is that poor wage earners pay absolutely no tax at all on their income with this Automatic Tax, but neither do rich people.

Have a look at www.ProgressiveTaxation.com to educate yourself on the fallacies of progressive taxation and how it is actually a non-issue with Automatic Tax.

The second most frequent objection is the conclusion that this tax might create a vast cash economy because cash transactions will totally evade the 5% tax. That looks like a great incentive to circumvent Automatic Tax but on closer examination current systems of taxation create far greater incentives to circumvent taxation with cash transactions. That is also the reason why estimates under current taxation in the United States are that around 30% of the potential tax revenue is lost through tax avoidance and tax evasion by economic transactions that take place in the "underground" economy. The dollar volume of cash transactions under Automatic Tax are estimated to be no more than 1%. See point "10" below under "Introduction" for the answers to the cash transaction fallacy.

Another criticism is that this is a "cascading" tax. Cascading is another mythical word dreamt up by those who fancy themselves "experts" in the field of taxation. It refers to the observation that successive transactions in the production of a product will tax a product again and again at every step of the production process and then tax it again and again through all the steps of distribution on its way to the end-consumer and that it will make products exceedingly expensive. See why this is a fallacy in analytical deduction as well by reading www.CascadingTaxes.com

The "vertical integration" argument is
another tool used to criticize this taxation method. Some people expect that businesses will want to evade the above mentioned successive incidences of tax by means of vertical integration. This means that larger businesses would see an incentive in doing as much as possible "in-house" by means of vertical integration instead of outsourcing the work with subcontractors and suppliers. In so doing they would decrease the number of monetary transactions a product would be subject to and thereby reduce the number of incidences of 5% tax being applied to the product. Some of this vertical integration will undoubtedly take place as a result of this Automatic Tax, but that is not necessarily a detriment to the economy as a whole.

5. There is an additional ridiculous philosophy about hidden taxes. There are many very misguided but sincere concerns about "hiding" taxes from view by embedding them within the cost of products or services. The theory here is that the public should be fully aware how much tax is being collected in conjunction with purchases or any other economic activities. It is theorized that the public awareness of the taxes will keep the politicians more honest because the public will be more vigilant. That is why in the United States sales taxes are added to the price of products instead of being part of the sales price. This extra inconvenience practiced over several decades has not contributed to even the slightest degree of keeping politicians more honest or making the public more vigilant. The only thing the separately added sales taxes have done is to add the the cost and inconvenience of taxation and to the annoyance for the general public. The vigilance of the general public should not be increased at the collection side of the revenue but rather at the government spending side of the revenue.

All of these objections are evidence that the vast majority of the public and even the vast majority of so called "experts" in the field of economics and taxation do not have much of a clue of how economics really work, specially in relation to taxation.

The main benefits of Automatic Tax:
Collecting at the least cost and least inconvenience, revenue sufficient to cover the combined budget requirements at all levels of government. Creating a completely predictable and stable tax system that will facilitate long term planning for individuals and businesses alike and raising the standard of living by $7500 per household per year by saving $900 billion dollars per year that are currently wasted on direct and indirect costs created by our current corrupt 17,000 page income tax system.

Introduction:

1. Automatic Tax will eliminate all Federal Taxes, all State Taxes, County Taxes, Local Taxes and replace all of them together with a single very broad based tax of under 5%.

2. This tax is entirely collected by automatic means through the banks in the National Banking System. The banks will deduct 5% from all deposits made to bank accounts and they will credit the accounts with the remaining 95% of the total deposits. There are some exceptions to this tax. For example transfer payments between accounts that are owned by the same account holder are exempt from this tax and most financial instrument related deposits are exempt as well (stocks, bonds, foreign exchange and the like). Various other transactions for which tax exemptions

Following is a short introduction to Automatic Tax

1. Automatic Tax will replace all taxes at all levels of government ( Federal, State, County and Local) and replaces all of them together with a simple financial transaction service fee of 5% or less (this already sounds impossible but it is true).

2. This service fee collection process does not require any accounting or keeping of records because it is entirely electronically collected through the banking system. Banks will deduct 5% from all deposits made and will credit the bank accounts with the remaining 95% of the deposit. All the electronic equipment and most of the software is already in place at banks so that this system could be implemented at any time without much extra expense and preparation.

3. To prevent massive sudden unemployment in tax related jobs  the tax will be gradually phased in over a period of 20 years. The tax will be phased in starting with a 0.1% rate the first year and increasing by 0.25% every following year. All the current taxes at all levels of government will be gradually phased out over the same 20 year period by gradually decreasing their tax rates with the total amount collected by this Automatic Tax. The exact rate of Automatic Tax needed to replace all those other taxes will be known more precisely after the first year of collecting 0.1% Automatic Tax. By simply multiplying the amount collected by 50 will reveal whether my calculation is correct that 5% will collect taxes in excess of the amount needed to replace all the other taxes.

4. No tax returns ever have to be prepared or filed. Nobody will ever be subject to audits. Banks will have government supervision (as they have today) and they will be amply rewarded for the tax collection function and the keeping of good records.

5. The only taxes that will remain are property taxes and energy taxes for primarily regulatory reasons (more about this elsewhere on this website).

6. This new system of taxation fulfills the only function any tax system should, namely to collect tax revenue at the least cost and least inconvenience. A tax system should NEVER be used as a manipulative tool with which lobbyists can buy favors from politicians to satisfy the economic and political objectives of the special interests they represent. Those efforts of corruption and collusion with politicians are twisting tax systems around the World into the extremely costly and inconvenient tax mess we are suffering. The United States 17,000 page 9 million word Federal tax code is most likely the grand prize winner for the most complicated, costly and wasteful tax system of them all. The reason for being the grand prize winner is that the United States is the largest economy in the World and so much more can be stolen from it through the lobbying efforts of the Special Interests and the politicians that will .

7. The direct and indirect cost of the US Federal tax alone is estimated at $900 BILLION 2005 dollars. Add to that the direct and indirect cost of collection and administration of the remaining 30,000 taxing authorities (State, County, Local Municipal). Automatic Tax will cost a maximum of $25 billion to collect and administer for all taxes it will replace.

8. There are specific exceptions to the tax. All transactions between bank accounts owned by the same account holder are exempt. All transactions involving financial instrument trading such as  international currency trading, bond trading, stocks trading, commodity trading etc. are excluded from this tax. For all other cases with merit for tax exemption can be submitted in the form of petitions for tax exemptions to special State administered tax refund offices.

If we want to improve the way we collect taxes in all countries around the World, we first have to establish some general rules and objectives for taxation systems.

Most people have opinions about what taxation should accomplish, but that is where the problem starts. Many of these opinions differ a great deal and are in conflict with each other. In other words, we have no consensus on what taxation should accomplish, because most people have a whole list of things that they expect taxation to do for them and for others.

In order to have a reasonable chance to be able to replace the many archaic tax systems in all countries on Earth, we must first try to agree that taxation has but one single purpose and nothing else, namely to collect sufficient revenue with which the various governments at all levels of jurisdiction can meet their financial needs to govern.

For that purpose I have created a list of 10 tax maxims   that must be adhered to as closely as possible when creating any system of taxation. I created this Automatic Tax system with these rules as guidelines and the result has been beyond my greatest expectations. Simple, comprehensive and easy to implement and to administer.

It would not mean much if this tax proposal were merely better than the more well known tax proposals like the FAIR TAX and the FLAT TAX. Those two proposals identify most excellently what is wrong with our current system but they do not come up with excellent solutions.

Supporters of these well known tax proposals should have a good look at Automatic Tax and switch their support to it if they like what they see. Automatic Tax is truly far superior to any and all other tax reform and tax replacement proposals I have knowledge of.

Like many other tax proposals Automatic Tax will spell the end of the dreaded IRS with its 17,000 page, 9 million words tax code. It sounds too good to be true, but not only is it true, it is ready for immediate implementation.

Nothing will happen as long as "we the people" are complacent and do nothing and are convinced that the "special interests" have more power than we have and that they will be able to maintain things exactly as they are. Cast your vote for Automatic Tax. Give us your opinion and suggestions for promoting this idea.

Automatic Tax is similar to a credit card users fee. It is the simplest solution to replace all current forms of taxation at all levels of government (Federal, State, County, Local) with a single 5% users fee for using the monetary system created, regulated and controlled through the government. This transfer fee is automatically collected by the government through the same banking system it already controls and regulates now. It is similar to the 2% or 3% credit card users fee that is collected by credit card companies for using the services provided by credit card companies. 

No more accounting and record keeping for tax purposes. No filing of any tax forms. No audits of any kind and no more government intrusion into our private lives.

I am the manufacturer of a
product  that sounds too good to be true and here I am, the same manufacturer, proposing a system of taxation that sounds too good to be true as well. My name is Alf Temme and my hobby is tilting at government windmills. Email alf@400a.com

What can a manufacturer possibly know about taxation? Shouldn't members of Congress, tax experts and professors of economics know more about taxation than a manufacturer possibly can?

Congress had its chance

Let's face it, we have left taxation up to members of Congress for a long time. They were assisted by tax experts and professors of economics and look what they came up with over the years. All they created is this dumb and very costly 17,000 page Federal Income Tax code with 9 million words of incomprehensible nonsense that costs the United States economy about $900 billion per year (2005 dollars) in administration, collection, accounting, filing, auditing, prosecution and additional unproductive and counterproductive efforts to evade, avoid and minimize taxes. Add to that the costs of administration and collection for all the other, over 30,000, taxes at State and local levels of government (yes, believe it or not, in addition to the dreaded IRS and 50 State taxing agencies, there are over 30,000 additional taxing authorities with many costly employees at lower levels of government for counties and cities, that make the lives of business owners a bit more difficult every day with forms and regulations and of course tax collections).
 

My simple thoughts
So, I thought, that if I were to apply to taxation the same manufacturing economies that I use in manufacturing, that I might be able to create a very simple and economical system of taxation that raises, with a single, automatically collected 5% transaction fee, all the revenue needed to replace the current taxes collected by the IRS and all the other 30,000 tax jurisdictions combined. 

Too fantastic?
It sounds too fantastic and it also sounds that if such a thing would be possible that many other people would have thought of it before and it would have been implemented a long time ago. But that is of course the usual reaction from people when they hear of a new invention that puts to shame all old insights with brilliant and seemingly obvious simplicity. The fact is that simplicity is often much more difficult to create than complication. Complication is far easier to create. Just look at the ease with which our legislators complicate our lives. They should be ashamed and they should consult with manufacturers rather than University Professors for simplicity, innovation and efficiency.

Those tricky politicians
It also sounds that, if it were even possible, that such a simple transaction fee would have to be at a very high percentage rate to replace all those other taxes combined.  Because, lets face it,  those tricky politicians are nickling and diming us to death with all those different smaller taxes, because they do not dare to put all those smaller taxes together into a single large tax for fear that it would reveal the over 50% combined taxes the average citizen is paying on income. The politicians fear that combining all taxes into a single larger tax would cause tax riots and tax revolutions. They might be right.

Surprise, 5% will do it
But, surprise, surprise, because after over 20 years of research and toil, I exceeded my wildest expectations and created a simple method of taxation that virtually eliminates all the cost and unproductive work associated with current methods of taxation. And the tax rate is a very low 5% (likely even less), so that the work and methods to avoid and evade this tax are hardly worth the effort and the risk of criminal prosecution for tax evasion and avoidance. 

Free enterprise and competition
The profit motive and competition dictate that a manufacturer must always use the most economical, least labor intensive methods to do a certain task in the process of manufacturing a product. Manufacturers that do not employ the most efficient and most effective methods of manufacturing will be run out of business by their competitors. That is how free enterprise and competition create better products and services.

Governments have no competition
Unfortunately, governments rarely face competition, and in the few instances where governments do face competition,  they play dirty and change the rules in the middle of the game. Governments have never even conceived of, or tried to find, a system of taxation that will use a very small tax rate on a very broad tax base.

The purpose of taxation
The only purpose of a system of taxation is to collect revenue to pay for government services, or at least it should be the ONLY purpose.  Government officials and politicians have become extremely confused and are sidetracked in allowing tax systems to become very corrupt vehicles for the pursuit of economic and political objectives promoted and lobbied for by special interests. In addition politicians use www.incorrectlogic.com by thinking that they can take from the rich and give to the poor via twisting of the tax laws. They do this in hopes of being able to bribe "the poor" into voting for them. The only thing they accomplish with these ill advised schemes is creating class strife and class hatred. Nice going guys.

The end of corrupt tax legislation
This corruption and collusion is facilitated by politicians of all stripes and persuasions who accept "election contributions" (read bribes)and all the special tax favors they deliver in payment for those bribes are unfortunately paid for by all tax payers and the entire United States economy that now becomes less competitive in the Global market place. This very expensive and corrupt income tax system costs us, the public, around $900 billion per year (2005 dollars). That amounts to a healthy $7500 per family per year. It is about time to end this corruption and collusion with a system of taxation that takes advantage of modern efficiencies such as is done by manufacturers in making products and by service providers in delivering services.

To fully understand how a good system of taxation should function and what it must accomplish, you should read 10 Tax Principles next.



Please read as much as your attention span will permit and be so kind to give me some feedback and ideas on issues you think have been overlooked and possible improvements to this tax at alf@fastexercise.com (my name is Alf Temme).

A word of advice: Do not jump to conclusions too fast (such as: "Cash transactions will skyrocket" or "This tax will not help the poor because it is not a Progressive tax" or "This is a cascading tax, a tax upon tax upon tax at every successive level of trade and that will make products exceedingly expensive" or "This tax will create vertical integration in businesses" or "This tax can still be circumvented by this, that and the other method" tell me the method and I will explain why this tax is better for "the poor" less prone to tax evasion and tax avoidance than current methods of taxation ).

A word about taxation in general:
As mentioned above, the sole objective and function of any tax system should be to generate and collect revenue at the least cost and least inconvenience and in amounts sufficient to cover all government operating expenses and special budget requirements. Contrary to that single simple objective taxation has deteriorated into extremely costly and exceedingly inconvenient systems that often do not even cover the budget requirements of the governments they are expected to serve. Very busy and small minds on opposite ends of the political spectrum have selfishly used taxation for their own economic or political objectives with total disregard to the damage they create to the overall economy and the financial burden they create for each and every citizen.

The general fallacy of taxation as presently practiced by most governments, lies in the disastrous philosophical notion that taxation should be used to pursue economic and political goals and to manipulate economic and political outcomes. Since there are so many divergent political and economic objectives, philosophies and theories, taxation has become an economic and political football that is kicked into all different directions that are entirely unpredictable and make long-term economic planning near impossible for individuals and businesses alike.

The result is an ever changing variety of different very expensive and inconvenient systems of taxation that often do not even meet the budget requirements of the governments they serve. In addition these tax systems are completely unpredictable because they undergo changes whenever special interests are able to persuade the legislatures to incorporate their economic or political objectives into the tax codes. As a result the ever changing tax codes become increasingly more complex, less effective and more costly to the entire economy. The economic cost of these complex and unpredictable systems of taxation result in lower standards of living for all people (rich and poor alike).

FLAT TAXES are not a new concept. However this latest proposal named "Automatic Tax is ready for prime time because it is the absolute least expensive and least inconvenient tax system ever proposed.

Automatic Tax fulfills the only objective that any tax system should, namely collecting, at the least cost and the least inconvenience, sufficient revenue to satisfy the total budget requirement of government. Economic and political objectives are largely excluded by Automatic Tax and those objectives can be addressed as a separate issue by way of giving or withholding outright or conditional grants. Special interest lobbyists can concentrate their self-serving efforts on lobbying for special grants instead of doing what they are doing presently, namely distorting and twisting and corrupting our systems of taxation into shamefully expensive and complex systems of taxation like the United States income tax code of 17,000 pages and over 9 million words. Shame on the members of Congress. How dare they allow such collusion and corruption to take place while impoverishing the whole Country in the process. Making the poor poorer and making the rich poorer as well.

After reading the following short introduction, see what you think of this excellent fully automated Automatic Tax system. Pay special attention to the true objective of a tax system and do not be sidetracked by the often persuasive socialist and capitalist diversions that will complicate tax systems and make them vastly more expensive. Let's concentrate on satisfying budget requirements and expose the other economic and political objectives from the special interests as the fallacies and frauds they most often are. Please email me feedback so that I may learn of your insights or lack thereof and your suggestions for improvement and criticisms as well. My name is Alf Temme and I am a manufacturer. Email me at alf@FastExercise.com

The most often voiced criticisms against Automatic Tax are:
Many kind and well meaning socialists lament the fact that this 5% flat tax is not a progressive tax. They want to use the tax systems to pursue their political agenda and to right, what they perceive as, social wrongs. Well meaning socially thinking people are of the faulty opinion that progressive taxation will help poor people who are at the bottom of the economic ladder. Progressive taxation instead of helping people, it actually harms poor people in more ways than one (explained on my separate website www.ProgressiveTaxation.com ) . In their misguided designs to use taxation as a tool to right the perceived social wrongs they have helped to create a 17,000 page tax code that neither satisfies the main objective of collecting adequate revenue but costs the total United States economy $900 billion in waste of money and effort. These undoubtedly well meaning socialists will even refer to progressive taxation as being FAIR taxation, implying of course that anything but a progressive tax, would be UNFAIR. Progressive taxation means that it will tax poor people at a lower percentage rate (as a percentage of their income) than people higher up the economic ladder. The tax percentage rate rises progressively in relation to the rise in income. Strangely, paying an equal percentage rate, or FLAT TAX, is seen as UNFAIR. So any form of flat tax is opposed by these nice well meaning socialists. What is even worse in their view is that a flat tax actually might turn out to be regressive, horror of horrors. Regressive taxation means that poor people wind up paying a larger percentage of their income in tax than rich people do.

It takes a bit of explanation to get "experts" in the socialist camp of political leanings to understand that their view of economics, and specially as pertains to taxation, is severely flawed. Worse yet, that as a result of their socially well meaning but flawed theories, they are creating greater poverty (in terms of money and also mind) among the poor and it creates a lower standard of living for everyone, rich and poor alike. Fact is that poor wage earners pay absolutely no tax at all on their income with this Automatic Tax, but neither do rich people.

Have a look at www.ProgressiveTaxation.com to educate yourself on the fallacies of progressive taxation and how it is actually a non-issue with Automatic Tax.

The second most frequent objection is the conclusion that this tax might create a vast cash economy because cash transactions will totally evade the 5% tax. That looks like a great incentive to circumvent Automatic Tax but on closer examination current systems of taxation create far greater incentives to circumvent taxation with cash transactions. That is also the reason why estimates under current taxation in the United States are that around 30% of the potential tax revenue is lost through tax avoidance and tax evasion by economic transactions that take place in the "underground" economy. The dollar volume of cash transactions under Automatic Tax are estimated to be no more than 1%. See point "10" below under "Introduction" for the answers to the cash transaction fallacy.

Another criticism is that this is a "cascading" tax. Cascading is another mythical word dreamt up by those who fancy themselves "experts" in the field of taxation. It refers to the observation that successive transactions in the production of a product will tax a product again and again at every step of the production process and then tax it again and again through all the steps of distribution on its way to the end-consumer and that it will make products exceedingly expensive. See why this is a fallacy in analytical deduction as well by reading www.CascadingTaxes.com

The "vertical integration" argument is
another tool used to criticize this taxation method. Some people expect that businesses will want to evade the above mentioned successive incidences of tax by means of vertical integration. This means that larger businesses would see an incentive in doing as much as possible "in-house" by means of vertical integration instead of outsourcing the work with subcontractors and suppliers. In so doing they would decrease the number of monetary transactions a product would be subject to and thereby reduce the number of incidences of 5% tax being applied to the product. Some of this vertical integration will undoubtedly take place as a result of this Automatic Tax, but that is not necessarily a detriment to the economy as a whole.

5. There is an additional ridiculous philosophy about hidden taxes. There are many very misguided but sincere concerns about "hiding" taxes from view by embedding them within the cost of products or services. The theory here is that the public should be fully aware how much tax is being collected in conjunction with purchases or any other economic activities. It is theorized that the public awareness of the taxes will keep the politicians more honest because the public will be more vigilant. That is why in the United States sales taxes are added to the price of products instead of being part of the sales price. This extra inconvenience practiced over several decades has not contributed to even the slightest degree of keeping politicians more honest or making the public more vigilant. The only thing the separately added sales taxes have done is to add the the cost and inconvenience of taxation and to the annoyance for the general public. The vigilance of the general public should not be increased at the collection side of the revenue but rather at the government spending side of the revenue.

All of these objections are evidence that the vast majority of the public and even the vast majority of so called "experts" in the field of economics and taxation do not have much of a clue of how economics really work, specially in relation to taxation.

The main benefits of Automatic Tax:
Collecting at the least cost and least inconvenience, revenue sufficient to cover the combined budget requirements at all levels of government. Creating a completely predictable and stable tax system that will facilitate long term planning for individuals and businesses alike and raising the standard of living by $7500 per household per year by saving $900 billion dollars per year that are currently wasted on direct and indirect costs created by our current corrupt 17,000 page income tax system.

Introduction:

1. Automatic Tax will eliminate all Federal Taxes, all State Taxes, County Taxes, Local Taxes and replace all of them together with a single very broad based tax of under 5%.

2. This tax is entirely collected by automatic means through the banks in the National Banking System. The banks will deduct 5% from all deposits made to bank accounts and they will credit the accounts with the remaining 95% of the total deposits. There are some exceptions to this tax. For example transfer payments between accounts that are owned by the same account holder are exempt from this tax and most financial instrument related deposits are exempt as well (stocks, bonds, foreign exchange and the like). Various other transactions for which tax exemptions may be granted will be handled through a State tax refund office where requests or petitions for tax exemption will be adjudicated and administered.

3. Automatic Tax requires absolutely no record keeping and no filing of tax returns and it requires no audits either.

4. This tax should be phased in gradually over a period of 20 years while all taxes that will be replaced by it are equally gradually phased out. Faster transition from the current tax systems to Automatic Tax or to any other tax replacement would create massive economic disruptions and a severe economic depression.

5. This tax replacement will save the United States economy around $900 billion (2005 dollars) per year in direct and indirect cost of collection, cost of enforcement and accounting. Add to that the cost of economic distortions created by our current 17,000 page income tax code by all manner of unproductive activities aimed at tax avoidance and evasion such as offshore bank accounts and investment schemes all designed to create "tax savings". This Automatic Tax eliminates almost all incentives and loopholes for tax evasion and avoidance.

6. Automatic Tax creates an absolute level playing field without possibility for special interests gaining special tax treatment. It also creates a very stable economic climate with its absolute predictable never changing tax rules that allow for long term personal and business planning without the unpredictable economic environment created by the current ever changing quixotic tax rules, rates and regulations.

7. This system of taxation is as applicable to all other countries as it is to the United States and it would greatly facilitate international trade if gradually most countries were to adopt this extremely efficient automatic tax revenue system.

8. The actual percentage of tax needed to collect the total revenue of all the taxes that are replaced by Automatic Tax is only around 3.8% and the additional 1.2% collected excess will be used for special projects such as paying off the National Debt and all public debt at all lower levels of government and it can be used to fund improvements to the Social Security System and its transition to a personal investment funded system. Other off-budget projects can be funded as well and any excess can be used to fund research or improve government services. About 0.5% of the total 5% tax is earmarked for donations to true charity organizations. This will more than offset the potential negative impact on charitable organizations from losing their tax exempt status they enjoy under the current tax system.

9. One of the best aspects of Automatic Tax is that private and business bank account holders who all have the 5% tax deducted from their bank deposits will have absolutely no negative financial impact on their income from the tax. Let me explain: Businesses will fully anticipate the 5% tax and will factor the 5% tax into their selling price of the products they sell or the services they render. If a business wants to receive a net $1000 for a product, after the 5% tax deduction, they will simply price the product at $1053 to have $1000 left after the 5% tax has been deducted from their bank deposit. Wage earners will not have a negative impact on their income either because they will receive paychecks that have the amount of their wages displayed in the usual field on the right hand side of the paycheck and immediately under that field that displays the net the wage amount is another field that displays a 5.3% extra employer contribution amount that is equal to the 5% tax that will be deducted by the bank. So if the wage of an employee is $1000 per week the paycheck will display the $1000 wage with an additional smaller field under the $1000 field that will display the $53 employer contribution. The employer in turn factors the $53 in as a cost of wages, a cost of doing business. The employee gets exactly the $1000 full amount of wages without ever having to pay any additional taxes on the $1000 wages. When people purchase a product or service they do not experience the tax either because it is included (hidden) in the price as part of the cost. There is an additional ridiculous philosophy about hidden taxes. There are many very misguided but sincere concerns about "hiding" taxes from view by embedding them within the cost of products or services.

10. The incentive for tax avoidance and tax evasion is extremely low under Automatic Tax. Many people believe incorrectly that Automatic Tax will promote an enormous upswing in cash transactions because cash transactions would not be subject to the 5% tax. Nothing could be farther from reality because the 5% incentive is far too low to be interesting enough to incur the extra inconveniences involved in cash transactions (not to speak of the easier detection and more certain prosecution of tax evasion under this tax system).

Merchants who accept credit card payments incur 2% or 3% credit card fees and they gladly pay those fees in exchange for benefits they receive from offering to accept credit card payments (more sales, no bounced checks, etc.). To make cash transactions that would evade the tax it requires two parties to the "conspiracy". It would mean that both parties to the transaction would have to agree to share the 5% with only 2.5% for each "conspirator".

The Automatic Tax code requires that all receipts are documented and reported on special forms that can be filed at any bank or can be mailed to a central State tax disbursement authority with heavy penalties (including jail) for non-reporting of receipts.. However, all money receipts that are presented to a bank for deposit into an account, or for conversion into other money instruments, will automatically deemed to having been documented and reported and no separate reporting is required for all deposited receipts.. This means that only cash receipts that are not presented to a bank require to be documented and reported and failure to do so exposes a person to prosecution under this tax law.

It can be safely assumed that the vast majority of small cash receipts that will not be deposited, will never be documented and reported. It is not practical for the State tax disbursement authorities to prosecute the recipients of such unreported small cash receipts. If however much larger sums of cash are routinely received by individuals or businesses without documenting and reporting them, those individuals would expose themselves to criminal prosecution for evasion of this small 5% tax. It is hardly worth the risk and there is always someone who will rat them out and it is a risk not worth taking for such a small 5% tax saving.

Cash received from cashing a check or withdrawing money from an account is also subject to a 5% tax that will be deducted by the bank immediately during the cashing transaction. Cash presented to a bank, except for purposes of exchange into smaller denominations or coin, are also subject to the 5% tax.

Cash surprisingly has only a 2.9 transactions "lifecycle" before it hits a bank. Since both the withdrawal of cash from a bank and the deposit of cash are subject to the 5% tax, there is only a 0.9 cash rotation cycle that escapes the 5% tax. The total tax evasion and tax avoidance is therefore miniscule under Automatic Tax as compared to the $300 billion in uncollected taxes plus the huge amount of tax avoidance and tax evasion under the current systems of taxation at all levels of government.

This Automatic Tax system is far less likely to be subject to tax evasion and tax avoidance as are many current systems of taxation. Current systems of taxation in the United States offer tremendous high incentives for tax evasion and tax avoidance because the non-reporting of receipts is rewarded with much higher percentage tax savings.

If a person for example purchases a $1000 product in California, there is an 8% sales tax that can be saved by the purchaser if he offers cash to the merchant and if the merchant does not report the sale. If the merchant has a net taxable income of about $60,000 per year or over, then the not reporting of the $1000 sale will save him 28% in federal tax and an additional 9% California State income tax. That is a healthy $370 tax evasion. All together the Federal and State tax agencies lose the $370 plus the $80 sales tax. That is a huge $450 incentive for people to cheat on taxes and it requires a large auditing/policing bureaucracy to temper the cheating somewhat. Still there is currently in the United States an estimated 30% "underground" economy that adds to the already $300 billion uncollected "tax gap".

Under Automatic Tax there is only a total 5% or $50 incentive to not reporting the $1000 sale. And to take the risk of cheating for these $50 is a much larger risk because detection is easier than under the current tax systems because all receipts must be reported within 7 days. The time after which a reporting violation can be cited is only 7 days after a non-reported transaction has taken place and not many months later when Federal and State tax returns have been filed.

Short Introduction

The 5% Automatic Tax :

In order to appreciate the simplicity and the practical utility of Automatic Tax, it will be well worth it to read 10 Tax Principles (click on the button right under Homepage).

Banks will collect the Automatic Tax by deducting 5% from transfers of funds between two different parties. Transfer of funds between different accounts held by the same party are exempt from the tax.

When money is paid by one party to a second party, money will leave the account of the first party (payer) and will transfer to the account of the second party (payee). The bank of the payee will credit the account of payee with 95% of the payment, effectively collecting 5% tax. The bank of the payer will pay the bank of the payee 97.5% of the payment, effectively retaining 2.5% of the tax withheld from the payee and leaving each bank with 2.5% collected tax funds.

Individuals and businesses that make use of the country's currency in some form or another must "report" each single money transfer/receipt. Transfers made with nexus to the Government-authorized, -regulated and -supervised banking system are deemed to have been "reported". These transfer receipts that are deemed "reported" are all funds that are submitted to banks for handling, including cash, checks, wire transfers, money orders and cashiers checks.

CASH
Cashing a check is subject to 5% tax, 95% of the face value of the check is paid out in cash. Cash deposited is subject to 5% tax as well. Cash withdrawal from your own bank account is unfortunately subject to 5% tax as well to discourage the cash economy.

LOANS
Loan proceeds are subject to the 5% tax and loan repayments are subject to the 5% tax as well. If it is deemed inappropriate to tax loan proceeds for example, there is a built-in refund provision as part of this tax system, as discussed below.


DISCUSSING FAIRNESS
In order to have a very clean and simple tax collection system of this nature, it must not be subject to all manner of exceptions and exclusions and it must not be subject to interpretation. The tax must be very anticipated and universally applied. It is a money movement tax of 5% exactly on every money transaction. I have received many comments and questions about how to deal with special situations and concerns about money transfer that is of funds to which the application of a 5% transfer tax would seem "unfair" or inappropriate. In order to derive maximum benefit from this tax system there must be no exceptions for reasons of "fairness" or impropriety, but there are provisions in this tax system to remedy "unfair" and inappropriate instances of taxation. There is a built-in refund mechanism administered by the individual State tax authority that will make refund determinations based upon legislated rulings regards special transfer tax collections. An additional option is the use of grants to remedy injustice from unanticipated taxation on previously untaxed income.

Specially in the transition period from one tax system to the final Automatic Tax there are a lot of reasons to initiate refunds to remedy transitional injustice from unanticipated taxation on certain types of transfers of funds that were not taxed prior to the transition to the new tax.

The reason why there should not be the possibility of creating special provisions for exclusions of the tax on special money transfers is the simple fact that it would open a Pandora's Box of lobbying and Congressional meddling and tweaking to where the value of this very clean and straight forward tax system would rapidly diminish and deteriorate into an incomprehensible mess dreaded by all and unjustly enjoyed only by the few. The tax base would be narrowed incrementally whereby the tax rate would have to increase incrementally to offset the revenue lost from the special interests that paid so generously with their election contributions for the votes they needed in Congress to burden the rest of the population with what amounts to no less than shameful corruption.

The abstention from "fiddling" with the tax itself and only making often local and temporary adjustments through the refund and grant/subsidy avenues of Automatic Tax, will render this tax system sublime for adoption by all the different countries around the Globe to facilitate international trade and cross-border employment. When the tax system is identical and the rules apply to all in the same manner, then an international cross-border integration of taxation is greatly facilitated. We will need these cross-border alignment of tax systems very urgently because literally hundreds or thousands of ever changing international tax related treaties and agreements can be largely eliminated instantly when tax systems are identical in all countries. If the politicians cannot discipline themselves and refrain from "fiddling" and "tweaking", their dark urges can still be satisfied by legislating special refunds and grants to satisfy the "special interest" corruption by the lobbyists that work the hallways of Congress.