H.R. 2130 would require a study and comprehensive analytical report on transforming America by reforming the Federal tax code through elimination of all Federal taxes on individuals and corporations and replacing the Federal tax code with a transaction fee-based system.
Detailed Summary
This is not a change in the federal tax structure, but the establishment of an in depth study to be conducted by the U.S. Department of the Treasury to evaluate a significant change in the tax structure of the federal government.
Proponents of this tax change would encourage the complete elimination of the Internal Revenue Code and the need to have an agency like the Internal Revenue Service. Nearly everything we currently understand as income taxes would be changed to something related to a consumption tax, similar in nature to a sales tax, but imposed on a national level instead of on a state by state basis.
Again, proponents of this change suggest that any such overhaul of the tax structure would be revenue neutral. In other words, you as an individual would be paying roughly the same amount of federal taxes under either system but the format of the taxation would change substantially.
The purpose of this study is to confirm if such a tax overhaul is indeed possible to be tax neutral, and to perform an extensive study to see what kind of impact this sort of tax structure change would have on ordinary taxpayers and voters, as well as the genuine impact this would have on the economy of the USA.
Specific assumptions are addressed in the text of this bill that would govern the direction of this study, including major areas of consideration that have been in many of the proposed consumption tax proposals, as well as considerations for how the revenue generated through such a tax might be spent.
A side by side comparison is also requested that would study the impact of both taxation structures and comparing their impact through the following areas:
- job creation
- economic growth
- consumption
- investments
- savings levels
This bill also asks the Department of the Treasury to give specific comments about what sort of bureaucracy would be needed to implement such a new tax structure and to suggest what sort of costs would be involved in the transition to this sort of tax structure.
This study is to be completed within one year from when legislation authorizing the study has been passed.
Status of the Legislation
Referred to the House Committee on Ways and Means (5/3/2007)
Points in Favor
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Points Against
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Visitor Comments
pevo
This would amount to a flat tax and as such would unfairly stress the poor and unjustly aid the rich.
Robert
This is not the implementation of a "flat tax" but would be a formal study to see if it might just "unfarly stress the poor and unjustly aid the rich".
This change in the tax structure has been debated on several levels, and is something that has the bi-partisan support of several members of congress in both houses. Unfortunately the studies to see what the real impact might be are tainted by strong proponents, and have been criticized as being overly simplistic.
The only reason I can see opposition to this bill is if you think the idea of a consumption tax is something that is a pipe dream that will never happen, and that spending any money to study what effects it may have is a waste of resources. And the belief that such a proposal to overhaul the tax code will never make it onto the floor of the U.S. House of Representatives.
Jeff
Tax reform is long overdue. I would happily give up my mortgage deduction to eliminate all the other special interests that are the US Tax Code.
Richard
This could indeed transform the country, but only if the government were to concurrently do the following: (1) permanently and irrecovably exit from funding entitlement programs and turn the management of such to private charity; (2) cease and desist from the practice of congressional earmarks and let each new bill stand or fall on its merits; (3) outlaw lobbying, lobbyists and influence peddling in all its forms; (4) apply the same term limits to all elected officials as exists for the President.
Ed Z
This isn't a consumption tax -- it's legalized mugging. Only instead of someone having to sneak up behind you while you're at the ATM machine to do it, they just have to get elected or appointed to Federal office.
If I withdraw $500.01 from my bank account -- using a check, my ATM card, or any other "non-cash" means, (To my knowledge, there is no other way to withdraw money from one's own bank account.) I get soaked some amount in taxes. If you think a $2.50 ATM fee is bad, just wait under the IRS gets their hands in there, too. If you find it hard to balance your checkbook when it's only _you_ spending your money, just wait until everyone else is, too.
Gary
it's VAT (value added tax) like what Europe has been using for years. Pay tax on what you consume. Your money is your money, until you spend it. The rich and corporation buy more and they pay more taxes, a lot more taxes. How can this be bad for the poor, if basic necessities have a lower or no VAT?
Best of all, no income tax forms!
Mikey
Although I have no issues with the government conducting a study on such a tax, I would add that there does not seem to be a concerted effort to see the black market a Consumption Tax would create. High taxes on cigarettes have already lead to interstate smuggling operations. Moreover, Hezbollah has used cigarette smuggling to raise funds in America.
Ed Z
Gary, it's _not_ a value-added-tax when they're not taxing purchases, but "non-cash transactions," meaning even just the act of withdrawing cash out of your bank account "entitles" the government to a cut of that withdrawal. Read the bill, that's in there.
Rich or poor, this bill is bad for the _individual_.
Lynx
It is not a VAT but a transaction tax - for example if you use your credit card and purchase something for $66.95 and the transaction tax is 0.5% (1/2 percent) then the tax is 0.33. The reason the tax rate can be so low is that the number of transactions that pass through the credit/banking system is something like 850 TRILLION dollars a year. Even if the number of transactions consolidate a bit because of the tax and reduces to about $500 TRILLION dollars (at 0.5%) could potentially collect about $2.5 trillion - which would replace ALL current federal taxes.
albi
So, would a megamerger generate a lot of tax revenue for the government?