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Starting Over: The Automated Payment Transaction Tax

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  • Feige, Edgar L.

Abstract

This paper proposes a 21st century global fiscal architecture to replace the present system of personal and corporate income, sales, excise, capital gains, import and export duties, gift and estate taxes with a single comprehensive revenue neutral Automated Payment Transaction (APT) tax. In its simplest form, the APT tax consists of a flat tax levied on all transactions. The tax is automatically assessed and collected when transactions are settled through the electronic technology of the banking/ payments system. The APT tax introduces progressivity through the tax base rather than via the rate structure. Since roughly 85% of all transactions involve the exchange of financial instruments, it is the wealthy who carry out a disproportionate share of total transactions and therefore bear a disproportionate burden of the tax despite its flat rate structure. The automated recording of all APT tax payments by firms and individuals creates a degree of transparency and perceived fairness that induces greater tax compliance. Also, the tax has lower administrative and compliance cost. Like all taxes, the APT tax creates new distortions whose costs must be weighted against the benefits obtained by replacing the current tax system.

Suggested Citation

  • Feige, Edgar L., 2001. "Starting Over: The Automated Payment Transaction Tax," MPRA Paper 11533, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:11533
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    File URL: https://mpra.ub.uni-muenchen.de/11533/1/MPRA_paper_11533.pdf
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    More about this item

    Keywords

    APT tax; transaction tax; Tobin Tax; Security Transaction tax; debit tax; global achitecture; tax reform; flat tax;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • A10 - General Economics and Teaching - - General Economics - - - General
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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