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Lanny Davis Calls For A ‘Transaction Tax’

A little groundwork for the White House, via Lanny Davis’ weekly column at The Hill:

A Debt-Free America? Yes, It’s Possible

Lanny Davis

July 7, 2010

We all know, liberals and conservatives, that the growth of the U.S. national debt is, to use a favorite word of our time, unsustainable…

We all know there is only one answer to paying down the debt and balancing the budget: cutting spending and raising taxes. Both are necessary. Getting leaders of both parties to be honest about that and to have the courage to do something about it is the great challenge faced by the Bipartisan National Commission on Fiscal Responsibility and Reform — headed by Erskine Bowles, former Clinton White House chief of staff and currently president of the University of North Carolina — and Alan Simpson, former Republican senator from Wyoming.

One idea for raising taxes to pay down the debt is the bill introduced this February by Rep. Chaka Fattah (D-Pa.). His "Debt Free America Act" (H.R. 4646) would impose a 1 percent "transaction tax" on every financial transaction — whether paid by cash, credit card or any form of financial transfer, the only exception being transactions involving the purchase or sale of stock. Theoretically, everyone would pay one cent on the dollar for every such transaction in America every day — whether $3 million on a $300 million business acquisition, $300 on the purchase of a $30,000 car, or $5 on a $500 ATM withdrawal.

Yeah! Raise taxes! What a great idea! Why hasn’t anyone thought of doing this before?

To reduce the impact of such a flat tax on the poor, Fattah’s bill provides for a 1 percent tax credit for couples earning $250,000 or less ($125,000 or less for individuals) and discretion by the Treasury Department to exempt certain transactions on which lower-income people disproportionately rely.

Such as ATM withdrawals at casinos and strip clubs.

Another idea would be to amend his bill to exempt all transactions below $500.

Using 2008 numbers as an example: There was $755 trillion in total transactions that year. If you deduct the exempted $312 million in stock transactions, that leaves $443 trillion in new revenues, minus the cost of the tax credit and other possible measures to soften the impact on the poor. This means that with Fattah’s transaction tax in place, there is a real chance for eliminating the national debt within the next 10 years.

Why not make the transaction tax a mere 2% and get rid of the deficit in five years? Or, better still, why not just raise it to 5% and get rid of the deficit immediately? Why fool around?

In the long term, the transaction tax could replace the need to rely entirely on the income tax, which too often favors wealthier taxpayers who can game the system with fancy shelters and expensive tax lawyers and accountants.

Note the artfulness of Mr. Davis’ language here. “The transaction tax COULD REPLACE the need” – which sounds like he is talking about getting rid of the hated income tax.

But, no, he slips in “to RELY ENTIRELY on the income tax.” So, as usual, a Democrat is just talking about piling another tax on the back of the American worker.

To prevent future Congresses from raiding the proceeds from this "dedicated" debt reduction transaction tax, Congress could establish a separate trust fund, controlled by trustees, not the Treasury Department, who are by law instructed to transfer all proceeds from the transaction tax only to pay down the national debt (and possibly reduce the deficit) and for no other purpose.

Congress could also require that only by a two-thirds vote of both houses could such trustee instructions be changed and the proceeds used for other purposes…

Yes! These tax revenues could be put in a ‘lock box.’ — Just like we have done with the Social Security trust fund.

Are you confused? An idea that would raise taxes, spread the pain, pay down the national debt and require pledges from politicians to protect the dedicated revenues? Is this a liberal idea or a conservative idea? Red-state or blue-state?

I think it’s both — it’s truly a purple idea

Throughout history purple has been the color associated with royalty. Indeed, under the sumptuary laws of ancient Rome, only the emperor’s family were allowed to wear purple.

So, yes, it is a “purple idea.” An idea that could only come from our hopelessly out of touch ruling elite.

In any event, I don’t believe any new tax proposal can pass unless, at the same time, liberals are ready to cut entitlement programs and conservatives are ready to close corporate tax loopholes.

Just like they did during the time of Kemp-Roth. Just like they have done every other time taxes have been raised or new taxes have been imposed.

If the Republicans fall for this it will prove once and for all that while history may not repeat itself, stupidity sure does.

But of one thing I am certain:

We are not going to dig ourselves out of this deep hole of debt that will burden our children and grandchildren and beyond unless all of us — Democrats and Republicans, liberals and conservatives — are forced to hold hands and jump into the pool together.

Talk about your mixed metaphors. And never mind that it was almost entirely due to the Democrats reckless spending ever since the Great Depression that we have such a deep hole of debt.

They made their pool – let them jump in it – alone.

Good luck, Mr. Bowles and Sen. Simpson. We will certainly need your help — especially to give us the push into the pool

Gosh, this is so subtle. You don’t think that Mr. Obama’s debt commission might be going to suggest a ‘transaction tax,’ do you?

This article was posted by Steve on Thursday, July 8th, 2010. Comments are currently closed.

10 Responses to “Lanny Davis Calls For A ‘Transaction Tax’”

  1. jackal40 says:

    How about a “stupid tax” on everyone who votes for a democrat? That should fix things really quick. Oh, and lets add a tax on senators and representatives who vote for a bill without studying it (note – I didn’t say read it) – we could put this at about 100% of their salary. That should help rein in spending. And how about a tax for not doing their jobs, you know things like passing (or more importantly balancing) a budget.

    I mean the possibilities are endless here!

  2. untrainable says:

    I thought the “healthcare bill” was magically going to reduce our healthcare costs AND reduce the national debt. I’m confused. If Obamacare works the way they said it would… why are they even discussing a new tax. Once Obiecare is up and running, we’ll have no more debt, we’ll have no more deficit, healthcare will be cheap, we’ll be happier… healthier… and more solvent… I think that’s supposed to happen RIGHT AFTER THOSE PIGS FLY OUT OF MY ARSE!
    Just wait for the V.A.T. debate. That should be an entertaining debate… if the regime let’s anyone debate it… or even read it before it’s passed on a late Friday night session!

  3. Georgfelis says:

    Despite all the talk about the FAIR tax and the VAT tax, there is one element of this taxation system that the Democrats are just drooling about. That little “reimbursement” check you would get every year. Because you see, that little nip you get out of every purchase you make every day, every quarter you put into a vending machine, every gallon of milk you buy at the store, those little bits of pain are carefully scattered out smoothly as not to scare the sheep…err…taxpayer. But once a year, the benevolent hand of the Federal Government will send you a check. For those in the lowest of income brackets, this will be like mana from heaven, the gift of their Democratic Masters, a new big screen TV courtesy of the Democratic Party, long may it receive their votes. For the vast majority of the middle classes, the check will be a small fraction of what has been removed from their wallets all year, but still will be credited to the Almighty Government. And the wealthy…well, you didn’t really need that money anyway, we’re going to take it away from you and use it for something “better”.

    The only way any national sales tax should ever be implemented, is by constitutional amendment that invalidates the 16th amendment (thereby eliminating the federal income tax), sets a hard cap on the amount of reimbursement, and a hard cap on the top rate of the tax. Otherwise our elected (censored) will squeeze us from both ends.

  4. Reality Bytes says:

    How about a “More Than Three Term Tax” – or a “Tax Hike Tax” – “Sweet VIP Loan Tax” – “Idiot Tax” – “Stupid Idea Tax” – “Threat to National Security Tax” – “Infringement of Americans Constitutional Rights Tax”.

    If we had these, at the rate we’re going, Washington would balance the budget in a couple of weeks.

    • GL0120 says:

      If only we’d had a “Forgive me for What America May Have Done” tax, we’d be operating in the Ink of Color now!

  5. proreason says:

    The only thing that should be done with the tax code is a multi-decade effort to simplify it from about 40,000 pages to about 4.

    Anything else will be a disaster. On the surface, you can make a case for a flat-tax or a transaction tax or a vat tax or a wealth tax, and intellectually, they can all sound good. The problems are:
    1. So much of life is intertwined with the tax code that changing it in a major way is bound to ruin a lot of people.
    2. No matter what a “new” tax is, it will never be a replacement. It will always be incremental to what already exists.

    But over a long period of time, all of the convolutions could be removed from the tax code and it could be reduced to something very simple.

    And for that reason it will never happen. Every line of that monstrosity is a essentially a bribe to some constituency.

  6. Right of the People says:

    I never thought I’d say this but the tax system and I stress the word system in England is far superior and easier to understand than our Infernal Revenue Service. They collect a percentage of your pay and– wait for it– that’s it. You don’t file a return, have to figure out deductions, etc. etc. You know up front that you’re going to pay X percent and that’s it.

    The amount they collect, well that’s a whole different story, got to pay for all those “free” entitlements somehow.

    Just think of all the money the federal government could save if we did away with the IRS, that would a long way to paying down the debt.

    • Rusty Shackleford says:

      “The first thing we do, let’s kill all the lawyers.”

      Wm Shakespeare, Henry VI, Act IV, Scene II

  7. U NO HOO says:

    “cutting spending and raising taxes. Both are necessary.”

    Right off Lanny “I’m a friend of the Clintons” Davis makes an error. Both are not necessary. Cutting spending is the only option. Raising taxes allows increased spending.

    • Rusty Shackleford says:

      What’s really necessary is self-control on the part of ALL elected officials to “death panel” anticipated spending habits.

      That is, if term limits were in place, elected officials would more readily assess the “need” to spend ridiculous sums of money to save fish hatcheries or the spotted owl in order to get re-elected.

      But, as we’re seeing now, all rules of law are suspended. The ultra-left government we now have disregards any margins of safe-spending. Not that they were held in tight check to begin with but this is beyond the beyonds. I listened to Rham-it-down-our-throat last night on PBS actually say that they have “spending under control”. He slammed the molehill debt that “Bush left us” and completely ignored the mountain that is at his front door.

      There are several combinations of things taking place in our government, all pointing in the direction of an absolute dictatorship. Many different deceptive practices are occurring to hide that fact but in the end, they see victory.

      As long as they don’t let the cat completely out of the bag, they will win because at least 50% of the population seems to think that the government’s job is to provide everything. That has been a creeping paralysis in our culture for some decades now.

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