Re: I wonder @LucreLout
Why would you want to take your mortgage payment underground ?
I don't think you get this idea at all.
If you withdrew cash at 0.7% and can convince everyone you deal with to take cash forevermore, you may indeed save 0.35 % on each transaction. But the first person who puts that money back into the bank will have to pay 0.7 % tax. He might prefer to just pay 0.35 % instead. Particularly, if he is a cheapskate like you and can't convince the electric company to take your greasy notes.
Nor do I think your bank manager will be too happy with that arrangement either, since he will lose out everytime he deposits your cash.
I also don't think the news agent will think saving 35 cents on every 10 dollar purchase (his only tax payments) is worth the risk of keeping a box full of used notes under the counter, just so you and he can avoid a 0.35 percent contribution.
Do you think Amazon and Ebay are going to implement a "cash only" policy where everyone can send brown envelopes to a cash handling center? I don't think so. They are close enough to the 0.7 % taxation mark as it is.
I suggest we use Tim's 3 way yardstick instead, to dissipate arguments like "everyone will just use cash".
1) Efficacy. I admit the jury is still out until this is put into practice, BUT, Feige estimates that 70 % of US GDP is personal consumption. Tax that at 0.7 % and it indeed becomes a shedload of money. My calculator breaks when I use the entire number so let's try per capita figures instead.
In 2013, US GDP was 53,142.89 USD per head. That is 37,200 USD of personal consumption per person.
Multiply that by 0.7 % (buy / sell) and that becomes 2604 USD x 316,100,000 people which becomes 823,124,400,000 USD in tax revenue.
823 billion dollars is about 15 % of the 5.4 trillion USD the US took in in global tax revenues in 2013.
So yes, at first view we do have a BIG shortfall.
However, this assumes that everyone is making only one transaction a year. And we are not taxing stock transactions in the above figures.
On Jan 2 2015, the NYSE had a total trade volume of 33,253,336,431 USD.
Taxed at 0.7 %, that would collect 2,327,733,550 USD in tax for just ONE DAY (YES, 2.3 BEELION dollars). I think this will help cover the shortfall nicely, but someone else should check because I am getting RSI now.
Ah to hell with it, lets do the math. 2.3 billion times 180 working days = 414 billion.
No wonder no one wants a Tobin tax. But we are now up to 1.5 trillion in revenue. Still not enough for 2013 right?
The underground economy (i.e. you and your merry men) would also have to pay tax every time it injects or removes money from "legit" payment systems. Some estimate that the shadow economy represents 2 Trillion dollars a year. SO 0.7 % of that would reap quite a bit as well. Let's go for broke and say another 140 billion, since every little helps. Now we have 1.64 trillion
Today, 65 % of US businesses and 45 % of US citizens effectively pay no taxes at all after loopholes, subsidies and transfer payments are calculated. When they start paying something and perhaps receiving less handouts, money will flow in, but more research is needed to see how much that non-payment really amounts to. So we don't know yet.
And what is 30 % loss on 5.4 trillion again? I get 3.8 trillion left over. 3.8 - 1.64 = still 2.16 trillion short. So we are getting a little closer. Maybe we will have to cut down on government spending a bit or do this more progressively, starting at the state level first. Perhaps a few less global wars, less bailouts and a balanced budget will help.
More figures please:
Social Security, Medicare, Medicaid and DOD spending represents around 65 % of federal spending, which is a lot. 24 % of that is spent on administration. So there is much work to do.
Also note that the total revenue gathered for 2012 was only 4.9 trillion (as opposed to 5.4). As we gather more, there is a tendency to spend more.
If people suddenly find they have more disposable income when they no longer pay income tax,land tax, fuel tax, sales tax, etc. (not to mention having more free time after binning their tax forms) won't they go out and spend a bit more ? I'm guessing yes. The result would be more tax revenue.
So I will concede that the jury is still out on Efficacy. But you must break eggs to create omelettes, and omelettes made from freshly printed QE notes don't taste as good they used to.
2) Efficiency. This one is my favorite. If the transaction tax was levied at every sale, from every till, every credit card or paypal transaction and every bank transfer and then instantly pushed into the state's bank account, much goodness could arise.
Let's look at a few of the benefits:
No need for tax declarations, tax audits, tax inspectors, printing of those cute little stamps and forms, no large bureaucracies to make sure everyone pays their "fair share". Not to mention the disappearance of the enormous mountains of regulations that businesses and individuals must wade through every year. If all that went away, I would humbly suggest that tax collection would be mightily more efficient, and not with the 30 % loss rate quoted by Tim.
Face it, a system that must keep track of which tax rates apply to Jaffa cakes is not efficient, it is a fucking joke.
So one out of 2 isn't bad and less loopy than we might think
3) Equity. People will argue until they are blue in the face about this, but most would agree that consumption taxes are about as fair as it gets. Everything else has been legislated and lobbied to death or designed to ensure that one set of taxpayers loses out to another (usually the middle class). Don't forget the loss of human potential, dignity and faith in government that comes with each new tax hike or "favor".
A 0.35 % tax on stock trades might seem unnecessary and harmful to some. However, if the brokerage and traders no longer need an army of accountants, tax lawyers and the constant fear of audit, they may actually come out ahead. Brokerage fees will be taxed at 0.35 %, as well.
Today, people on low incomes and small businesses pay an inordinate amount of tax vs income and also contend with Vat rates of 20 %. The very wealthy pay hardly any tax at all in comparison. This isn't fair and even the rich know it isn't fair.
If everyone pays a little bit every time they buy something, no one is going to argue about tax disparities because everyone will have to pay every time they consume, including the Pentagon, the NHS and all other bureacracies living off the working man's back. What could be fairer than that?
I'd say 2 out of 3 ain't bad, your flames and comments are welcome