Frequently Asked Questions
by William J. Hermann, Jr. MD, Director

1. Is this an Ad or a political agenda?
NEITHER...This is a serious attempt to spread an idea that will significantly and favorably change everyone's life regardless of political party or persuasion. We are not commercial, NOT selling anything, and at this point not even trying to raise money (but would consider financial backing, if interested, due to the high cost of doing anything on a large scale). We are patient because we know that this small "fire" of an idea should spread by word of mouth and keyboard across the fruited plain rather rapidly. Remember even politicians pay taxes (most of them, anyway).

2. Dr. Feige's paper's indicates the last time the Federal Debits were accounted by the Fed was 1996. Is it possible to do an estimation of the APT tax base for 2003/2004 since this exact piece of data is not available?
Yes - and research is in progress, check back soon! (est 5-04)

3. What would be a prudent implementation system?
After the political will is firmly expressed to transition to an APT Tax system, a bi-partisan, expert Commission should be established by Congress to study and define all of the details needed to be considered in modifying the current software to capture all transactions while providing security and privacy. After the fine points of the system are designed, a year of computer simulation could be used to test the software and certify estimates of revenue without any money changing hands. Next the old taxes would be phased out and the APT rate would begin to build toward its final level when ALL federal and state income and excise/sales taxes are removed. The following three phases could be forseen:

Phase I: All Federal income, estate, and excise taxes are removed over a period of a few years with adjustments in the money supply to avoid excessive inflationary pressures.

Phase II: Social security payroll taxes would be rolled into the APT rate.

Phase III: A mechanism could be established, probably requiring a Constitutional amendment, where an entity controlled by Congress, would collect additional taxes under the APT system to fund all state budgets allowing the elimination of state income, sales, and excise taxes as well as the public school portion of the local property tax.

There may be a small upward rate adjustment required to accommodate Phase III. However, the possibility exists that the multiplier effects of Phases I and II will generate more than enough revenue to incorporate Phase III.

4. Wouldn't there be a (further) loss of discipline among politicians who, once they swallowed the big change from the current system, would realize that they could increase government spending considerably with infinitesimal increases in the tax rate?
Relatively large programs would require only at the one-hundredth decimal place increase and government would grow that much further... Even the multiplier effect on the economic growth expected from adoption of the APT system will fill the government coffers without a rate increase. We would hope the public rhetoric would serve to control this natural urge and considerable progress on reducing the national debt could be made. But in the long run this is obviously NOT a reason why we must all continue to pay 100 times as much in taxes as necessary under the APT Tax.

5. Who would oppose this virtually, universally beneficial concept?
It is a very small group (but they too, all pay taxes) whose livelihood and career is based primarily on our unwieldy tax system eg. H&R Block, Inc., IRS employees and others working in the collection side of state and federal government, attorneys and accountants that primarily deal with form submission and very basic issues tax (of whom, I am told there are relatively few). However, the stimulatory effect of returning these tax dollars (gradually) to the consumer will create robust growth and job opportunities should abound. It is this growth, saving and investment that will increase tax revenues with increasing the tax rate and allow the APT concept to be potentially expanded to include FICA/Social Security and the largest part of local property tax that serve school districts (see phase in suggestions below).

6. what are some of the positive and negative ramifications of a change to the APT Tax?
Some that come to mind are listed below. As with any major change what is viewed as positive for one group may be considered a negative for another. These are listed in accord with the expected majority point of view:

Strong dollar due to economic stimulus attracting foreign investment where no income or excise taxes exist. Public insensitivity to expansion of government budgets and commensurate regulation.
Very low interest rates due to extra savings by individuals and attraction of foreign investment capital allowing lower cost capital and infrastructure expansion. Very low interest rates for people relying on secure, fixed sources of income.
Budget elasticity for government including the ability to respond to special demands such as war or national emergencies. Loss of tax incentive for charitable contribution. People will have more wealth to give but must do so without economic advantage.
Eliminate budget deficits with minor adjustments in an already extremely low tax rate. Eliminate accumulated national debt through same mechanism if desired - further strengthening the currency.  
Multiplier effects of economic stimulus creating greater numbers and value of transactions in an upward spiral reducing rates or allowing more services.  
Incentive to move toward a "cashless" system.  

7. Isn't there a big loophole around the APT Tax by simply using cash?
We must remember from Dr. Feige's bio - his expertise is in cash and "underground economies" so this topic is pretty well covered. It is known that cash goes through an average of 2.5 transactions between leaving a bank or other tax collecting entity, before it returns. So a tax of 2.5 times the electronic single side rate would be charged on withdrawal and deposit.

Based on the rate we are projecting of 0.3%, that would mean a tax of $0.75 per $100 cash entering or leaving a "taxing institution/account". That sounds a bit onerous but consider that replaces all the other Federal taxes and, if we can come to the agreements required to implement Phase III (see FAQ # 3) instead of sales tax at $6 to $9 per $100 spent.

One would presume businesses dealing in cash might choose to add that minute amount to the purchase, as sales tax is added today, to compensate them when they deposit the cash in their accounts. Monies paid to what is now an external wiring service, like Western Union, for wiring out of the country, would be taxed at the cash rate on deposit and, again, at the "electronic" rate on actual wiring. The savings would be so minimal for small transactions to go to very much inconvenience to avoid the tax that small time evasion is anticipated as rare. Of course, there still is envisioned a smaller, leaner and acutely focused IRS or equivalent to watch the very large transactions, especially those with a foreign side.