Budget and taxes

Our current tax system is unfair, inefficient, and so complex that it is opaque to virtually every taxpayer. The Uniting Amendment establishes a simple, low tax rate without exemptions or deductions -- none. Every dollar a person receives is taxed at a very low rate; so low that most people don't believe it when they hear it. The rate is just 1/2 percent!

How can we fund the entire government on just 1/2 percent? It turns out that if every single tax loophole is closed -- all of them -- a rate of under one percent can bring in more revenue than the Treasury receives today. In the United States, there is about $1,100 trillion per year in transactions (give or take, it depends on how much of the settlement volume overlaps between the various payment/clearing systems). That is, if you add up every dollar that every person receives, the total is about $1,100T. At a tax rate of 0.5%, that's $5.5 trillion, more than double what the Treasury currently receives in tax revenue each year.

Overview of benefits

The system is much more efficient, transparent and fair:

• Taxpayers all pay the same rate
• No indecipherable forms to fill out
• Almost everyone will pay less tax
• No more keeping track of receipts
• Stops intrusions and abuses by the IRS
• Discourages high-frequency trading
• Reduces the incentive to cheat on taxes
• Provides certainty in tax policy for businesses
• Favors longer-term investing rather than short-term speculation
• Easy to understand for everyone

If you are paying more than 1/2 percent today in taxes, you will want to see this tax implemented.

Balanced budget

The Uniting Amendment also includes provisions for a balanced budget. The politicians can't spend more money than the country receives in revenue. When the country is in debt, some of the revenue is set aside to pay down the debt.

But what about when there is an emergency, like a war? The problem with so-called "emergency exceptions" in law is that suddenly everything becomes an emergency to the politicians and they end up over-spending again on a regular basis. The Uniting Amendment allows for debit spending in emergencies with one catch -- the Amendment says:

"No President, Representative, Senator, or Federal Reserve Governor may be elected, reelected, hired or appointed to any office or position within any public government or receive any benefit or payment, directly or indirectly from the United States or any State until all debts incurred or authorized during or subsequent to her term have been repaid."

If we really are in an emergency, then the politicians will have to decide if the consequences of the emergency outweigh the consequences of losing their jobs if the debt isn't repaid.

Effects on the economy

Some of the transactions that occur in the economy are very short term, such as stock day-trading and flash-trading. Most of those types of transactions would likely no longer occur with a .5% tax because the rate of return for each trade is less than the tax. But many economists would argue that discouraging such trading will be beneficial since it will encourage longer-term investing rather than those short-term trades which are considered parasitic by most investors.

Other short-term transactions in our economy involve short-term loans made between banks to comply with reserve requirements or for other purposes. Those would likely decrease under the new tax system also. However, because the tax rate is so low, many transactions that do not occur today because of high tax rates would become viable. Also, many small and medium sized businesses that cannot afford the compliance costs of dealing with all those complicated regulations will be able to thrive once a simple tax system is in place.

And without the huge payroll taxes that employers pay now, businesses will have more money to pay to their employees, and workers won't see a huge chunk of their earnings deducted from their paychecks each week, which means more money flowing into the economy.

Also, with a very low rate, compliance in paying the tax will be much higher. Very few people will make an effort to try to avoid the tax or to cheat. Using cash transactions to cheat the tax would not be practical except for small transactions because for medium-sized transactions, the cost of counting and handling cash is larger than .5% and very large cash transactions are easy to detect.

Supporting data

Transactions in the U.S.

The following two tables show transaction settlements for the major payment systems and interbank funds transfer systems. (Tables courtesy of Bank for International Settlements, from file ctrytbls_11_final.xls) Also, for transactions during the years 2007-2011, the New York Stock Exchange handled an average of $22.3T/year in executed trades, NASDAQ handled $13.7T/year, the National Securities Clearing Corporation cleared transactions averaging $249.2T/year, and the Depository Trust Company and the Federal Reserve processed an average of $151.2T and $352.5T per year respectively. Because of overlap between the funds transfer systems and the settlement systems, the actual total of all transactions is less than the total of all these sources.

Table 1, Transactions by payment system

Using payment systems
(USD billions, total for the year)
	2007	2008	2009	2010	2011
Transactions per type of payment instrument(1)
Credit transfers	19,808.9	21,169.6	21,169.6	23,065.4	25,033.2
paper-based	nap	nap	nap	nap	nap
non-paper-based (ACH)(2)	19,808.9	21,169.6	21,169.6	23,065.4	25,033.2
Direct debits (ACH)(3)	14,440.0	14,768.7	14,641.3	15,336.4	16,034.1
Card payments(4)	3,287.8	3,490.6	3,385.9	3,695.8	4,097.1
payments by cards with a debit function(5)	1,182.9	1,342.2	1,447.3	1,648.8	1,846.8
payments by cards with a delayed debit function	nav	nav	nav	nav	nav
payments by cards with a credit function(6)	2,104.9	2,148.5	1,938.6	2,047.0	2,250.3
of which: payments by retailer cards with a credit function	194.8	206.1	177.2	174.9	200.0
E-money payment transactions(7)	nav	nav	nav	nav	nav
by cards with an e-money function
through other e-money storages
Cheques(8)	37,438.0	34,272.0	31,599.4	28,955.4	26,469.1
Other payment instruments
Memo
ATM transactions	nav	nav	nav	nav	nav
of which: ATM cash withdrawals(9)	nav	nav	646.7	nav	nav
	98,266.1	98,567.2	96,175.4	97,989.1	100,964.0
1 Includes payments by banks for their own account. 2 Includes an estimate of the value of on-us payments. A study conducted by the Federal Reserve estimated that the value of on-us ACH credit payments was USD 1,385 billion in 2003, USD 2,543 billion in 2006 and USD 4,231 billion in 2009. Other figures are derived from these estimates. 3 Includes an estimate of the value of on-us payments. A study conducted by the Federal Reserve estimated that the value of on-us ACH debit payments was USD 2,027 billion in 2003, USD 2,046 billion in 2006 and USD 2,990 in 2009. Other figures are derived from these estimates. 4 Payments made in the United States using cards issued inside and outside the United States. 5 Excludes cash back. Studies conducted by the Federal Reserve estimated that the value of debit card payments was USD 600 billion in 2003, USD 1,000 billion in 2006 and USD 1,400 billion in 2009. The figures in the table differ from the Federal Reserve estimates, but are provided to allow a consistent time series. 6 Excludes cash advances. Total of Visa, MasterCard, Discover, American Express, Diners Club and retailer cards. Studies conducted by the Federal Reserve estimated that the value of credit card payments was USD 1,700 billion in 2003, USD 2,100 billion in 2006 and USD 1,900 billion in 2009. The figures in the table differ from the Federal Reserve estimates, but are provided to allow a consistent time series. 7 E-money products have not been widely adopted in the United States. In this reporting period, e-money transaction terminals, volume and value are negligible relative to other card instruments. 8 Annualised value of paid cheques including commercial cheques, US Treasury cheques and postal money orders. Studies conducted by the Federal Reserve estimated the value of paid cheques in 1995, 2000, 2003, 2006 and 2009. Other figures are derived from those estimates. 9 A study conducted by the Federal Reserve estimated the value of on-us ATM withdrawals, meaning they involved only one depository institution, amounted to approximately 62%, 65% and 68% of the value of ATM cash withdrawals in 2003, 2006 and 2009, respectively. Sources: Federal Reserve; The Nilson Report (HSN Consultants Inc, Oxnard, CA); NACHA.

Table 2, Interbank funds transfer systems

Payments processed by selected interbank funds transfer systems: value of transactions
(USD billions, total for the year)
	2007	2008	2009	2010	2011
Large-value payment systems(1)
CHIPS(2)	485,624.1	508,758.7	364,355.1	365,096.3	403,349.0
Fedwire(3)	670,665.6	754,974.6	631,127.1	608,325.9	663,837.6
Cheque clearings(4)
Private clearing houses and direct exchanges(5)	10,741.1	7,431.7	6,548.1	7,106.2	6,425.0
Federal Reserve	15,129.9	15,558.4	14,094.3	11,381.9	10,163.8
Automated clearing houses (ACH)
Private(6)	13,753.9	13,541.3	13,197.1	14,051.6	15,664.5
Debit transfers	5,363.9	5,078.9	4,696.9	4,895.6	5,328.6
Credit transfers	8,390.1	8,462.4	8,500.2	9,156.0	10,335.9
Federal Reserve(7)	15,064.5	16,424.4	16,432.8	17,688.8	18,242.7
Debit transfers	6,686.6	7,125.4	7,277.7	7,632.1	7,769.6
Credit transfers	8,377.9	9,298.9	9,155.1	10,056.7	10,473.1
Memo
On-us cheques(4)	11,567.1	11,281.9	10,957.0	10,467.3	9,880.3
On-us ACH(6), 8	5,430.5	5,972.6	6,180.9	6,661.5	7,160.1
Debit transfers	2,389.5	2,564.4	2,666.6	2,808.7	2,936.0
Credit transfers	3,041.0	3,408.3	3,514.3	3,852.8	4,224.2
1 Number of originations. 2 CHIPS, the Clearing House Interbank Payments System, is owned by The Clearing House. 3 Fedwire is operated by the Federal Reserve. 4 Studies conducted by the Federal Reserve estimated the value of cheques paid in 2000, 2003, 2006 and 2009. The value of on-us cheques for those years was also estimated. Total paid cheques = Federal Reserve + private clearing houses and direct exchanges + on-us. Figures for other years are derived from those estimates. 5 Calculated as total cheque value less value of Federal Reserve cheque clearing and value of on-us cheques. 6 Value originated using private ACH operators. Includes transfers sent by private ACH to the Federal Reserve for transmission to the receiving depository institution. In 2007 through 2011, these transfers amounted to USD 3,278.6, 3,327.5, 3,354.3, 3,751.8 and 4,200.1 billion. 7 Value originated on FedACH. Includes transfers sent by the Federal Reserve to private ACH for transmission to the receiving depository institution. In 2007 through 2011, these transfers amounted to USD 1,785.0, 2,151.9, 2,179.5, 2,430.3 and 3,205.1 billion. 8 A study conducted by the Federal Reserve estimated that the value of on-us ACH payments (processed by only one depository institution) was USD 3,413 billion in 2003, USD 4,632 billion in 2006 and USD 7,222 billion in 2009. Figures for other years are derived from those estimates. Sources: Clearing House Interbank Payments System; Federal Reserve; NACHA.