The Proposed Transaction Tax

I always try to avoid politics and religion in my columns, but every so often there is a collision between one of those topics and another subject, which I want to address. This is one of those instances, so I will warn you up front that there is a political aspect to this column. Therefore, those of you whom I know would be offended are invited to stop here and go on to something more pleasing to you.

However, if you have read this far, I want to warn you that everyone will be impacted by the legislation in a very negative way, and you really should learn about it before it becomes the law of the land. If we are to stop its passage, we need every concerned citizen to join the cause.

There has been a lot of traffic on the e-mail circuit about a proposed 1% transaction tax that Congress is likely to pass in the “lame duck” session between November and January. Some claim that the transaction tax is just a rumor, an urban legend to scare people into voting out the present majority.

I would agree with that assessment if I didn’t have living proof that the Speaker of the House was questioned about it publicly, and stated (her exact words), “I think the idea still has great merit.” My proof? http://tinyurl.com/24dn5ud. Some things you can fake, but this isn’t one of those.

The latest message I received has a final line that I assume is the opinion of one of the forwarders. “Some will say aw its just 1%… Remember that once they pass it they can raise it at will.”

I strongly disagree with that statement. A 1% tax on every single transaction is HUGE.

First of all, every dollar that passes through your possession is two transactions, one to earn it and one to spend it. And that is only your tax. The entity that gives you the money, whether by check, cash, or direct deposit is also taxed at 1%. The entity that you give the money to is also taxed at 1%. So every dollar is actually taxed at 4% each time it is transferred to you and from you.

It is a fact of business life that the employee or consumer ultimately pays the business tax through less income or higher fees, so we have to double the tax every time you transact any business whether it is income or expense.

Here is an example of how much that 1% tax can grow:

You receive a payment of $1,000 from your employer. From that amount, $10 is deducted from you and another $10 is deducted from your employer—2 transactions.
You only have a net of $990. It is also probable that your actual pay should have been $10 higher, but your employer passed the transaction tax on to you in lost wages.

You deposit the $990 in your checking account. You only get credit for $980.10—that is, if your bank will eat the $9.90 tax they have to pay. If they don’t, your checking account will show a deposit of $971.20.

Are you following me so far?

You later decide to make an ATM withdrawal of $200. Well, you get the full $200, but your checking account shows a withdrawal of $204—that is, if the bank doesn’t charge ATM fees.

You write a check for $120 to the cable provider. Your account is depleted by $121.20. The cable company has probably already added the transaction tax to your bill, so you actually got billed $1.20 more for your service than you would have otherwise paid.

I could go on and on with this, but I think I can summarize your transaction taxes on that $1,000 earned income after you only spent $320 of it.

Let’s see, you lost $20 when you got paid, another $18.80 when you deposited the money, still another $4 when you used the ATM, and $2.40 when you paid your cable bill. That adds up to $45.20. By my reckoning, that means that you paid a transaction tax of 4.52%, and you still have bills to pay and food, gas, clothing and other staples to buy.

Do you see where this is going?

It is completely possible that your transaction tax on that $1,000 could be as high as the number of transactions make it, possible exceeding 10%. And none of that is deductible on your income tax forms. Oh yes, it also does nothing to reduce your income tax and payroll tax that is deducted from the wages to get that $1,000 in the first place.

"Now, tell me again that it is “only 1%.”

(Welcome to the Tea Party)