To require a study and comprehensive analytical report on transforming America by reforming the Federal tax code through elimination of all Federal taxes on individuals and corporations and replacing the Federal tax code with a transaction fee-based system.

Summary: Comprehensive Transform America Transaction Fee Act of 2005 - Directs the Secretary of the Treasury to conduct an in-depth study on the implementation of a transaction fee in the United States to replace all existing Federal taxes. Sets forth guidelines for such study, including: (1) an identification of the transactions to which such fee would apply; (2) exclusions from such fee; (3) the rate of such fee; (4) potential uses for revenue from such fee; (5) progressivity standards; and (6) general matters, including point of liability for such fee and responsibility for collection.

Requires the Secretary to report to Congress on the results of such study within one year after the enactment of this Act with a comprehensive analysis of various aspects of the transaction fee, including revenue generation, impact on the national economy, and implementation.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Comprehensive Transform America 
Transaction Fee Act of 2005''.

SEC. 2. FINDINGS.

    The Congress finds the following:
            (1) An effective stimulus plan meets the criteria of job 
        creation, fiscal responsibility, fairness, targeting of unmet 
        needs, tax reform and revenue sharing.
            (2) The current tax structure creates economic distortions 
        that limit growth and job creation.
            (3) The estimated cost of compliance to taxpayers is five 
        billion hours and approximately $200 billion.
            (4) The tax code produces inefficiency in revenue raising 
        that forces the nation to struggle unnecessarily under the 
        burden of unequal and inadequate systems of public education 
        and health care, a crumbling physical and social services 
        infrastructure, and a crushing national debt.
            (5) Implementing a transaction fee will provide the 
        structure to maintain current expenditures on defense-related 
        activities without sacrificing expenditures on additional 
        important national priorities.
            (6) Restructuring the tax code will promote economic 
        prosperity.
            (7) Replacing existing Federal taxes with a fee on 
        transactions eliminates systemic inefficiency that plagues the 
        current tax code.
            (8) Economic analyses have estimated a transaction fee 
        would allow businesses to undertake projects that are not 
        profitable in the current tax system, and workers would be more 
        willing to supply labor.
            (9) Responsible tax reform is necessary for all to enjoy 
        financial security, economic prosperity, educational 
        opportunities, and affordable health care.
            (10) Therefore, the Department of the Treasury shall 
        prepare a comprehensive analytical report to achieve these 
        stated goals.

SEC. 3. STUDY ON THE IMPLEMENTATION OF A TRANSACTION FEE.

    (a) In General.--The Secretary of the Treasury shall conduct an in-
depth study on the implementation of a transaction fee in the United 
States. In particular, such study shall include a comprehensive 
analytical report of the proposal outlined in subsection (b) (as well 
as an implementation/action plan) to replace all existing Federal taxes 
with a per transaction fee based on the value of the transaction.
    (b) Transaction Fee Proposal.--
            (1) In general.--The fee under the proposal would apply to 
        all non-cash transactions (including checks, credit cards, 
        transfers of stocks, bonds, and other financial instruments) 
        and all high-dollar cash transactions.
            (2) Potential exclusions.--The fee would not apply to--
                    (A) cash transactions of less than $500,
                    (B) salaries and wages by employers to employees, 
                and
                    (C) transactions involving individual savings 
                instruments through financial institutions.
            (3) Cash withdrawals from financial institutions.--The fee 
        under the proposal would apply to cash withdrawals from 
        financial institutions and be set at a rate that is either 
        double or higher than the standard transaction fee.
            (4) Fee rate.--
                    (A) In general.--The fee rate is set at a level 
                sufficient to generate revenues equal to revenues under 
                the Internal Revenue Code of 1986.
                    (B) Other potential uses of fee.--The fee rate 
                could be structured to cover 1 or more of the 
                following:
                            (i) A national debt reduction plan 
                        requiring elimination of the current national 
                        debt of $7.7 trillion over a period of 10 
                        years, with equal annual payments.
                            (ii) A Federal revenue sharing program 
                        providing funding to States to support 50 
                        percent of the K-16 education costs of each 
                        State which agrees to adopt an equitable public 
                        school finance system.
                            (iii) A plan to meet the promised levels of 
                        certain provisions listed under the National 
                        Security Intelligence Reform Act of 2004 
                        (Public Law 108-458), including those sections 
                        related to air cargo security (subtitle C of 
                        title IV of such Act), detention bed space 
                        (section 5204 of such Act), and border patrol 
                        agents (section 5202 of such Act); to create a 
                        dedicated funding stream for port security and 
                        improvements at levels recommended by the 
                        United States Coast Guard; and to increase 
                        expenditures for first responder grant programs 
                        funded under the Department of Homeland 
                        Security.
                            (iv) A Federal program providing quality 
                        health care insurance coverage (for the current 
                        estimated 45 million uninsured Americans).
                            (v) An increase in the military basic pay 
                        rate to a level comparable with that of Federal 
                        civilian pay, considering, but not being 
                        limited to, the following criteria: age, 
                        education, skills, years of service, and 
                        responsibilities.
                            (vi) A Federal revenue sharing program 
                        supporting community and economic development 
                        investments in new markets (rural and urban 
                        areas) at a level equal to 10 percent of 
                        current Federal tax revenues.
                            (vii) A plan to increase the pay for 
                        National Guard and Reserve soldiers to that of 
                        active duty military for periods of extended 
                        deployments abroad.
                            (viii) A Social Security and Medicare 
                        solvency plan ensuring that revenues continue 
                        to exceed expected outlays.
            (5) Progressivity.--The base standard transaction fee shall 
        not be greater than 1 percent for all noncash transactions 
        under $500. If more revenues are needed to meet the 
        requirements of paragraph (4), the Secretary of the Treasury 
        would calculate the minimum level of progressivity required to 
        cover these costs. This progressivity factor may include--
                    (A) a higher transaction fee for all transactions 
                above $500, and
                    (B) a progressive schedule of rates to tiered 
                ranges of transactions above $500.
            (6) General provisions.--
                    (A) Liability for fee.--Persons become liable for 
                the fee at the moment the person exercises control over 
                a piece of property or service, regardless of the 
                payment method.
                    (B) Collection.--The fees will be collected by the 
                seller or financial institution servicing the 
                transaction.
    (c) Report of Study.--
            (1) In general.--The results of the study shall be 
        submitted to the Congress by the Secretary of the Treasury in a 
        comprehensive analytical report, detailing--
                    (A) the methodology employed in the calculation of 
                the fee rate,
                    (B) the factors considered in assessing feasibility 
                of the proposed revenue generating system and the 
                weight applied to each, and
                    (C) the portion of the transaction fee attributable 
                to each of the programs identified in subsection 
                (b)(4)(B) and the methodology used to calculate each.
            (2) Other requirements.--The study shall (in the following 
        order)--
                    (A) compute the fee needed to meet current revenue 
                generation,
                    (B) compute the fee needed to meet revenue 
                neutrality and generate additional revenue to support 
                the program described in subsection (b)(4)(B)(i) 
                (relating to national debt reduction plan),
                    (C) compute the fee needed to meet revenue 
                neutrality and generate additional revenue to support 
                all the programs described in subsection (b)(4)(B), and
                    (D) determine the utility of pegging changes in the 
                transaction fee schedule of rates to the rate of 
                inflation.
            (3) Comparative analysis.--The study shall include a 
        comparative analysis of the existing revenue-raising system 
        versus the proposed fee-based system on economic behavior. The 
        study shall include an analysis of effect of the 2 systems on--
                    (A) job creation,
                    (B) economic growth,
                    (C) consumption,
                    (D) investments, and
                    (E) savings levels.
            (4) Types of transactions.--The study shall include a 
        broad-based examination of all types and categories of 
        transactions, including information on frequency and value of 
        transactions in each category.
            (5) Impact of exemptions.--The study shall examine the 
        impact of the transaction fee exemption for all cash 
        transactions under $500.
            (6) Program operations.--The study shall provide 
        instructions on program operations, including--
                    (A) transaction fee collection,
                    (B) transaction fee implementation, and
                    (C) transaction fee compliance, enforcement, and 
                administrative costs.
            (7) Distortions.--The study shall include an analysis, 
        prepared by the Secretary of the Treasury in consultation with 
        the Secretaries of Commerce and Labor, offering methods of 
        preventing and relieving potential distortions among economic 
        sectors created by the implementation of the transaction fee. 
        The study shall also include an analysis of the feasibility of 
        temporarily (for a period of not longer than 1 year) reducing 
        the fee rate (as otherwise determined in subsection (b)(4)) 
        applicable to an economic sector if such sector is experiencing 
        pronounced economic distress.
            (8) Fee as tool of fiscal policy.--The study shall assess 
        the transaction fee as a tool of Federal fiscal policy, 
        including an impact analysis on the elimination or retention of 
        existing tax expenditures, incentives, penalties, and credits. 
        The study should also research and comment on options for 
        rebating citizens currently not subject to Federal income taxes 
        or other current aspects of the Federal tax code including, but 
        not limited to--
                    (A) the earned income credit,
                    (B) the alternative minimum tax,
                    (C) the child tax credit, and
                    (D) the deduction for mortgage interest.
            (9) Impact of fee by income levels.--The study shall 
        include an assessment of the impact of the transaction fee by 
        quartile income levels.
            (10) Implementation plan.--The study shall include a 
        detailed action plan on how best to implement a transaction fee 
        in the United States and shall include information on timeline, 
        agency reform, potential pertinent regulatory issues, and type 
        of congressional action needed.
            (11) Internal revenue service.--The study shall--
                    (A) assume the transition and grandfathering of all 
                existing personnel of the Internal Revenue Service,
                    (B) examine elements of the current Internal 
                Revenue Service needed to administer the transaction 
                fee, and
                    (C) examine the feasibility of modifying the 
                overall mission and jurisdiction of the Internal 
                Revenue Service from one focused on tax law application 
                to one focused on uncovering waste, fraud, and abuse 
                throughout the Federal Government.
    (d) Due Date.--The report of the study shall be submitted to the 
Congress not later than 1 year after the date of the enactment of this 
Act.