I 

108TH CONGRESS 

2D SESSION H. R. 3759

To require a study 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. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 3, 2004

Mr. FATTAH introduced the following bill; which was referred to the 

Committee on Ways and Means 

A BILL

To require a study 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.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Transform America 

5 Transaction Fee of 2004’’. 

6 SEC. 2. FINDINGS. 

7 The Congress finds the following: 
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1 (1) An effective stimulus plan meets the criteria 

2 of job creation, fiscal responsibility, fairness, tar3 geting of unmet needs, tax reform and revenue shar4 ing. 

5 (2) Economic viability is inexorably linked to 

6 the rate of economic growth. 

7 (3) The current tax structure creates economic 

8 distortions that limit growth and job creation. 

9 (4) The cost of compliance to taxpayers is five 

10 billion hours and approximately $200 billion. 

11 (5) The tax code produces inefficiency in rev12 enue raising that forces the nation to struggle un13 necessarily under the burden of unequal and inad14 equate systems of public education and health care, 

15 a crumbling physical and social services infrastruc16 ture, and a crushing national debt. 

17 (6) Restructuring the tax code would promote 

18 economic prosperity. 

19 (7) Replacing existing Federal taxes with a fee 

20 on transactions eliminates systemic inefficiency that 

21 plagues the current tax code. 

22 (8) Implementing a transaction fee would allow 

23 businesses to undertake projects that were not prof24 itable in the past and workers would be more willing 

25 to supply labor than before. 
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1 (9) Responsible tax reform is necessary for all 

2 to enjoy financial security, economic prosperity, edu3 cational opportunities, and affordable health care. 

4 (10) Therefore, it is necessary for the Depart5 ment of the Treasury to conduct a transaction fee 

6 and implementation feasibility study to achieve these 

7 stated goals. 

8 SEC. 3. STUDY ON THE IMPLEMENTATION OF A TRANS9 ACTION FEE. 

10 (a) IN GENERAL.—The Secretary of the Treasury 

11 shall conduct an in-depth study on the implementation of 

12 a transaction tax in the United States. In particular, such 

13 study shall include a detailed feasibility and impact anal14 ysis of the proposal outlined in subsection (b) (as well as 

15 an implementation/action plan) to replace all existing Fed16 eral taxes with a per transaction fee based on the value 

17 of the transaction. 

18 (b) TRANSACTION TAX PROPOSAL.—

19 (1) IN GENERAL.—The fee under the proposal 

20 would apply to all cash and non-cash transactions 

21 (including checks, credit cards, transfers of stocks, 

22 bonds, and other financial instruments). 

23 (2) EXCLUSIONS.—The fee would not apply 

24 to—
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1 (A) cash transactions of less than $500, 

2 and 

3 (B) salaries and wages by employers to 

4 employees. 

5 (3) CASH WITHDRAWALS FROM FINANCIAL IN6 STITUTIONS.—The fee under the proposal would 

7 apply to cash withdrawals from financial institutions 

8 and be set at a rate that is either double or higher 

9 than the standard transaction fee. 

10 (4) FEE RATE.—

11 (A) IN GENERAL.—The fee rate is set at a 

12 level sufficient to generate revenues equal to 

13 revenues under the Internal Revenue Code of 

14 1986. 

15 (B) OTHER POTENTIAL USES OF FEE.—

16 The fee rate could be structured to cover 1 or 

17 more of the following: 

18 (i) A national debt reduction plan re19 quiring elimination of the current national 

20 debt of $6.846 trillion over a period of 10 

21 years, with equal annual payments. 

22 (ii) A Federal revenue sharing pro23 gram providing funding to States to sup24 port 50% of the K–16 education costs of 
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1 each State which agrees to adopt an equi2 table public school finance system. 

3 (iii) A Federal program providing 

4 health care insurance coverage (for the 

5 current estimated 43 million uninsured 

6 Americans) which is comparable to the 

7 Federal employee benefit program or Medi8 care. 

9 (iv) A Federal revenue sharing pro10 gram supporting community and economic 

11 development investments in high poverty 

12 rural and urban areas at a level equal to 

13 10% of current Federal tax revenues. 

14 (5) PROGRESSIVITY.—The base standard trans15 action fee shall not be greater than 1% for all 

16 noncash transactions under $500. If more revenues 

17 are needed to meet the requirements of paragraph 

18 (4), the Secretary of the Treasury would calculate 

19 the minimum level of progressivity required to cover 

20 these costs. This progressivity factor may include—

21 (A) a higher transaction fee for all trans22 actions above $500, and 

23 (B) a progressive schedule of rates to 

24 tiered ranges of transactions above $500.

25 (6) GENERAL PROVISIONS.—
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1 (A) LIABILITY FOR FEE.—Persons become 

2 liable for the fee at the moment the person ex3 ercises control over a piece of property or serv4 ice, regardless of the payment method. 

5 (B) COLLECTION.—The fees will be col6 lected by the seller or financial institution serv7 icing the transaction. 

8 (c) REPORT OF STUDY.—

9 (1) IN GENERAL.—The results of the study 

10 shall be submitted to the Congress by the Secretary 

11 of the Treasury in a comprehensive analytical report, 

12 detailing—

13 (A) the methodology employed in the cal14 culation of the fee rate, 

15 (B) the factors considered in assessing fea16 sibility of the proposed revenue generating sys17 tem and the weight applied to each, and 

18 (C) the portion of the transaction fee at19 tributable to each of the programs identified in 

20 paragraph (3)(B) and the methodology used to 

21 calculate each. 

22 (2) OTHER REQUIREMENTS.—The study shall 

23 (in the following order)—

24 (A) compute the fee needed to meet cur25 rent revenue generation, 
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1 (B) compute the fee needed to meet rev2 enue neutrality and generate additional revenue 

3 to support the program described in paragraph 

4 (3)(B)(i) (relating to national debt reduction 

5 plan), 

6 (C) compute the fee needed to meet rev7 enue neutrality and generate additional revenue 

8 to support all the programs described in para9 graph (3)(B), and 

10 (D) determine the utility of pegging 

11 changes in the transaction fee schedule of rates 

12 to the rate of inflation. 

13 (3) COMPARATIVE ANALYSIS.—The study shall 

14 include a comparative analysis of the existing rev15 enue-raising system versus the proposed fee-based 

16 system on economic behavior. The study shall in17 clude an analysis of effect of the 2 systems on— 

18 (A) job creation, 

19 (B) economic growth, 

20 (C) consumption, 

21 (D) investments, and 

22 (E) savings levels. 

23 (4) TYPES OF TRANSACTIONS.—The study shall 

24 include a broad-based examination of all types and 

25 categories of transactions, including information on 
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1 frequency and value of transactions in each cat2 egory. 

3 (5) IMPACT OF EXEMPTIONS.—The study shall 

4 examine the impact of the transaction fee exemption 

5 for all cash transactions under $500. 

6 (6) PROGRAM OPERATIONS.—The study shall 

7 provide instructions on program operations, includ8 ing—

9 (A) transaction fee collection, 

10 (B) transaction fee implementation, and 

11 (C) transaction fee compliance, enforce12 ment, and administrative costs. 

13 (7) FEE AS TOOL OF FISCAL POLICY.—The 

14 study shall assess the transaction fee as a tool of 

15 Federal fiscal policy, including an impact analysis on 

16 the elimination or retention of existing tax expendi17 tures, incentives, penalties, and credits. The study 

18 should also research and comment on options for re19 bating citizens currently not subject to Federal in20 come taxes and/or other current aspects of the Fed21 eral tax code (i.e. the earned income credit, the al22 ternative minimum tax, and the child tax credit). 

23 (8) IMPACT OF FEE BY INCOME LEVELS.—The 

24 study shall include an assessment of the impact of 

25 the transaction fee by quartile income levels. 
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1 (9) IMPLEMENTATION PLAN.—The study shall 

2 include a detailed action plan on how best to imple3 ment a transaction tax in the United States and 

4 shall include—

5 (A) information on timeline, agency re6 form, potential pertinent regulatory issues, and 

7 type of congressional action needed, and 

8 (B) an examination of the feasibility of 

9 modifying the overall mission and jurisdiction of 

10 the Internal Revenue Service from one focused 

11 on tax law application to one focused on uncov12 ering and eliminating waste, fraud, and abuse 

13 throughout the Federal Government. 

14 (d) DUE DATE.—The report of the study shall be 

15 submitted to the Congress not later than 1 year after en16 actment of this Act.

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