I 

111TH CONGRESS 

1ST SESSION H. R. 1703 

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. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 25, 2009 

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

Committee on Ways and Means 

A BILL 

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. 

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 ‘‘Comprehensive Trans5 form America Transaction Fee Act of 2009’’. 

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) The current tax structure creates economic 

6 distortions that limit growth and job creation. 

7 (3) The estimated cost of compliance to tax8 payers is five billion hours and approximately $200 

9 billion. 

10 (4) The tax code produces inefficiency in rev11 enue raising that forces the Nation to struggle un12 necessarily under the burden of unequal and inad13 equate systems of public education and health care, 

14 a crumbling physical and social services infrastruc15 ture, and a crushing national debt. 

16 (5) Implementing a transaction fee will provide 

17 the structure to maintain current expenditures on 

18 defense-related activities without sacrificing expendi19 tures on additional important national priorities. 

20 (6) Restructuring the tax code will promote eco21 nomic prosperity. 

22 (7) Replacing existing Federal taxes with a fee 

23 on transactions eliminates systemic inefficiency that 

24 plagues the current tax code. 


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1 (8) Economic analyses have estimated a trans2 action fee would allow businesses to undertake 

3 projects that are not profitable in the current tax 

4 system, and workers would be more willing to supply 

5 labor. 

6 (9) Responsible tax reform is necessary for all 

7 to enjoy financial security, economic prosperity, edu8 cational opportunities, and affordable health care. 

9 (10) Therefore, the Department of the Treas10 ury shall prepare a comprehensive analytical report 

11 to achieve these stated goals. 

12 SEC. 3. STUDY ON THE IMPLEMENTATION OF A TRANS13 ACTION FEE. 

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

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

16 a transaction fee in the United States. In particular, such 

17 study shall include a comprehensive analytical report of 

18 the proposal outlined in subsection (b) (as well as an im19 plementation/action plan) to replace all existing Federal 

20 taxes with a per transaction fee based on the value of the 

21 transaction. 

22 (b) TRANSACTION FEE PROPOSAL.— 

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

24 would apply to all non-cash transactions (including 

25 checks, credit cards, transfers of stocks, bonds, and 


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1 other financial instruments) and all high-dollar cash 

2 transactions. 

3 (2) POTENTIAL EXCLUSIONS.—The fee would 

4 not apply to— 

5 (A) cash transactions of less than $500, 

6 (B) salaries and wages by employers to 

7 employees, 

8 (C) transactions involving individual sav9 ings instruments through financial institutions, 

10 and 

11 (D) transactions involving stock (and any 

12 options or derivatives with respect to stock). 

13 (3) CASH WITHDRAWALS FROM FINANCIAL IN14 STITUTIONS.—The fee under the proposal would 

15 apply to cash withdrawals from financial institutions 

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

17 than the standard transaction fee. 

18 (4) FEE RATE.— 

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

20 level sufficient to generate revenues equal to 

21 revenues under the Internal Revenue Code of 

22 1986. 

23 (B) OTHER POTENTIAL USES OF FEE.— 

24 The fee rate could be structured to cover 1 or 

25 more of the following: 


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1 (i) A national debt reduction plan re2 quiring elimination of the current national 

3 debt of $8.8 trillion over a period of 10 

4 years, with equal annual payments. 

5 (ii) A Federal revenue sharing pro6 gram providing funding to States to sup7 port 50 percent of the K–16 education 

8 costs of each State which agrees to adopt 

9 an equitable public school finance system. 

10 (iii) A plan to meet the promised lev11 els of certain provisions listed under the 

12 National Security Intelligence Reform Act 

13 of 2004 (Public Law 108–458), including 

14 those sections related to air cargo security 

15 (subtitle C of title IV of such Act), deten16 tion bed space (section 5204 of such Act), 

17 and border patrol agents (section 5202 of 

18 such Act); to create a dedicated funding 

19 stream for port security and improvements 

20 at levels recommended by the United 

21 States Coast Guard; and to increase ex22 penditures for first responder grant pro23 grams funded under the Department of 

24 Homeland Security. 


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1 (iv) A Federal program providing 

2 quality health care insurance coverage (for 

3 the current estimated 46 million uninsured 

4 Americans). 

5 (v) An increase in the military basic 

6 pay rate to a level comparable with that of 

7 Federal civilian pay, considering, but not 

8 being limited to, the following criteria: age, 

9 education, skills, years of service, and re10 sponsibilities. 

11 (vi) A Federal revenue sharing pro12 gram supporting community and economic 

13 development investments in new markets 

14 (rural and urban areas) at a level equal to 

15 10 percent of current Federal tax reve16 nues. 

17 (vii) A plan to increase the pay for 

18 National Guard and Reserve soldiers to 

19 that of active duty military for periods of 

20 extended deployments abroad. 

21 (viii) A Social Security and Medicare 

22 solvency plan ensuring that revenues con23 tinue to exceed expected outlays. 

24 (5) PROGRESSIVITY.—The base standard trans25 action fee shall not be greater than 1 percent for all 


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1 noncash transactions under $500. If more revenues 

2 are needed to meet the requirements of paragraph 

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

4 the minimum level of progressivity required to cover 

5 these costs. This progressivity factor may include— 

6 (A) a higher transaction fee for all trans7 actions above $500, and 

8 (B) a progressive schedule of rates to 

9 tiered ranges of transactions above $500. 

10 (6) GENERAL PROVISIONS.— 

11 (A) LIABILITY FOR FEE.—Persons become 

12 liable for the fee at the moment the person ex13 ercises control over a piece of property or serv14 ice, regardless of the payment method. 

15 (B) COLLECTION.—The fees will be col16 lected by the seller or financial institution serv17 icing the transaction. 

18 (c) REPORT OF STUDY.— 

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

20 shall be submitted to the Congress by the Secretary 

21 of the Treasury in a comprehensive analytical report, 

22 detailing— 

23 (A) the methodology employed in the cal24 culation of the fee rate, 


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1 (B) the factors considered in assessing fea2 sibility of the proposed revenue generating sys3 tem and the weight applied to each, and 

4 (C) the portion of the transaction fee at5 tributable to each of the programs identified in 

6 subsection (b)(4)(B) and the methodology used 

7 to calculate each. 

8 (2) OTHER REQUIREMENTS.—The study shall 

9 (in the following order)— 

10 (A) compute the fee needed to meet cur11 rent revenue generation, 

12 (B) compute the fee needed to meet rev13 enue neutrality and generate additional revenue 

14 to support the program described in subsection 

15 (b)(4)(B)(i) (relating to national debt reduction 

16 plan), 

17 (C) compute the fee needed to meet rev18 enue neutrality and generate additional revenue 

19 to support all the programs described in sub20 section (b)(4)(B), and 

21 (D) determine the utility of pegging 

22 changes in the transaction fee schedule of rates 

23 to the rate of inflation. 

24 (3) COMPARATIVE ANALYSIS.—The study shall 

25 include a comparative analysis of the existing revVerDate Nov 24 2008 02:53 Mar 26, 2009 Jkt 079200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H1703.IH H1703

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1 enue-raising system versus the proposed fee-based 

2 system on economic behavior. The study shall in3 clude an analysis of effect of the 2 systems on— 

4 (A) job creation, 

5 (B) economic growth, 

6 (C) consumption, 

7 (D) investments, and 

8 (E) savings levels. 

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

10 include a broad-based examination of all types and 

11 categories of transactions, including information on 

12 frequency and value of transactions in each cat13 egory. 

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

15 examine the impact of the transaction fee exemption 

16 for all cash transactions under $500. 

17 (6) PROGRAM OPERATIONS.—The study shall 

18 provide instructions on program operations, includ19 ing— 

20 (A) transaction fee collection, 

21 (B) transaction fee implementation, and 

22 (C) transaction fee compliance, enforce23 ment, and administrative costs. 

24 (7) DISTORTIONS.—The study shall include an 

25 analysis, prepared by the Secretary of the Treasury 


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1 in consultation with the Secretaries of Commerce 

2 and Labor, offering methods of preventing and re3 lieving potential distortions among economic sectors 

4 created by the implementation of the transaction fee. 

5 The study shall also include an analysis of the feasi6 bility of temporarily (for a period of not longer than 

7 1 year) reducing the fee rate (as otherwise deter8 mined in subsection (b)(4)) applicable to an eco9 nomic sector if such sector is experiencing pro10 nounced economic distress. 

11 (8) FEE AS TOOL OF FISCAL POLICY.—The 

12 study shall assess the transaction fee as a tool of 

13 Federal fiscal policy, including an impact analysis on 

14 the elimination or retention of existing tax expendi15 tures, incentives, penalties, and credits. The study 

16 should also research and comment on options for re17 bating citizens currently not subject to Federal in18 come taxes or other current aspects of the Federal 

19 tax code including, but not limited to— 

20 (A) the earned income credit, 

21 (B) the alternative minimum tax, 

22 (C) the child tax credit, and 

23 (D) the deduction for mortgage interest. 


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1 (9) IMPACT OF FEE BY INCOME LEVELS.—The 

2 study shall include an assessment of the impact of 

3 the transaction fee by quartile income levels. 

4 (10) IMPLEMENTATION PLAN.—The study shall 

5 include a detailed action plan on how best to imple6 ment a transaction fee in the United States and 

7 shall include information on timeline, agency reform, 

8 potential pertinent regulatory issues, and type of 

9 congressional action needed. 

10 (11) INTERNAL REVENUE SERVICE.—The study 

11 shall— 

12 (A) assume the transition and 

13 grandfathering of all existing personnel of the 

14 Internal Revenue Service, 

15 (B) examine elements of the current Inter16 nal Revenue Service needed to administer the 

17 transaction fee, and 

18 (C) examine the feasibility of modifying 

19 the overall mission and jurisdiction of the Inter20 nal Revenue Service from one focused on tax 

21 law application to one focused on uncovering 

22 waste, fraud, and abuse throughout the Federal 

23 Government. 


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

2 submitted to the Congress not later than 1 year after the 

3 date of the enactment of this Act. 

Æ 


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