I 

109TH CONGRESS 

1ST SESSION H. R. 1601

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 

APRIL 13, 2005

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 2005’’. 

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, and 

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

10 (3) CASH WITHDRAWALS FROM FINANCIAL IN11 STITUTIONS.—The fee under the proposal would 

12 apply to cash withdrawals from financial institutions 

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

14 than the standard transaction fee. 

15 (4) FEE RATE.—

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

17 level sufficient to generate revenues equal to 

18 revenues under the Internal Revenue Code of 

19 1986. 

20 (B) OTHER POTENTIAL USES OF FEE.—

21 The fee rate could be structured to cover 1 or 

22 more of the following: 

23 (i) A national debt reduction plan re24 quiring elimination of the current national 
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1 debt of $7.7 trillion over a period of 10 

2 years, with equal annual payments. 

3 (ii) A Federal revenue sharing pro4 gram providing funding to States to sup5 port 50 percent of the K–16 education 

6 costs of each State which agrees to adopt 

7 an equitable public school finance system. 

8 (iii) A plan to meet the promised lev9 els of certain provisions listed under the 

10 National Security Intelligence Reform Act 

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

12 those sections related to air cargo security 

13 (subtitle C of title IV of such Act), deten14 tion bed space (section 5204 of such Act), 

15 and border patrol agents (section 5202 of 

16 such Act); to create a dedicated funding 

17 stream for port security and improvements 

18 at levels recommended by the United 

19 States Coast Guard; and to increase ex20 penditures for first responder grant pro21 grams funded under the Department of 

22 Homeland Security. 

23 (iv) A Federal program providing 

24 quality health care insurance coverage (for 
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1 the current estimated 45 million uninsured 

2 Americans). 

3 (v) An increase in the military basic 

4 pay rate to a level comparable with that of 

5 Federal civilian pay, considering, but not 

6 being limited to, the following criteria: age, 

7 education, skills, years of service, and re8 sponsibilities. 

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

11 development investments in new markets 

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

13 10 percent of current Federal tax reve14 nues. 

15 (vii) A plan to increase the pay for 

16 National Guard and Reserve soldiers to 

17 that of active duty military for periods of 

18 extended deployments abroad. 

19 (viii) A Social Security and Medicare 

20 solvency plan ensuring that revenues con21 tinue to exceed expected outlays. 

22 (5) PROGRESSIVITY.—The base standard trans23 action fee shall not be greater than 1 percent for all 

24 noncash transactions under $500. If more revenues 

25 are needed to meet the requirements of paragraph 
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1 (4), the Secretary of the Treasury would calculate 

2 the minimum level of progressivity required to cover 

3 these costs. This progressivity factor may include—

4 (A) a higher transaction fee for all trans5 actions above $500, and 

6 (B) a progressive schedule of rates to 

7 tiered ranges of transactions above $500. 

8 (6) GENERAL PROVISIONS.—

9 (A) LIABILITY FOR FEE.—Persons become 

10 liable for the fee at the moment the person ex11 ercises control over a piece of property or serv12 ice, regardless of the payment method. 

13 (B) COLLECTION.—The fees will be col14 lected by the seller or financial institution serv15 icing the transaction. 

16 (c) REPORT OF STUDY.—

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

18 shall be submitted to the Congress by the Secretary 

19 of the Treasury in a comprehensive analytical report, 

20 detailing—

21 (A) the methodology employed in the cal22 culation of the fee rate, 

23 (B) the factors considered in assessing fea24 sibility of the proposed revenue generating sys25 tem and the weight applied to each, and 
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1 (C) the portion of the transaction fee at2 tributable to each of the programs identified in 

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

4 to calculate each. 

5 (2) OTHER REQUIREMENTS.—The study shall 

6 (in the following order)—

7 (A) compute the fee needed to meet cur8 rent revenue generation, 

9 (B) compute the fee needed to meet rev10 enue neutrality and generate additional revenue 

11 to support the program described in subsection 

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

13 plan), 

14 (C) compute the fee needed to meet rev15 enue neutrality and generate additional revenue 

16 to support all the programs described in sub17 section (b)(4)(B), and 

18 (D) determine the utility of pegging 

19 changes in the transaction fee schedule of rates 

20 to the rate of inflation. 

21 (3) COMPARATIVE ANALYSIS.—The study shall 

22 include a comparative analysis of the existing rev23 enue-raising system versus the proposed fee-based 

24 system on economic behavior. The study shall in25 clude an analysis of effect of the 2 systems on—
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1 (A) job creation, 

2 (B) economic growth, 

3 (C) consumption, 

4 (D) investments, and 

5 (E) savings levels. 

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

7 include a broad-based examination of all types and 

8 categories of transactions, including information on 

9 frequency and value of transactions in each cat10 egory. 

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

12 examine the impact of the transaction fee exemption 

13 for all cash transactions under $500. 

14 (6) PROGRAM OPERATIONS.—The study shall 

15 provide instructions on program operations, includ16 ing—

17 (A) transaction fee collection, 

18 (B) transaction fee implementation, and 

19 (C) transaction fee compliance, enforce20 ment, and administrative costs. 

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

22 analysis, prepared by the Secretary of the Treasury 

23 in consultation with the Secretaries of Commerce 

24 and Labor, offering methods of preventing and re25 lieving potential distortions among economic sectors 
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1 created by the implementation of the transaction fee. 

2 The study shall also include an analysis of the feasi3 bility of temporarily (for a period of not longer than 

4 1 year) reducing the fee rate (as otherwise deter5 mined in subsection (b)(4)) applicable to an eco6 nomic sector if such sector is experiencing pro7 nounced economic distress. 

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

9 study shall assess the transaction fee as a tool of 

10 Federal fiscal policy, including an impact analysis on 

11 the elimination or retention of existing tax expendi12 tures, incentives, penalties, and credits. The study 

13 should also research and comment on options for re14 bating citizens currently not subject to Federal in15 come taxes or other current aspects of the Federal 

16 tax code including, but not limited to—

17 (A) the earned income credit, 

18 (B) the alternative minimum tax, 

19 (C) the child tax credit, and 

20 (D) the deduction for mortgage interest. 

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

22 study shall include an assessment of the impact of 

23 the transaction fee by quartile income levels. 

24 (10) IMPLEMENTATION PLAN.—The study shall 

25 include a detailed action plan on how best to imple-
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1 ment a transaction fee in the United States and 

2 shall include information on timeline, agency reform, 

3 potential pertinent regulatory issues, and type of 

4 congressional action needed. 

5 (11) INTERNAL REVENUE SERVICE.—The study 

6 shall—

7 (A) assume the transition and 

8 grandfathering of all existing personnel of the 

9 Internal Revenue Service, 

10 (B) examine elements of the current Inter11 nal Revenue Service needed to administer the 

12 transaction fee, and 

13 (C) examine the feasibility of modifying 

14 the overall mission and jurisdiction of the Inter15 nal Revenue Service from one focused on tax 

16 law application to one focused on uncovering 

17 waste, fraud, and abuse throughout the Federal 

18 Government. 

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

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

21 date of the enactment of this Act.

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