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.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Comprehensive Trans-
form 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, tar-
geting of unmet needs, tax reform and revenue shar-
ing. 
(2) The current tax structure creates economic 
distortions that limit growth and job creation. 
(3) The estimated cost of compliance to tax-
payers is five billion hours and approximately $200 
billion. 
(4) The tax code produces inefficiency in rev-
enue raising that forces the nation to struggle un-
necessarily under the burden of unequal and inad-
equate systems of public education and health care, 
a crumbling physical and social services infrastruc-
ture, and a crushing national debt. 
(5) Implementing a transaction fee will provide 
the structure to maintain current expenditures on 
defense-related activities without sacrificing expendi-
tures on additional important national priorities. 
(6) Restructuring the tax code will promote eco-
nomic 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 trans-
action 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, edu-
cational opportunities, and affordable health care. 
(10) Therefore, the Department of the Treas-
ury shall prepare a comprehensive analytical report 
to achieve these stated goals. 
SEC. 3. STUDY ON THE IMPLEMENTATION OF A TRANS-
ACTION 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 im-
plementation/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 sav-
ings instruments through financial institutions. 
(3) CASH WITHDRAWALS FROM FINANCIAL IN-
STITUTIONS.—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 re-
quiring 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 pro-
gram providing funding to States to sup-
port 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 lev-
els 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), deten-
tion 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 ex-
penditures for first responder grant pro-
grams 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 re-
sponsibilities. 
(vi) A Federal revenue sharing pro-
gram supporting community and economic 
development investments in new markets 
(rural and urban areas) at a level equal to 
10 percent of current Federal tax reve-
nues. 
(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 con-
tinue to exceed expected outlays. 
(5) PROGRESSIVITY.—The base standard trans-
action 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 trans-
actions 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 ex-
ercises control over a piece of property or serv-
ice, regardless of the payment method. 
(B) COLLECTION.—The fees will be col-
lected by the seller or financial institution serv-
icing 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 cal-
culation of the fee rate, 
(B) the factors considered in assessing fea-
sibility of the proposed revenue generating sys-
tem and the weight applied to each, and
(C) the portion of the transaction fee at-
tributable 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 cur-
rent revenue generation, 
(B) compute the fee needed to meet rev-
enue 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 rev-
enue neutrality and generate additional revenue 
to support all the programs described in sub-
section (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 rev-
enue-raising system versus the proposed fee-based 
system on economic behavior. The study shall in-
clude 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 cat-
egory. 
(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, includ-
ing—
(A) transaction fee collection, 
(B) transaction fee implementation, and 
(C) transaction fee compliance, enforce-
ment, 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 re-
lieving potential distortions among economic sectors
created by the implementation of the transaction fee. 
The study shall also include an analysis of the feasi-
bility of temporarily (for a period of not longer than 
1 year) reducing the fee rate (as otherwise deter-
mined in subsection (b)(4)) applicable to an eco-
nomic sector if such sector is experiencing pro-
nounced 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 expendi-
tures, incentives, penalties, and credits. The study 
should also research and comment on options for re-
bating citizens currently not subject to Federal in-
come 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 imple-
ment 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 Inter-
nal Revenue Service needed to administer the 
transaction fee, and 
(C) examine the feasibility of modifying 
the overall mission and jurisdiction of the Inter-
nal 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.
Æ