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Oct 14
2010

Debunking the latest tax-hike rumor

Posted by Stephen Taub in Taxsmall businessRiskCash

Stephen Taub

A rumor currently making the e-mail rounds would-if true-be especially devastating to small business owners. Good thing it is not true.

However, the hysteria among those who have received the e-mail is another reminder of how the internet can be misused and abused.

Here's the deal. A friend stopped me to warn that after the election "Obama is going to tax every bank transaction by 1 percent. Every deposit, funds transfer, withdrawal. Everything."

I would have reacted the same way if: 1) I hated Obama, or 2) didn't think it was preposterous, especially since I never heard about it given my obsession with reading and watching news.

So, I checked it out and here is the scoop.

According to the e-mail, HR-4646 "is a 1 percent tax on all transactions at any financial institution i. e. Banks, Credit Unions, etc. Any deposit you make, or move around within your account, i. e. transfer to, will have a 1 percent tax charged. If your pay check or your Social Security or whatever is direct deposit, 1 percent tax charged.  If you hand carry a check in to deposit, 1 percent tax charged. If you take cash in to deposit, 1 percent tax charged. This is from the man who promised that if you make under $250,000 per year, you will not see one penny of new tax. Keep your eyes and ears open, you will be amazed at what you learn."

Yikes!

Now, there actually is an HR-4646, called The Debt Free America Act. It was sponsored last February by Rep. Chaka Fattah (D-Pa.), who is completing his sixteenth year in the House of Representatives.

And, yes, it does call for some sort of 1 percent transaction fee. However, HR-4646 is a radical plan to eliminate the national debt, reduce the national deficit and reform the current tax system. It is not a simple tax-bank-transactions bill.

According to Fattah's website, the measure calls for a 1 percent fee on every dollar transacted in the United States - with the exception of stock transactions. Theoretically, everyone would pay one cent on the dollar for every such transaction every single day - whether $3 million on a $300 million business acquisition, $300 on the purchase of a $30,000 car, or $5 on a $500 ATM withdrawal, according to an analysis by thehill.com.

Under Fattah's plan, taxpayers would receive a 1 percent tax credit for gross income up to $250,000 to offset the impact of the fee on middle class, working and modest-income households.

"The legislation also goes after the root causes of the debt by providing statutory authority for the Bipartisan Task Force for Responsible Fiscal Action to review and limit federal spending," Fattah states. He adds that once the national debt is paid down, his goal is to institute broad-based tax reform with the goal of replacing the individual federal income tax.

So, this is a broad, sweeping, radical plan to revamp the tax laws in this country, which, incidentally, will probably never see the light of day.

Remember, anyone can introduce a bill and weird bills float around all the time. It is not even clear whether this is a plan that would be championed more by Democrats or Republicans.

There also is no indication that Obama has even addressed this issue, let alone supported it.

This is a good case for why people need to be registered and certified before they are allowed to send an e-mail (I am joking, of course).

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