Taxation for the 21ST Century: The Automated Payment Transaction (APT) Tax

Economic Policy, October 2000

41 Pages Posted: 24 Feb 2016

See all articles by Edgar L. Feige

Edgar L. Feige

University of Wisconsin - Madison - Department of Economics

Date Written: June 1, 1998

Abstract

This paper examines the desirability and feasibility of replacing the present system of personal and corporate income, sales, excise, capital gains, import and export duties, gift and estate taxes with a single comprehensive revenue neutral Automated Payment Transaction (APT) tax. In its simplest form, the APT tax consists of a flat tax levied on all transactions. The tax is automatically assessed and collected when transactions are settled through the electronic technology of the banking/payments system. The APT tax introduces progressivity through the tax base since the volume of final payments includes exchanges of titles to property and is therefore more highly skewed than the conventional income or consumption tax base. The wealthy carry out a disproportionate share of total transactions and therefore bear a disproportionate burden of the tax despite its flat rate structure. The automated recording of all APT tax payments by firms and individuals creates a degree of transparency and perceived fairness that induces greater tax compliance. Also, the tax has lower administrative and compliance cost. Like all taxes, the APT tax creates new distortions whose costs must be weighed against the benefits obtained by replacing the current tax system.

Keywords: APT Tax, Tax reform, Financial Transaction tax

JEL Classification: H21,H22, H26

Suggested Citation

Feige, Edgar L., Taxation for the 21ST Century: The Automated Payment Transaction (APT) Tax (June 1, 1998). Economic Policy, October 2000. Available at SSRN: https://ssrn.com/abstract=2486665

Edgar L. Feige (Contact Author)

University of Wisconsin - Madison - Department of Economics ( email )

1180 Observatory Drive
Madison, WI 53706
United States

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