How It Works

How it works:

When you buy something, you only pay the advertised price. Your bank will deduct five percent tax (the default) on anything you sell. There are no other taxes.

The tax revenue thus derived is equally credited to both the buyer and seller. For each, There are no other taxes to file, no deductions, no recurring taxes, no depreciation schedules, no sales taxes, no excise taxes, no environmental fees, no tax consultants, no April 15th. That's it. Only the U. S. Congress can change your tax rate, which can only vary by product (not by market or territory), and it must be the same throughout the United States. If the tax rate for a product is not five percent, it requires a progressive plurality of two percent for each point of difference of both houses of Congress for approval. Else, the difference is reduced each year until the tax rate is again five percent. The maximum tax rate is ten percent. What is likely is that milk, food, prescription drugs and other necessaries will have a much lower rate (2%) and luxuries, tobacco and alcoholic spirits will have a higher rate (say 7%), but most will be simply 5%. International purchases are taxed identically to domestic at port of entry. How it will affect you...
 * 1) one fifth goes to the federal treasury
 * 2) one fifth goes to your state treasury
 * 3) one fifth goes to your local government treasury
 * 4) one fifth goes to your individual entitlement fund (for social security and emergency health care).
 * 5) One fifth goes to a special charity fund which is given away to those you choose (other than yourself).

If you now have a salary, you will get your total gross pay. There will no longer be any deductions for tax or social security payments. When you deposit it your check, your bank will deduct a tax of five percent (the default). When you buy something, you simply pay the advertised price, but you, your local government and your state government will get 50% credit for the tax paid on your purchase by the seller. You must tell your bank (or other transfer agent) to whom your charity account is to be paid to. It can be anyone other than yourself (spouse, children, aging parents, church or anyone else you want). You can't save your Charity fund and it can't be encumbered or pledged; you are always free to change to those whom it is paid as long as you live. You will get a monthly statement which will include your social security and health care fund, as well as the tax distributed with your bank balance. You cannot be taxed again on anything you bought (no recurring property tax or tag fees) until you sell it.

If you have a business...
Now, let's say you run a business. Say you are an electrical contractor and you wire residential and commercial buildings and sell some material (wire, fixtures, etc.) in the process. You have five employees. For illustration, let's assume the product tax rate is 6% for electrical products and professional electrical services.

When you buy any material, you simply pay the price your supplier quotes (you don't have to deal with exemption certificates for there is no sales tax, nor any other add on fees). When you sell it along with your services and your customer writes you a check, you know that your bank is going to deduct 6% of the amount for taxes. There is no income tax, no sales tax, no social security or Medicaid premiums to pay and no withholding by the government on your payroll. You simply pay your employees their gross pay. That's it.

At the end of the month, you will get a statement showing 50% credit you received for things you bought from others, plus 50% credit for the tax on goods and services you sold along with your bank balance. You will need to declare to whom your charity account is to be paid (anyone but yourself). You can designate the local school booster fund, girl scouts or any other person you like. You also know that every other competitor pays the same rate of tax that you do. You've finally got a level playing field. You know that every electrical wholesaler and competing electrician pays the same rate. Of course, your labor cost is down and your tax accounting expense is near nil.

Now you have operational reasons to keep up with your accounting and such, but that's up to you.

If you buy a new truck, the tax is included in the selling price. You no longer have to pay recurring ad valorem tax or tag fees. You no longer have to file any sales tax or income tax or scramble to pay withholding deposits.

What's the catch? Read on, there's more.
This is all the result of the Constitutional Amendment that puts a limit on taxes and their complexity. It finally puts a cap on government for its own good, fixing it to a ratio of our free economy.

The Amendment is called “ClampIt” for Constitutional Limit on the Amount and Method of Internal Taxation.

It rescinds all other taxes in the United States... and that includes state and local governments. It replaces all of these with a single national tax that is applied on all sales that is by default five percent and limited to ten percent. In return, respective state and local governments are guaranteed one fifth of any tax collected, paid directly to them.

It eliminates any tax computation by any buyer. Taxes are exacted from the seller and are always a fixed percentage of the value of what is sold and are always included in any selling price.

It funds Individual entitlements of social security and basic health care from the entire economy, not just labor. It eliminates sacred cows.

It creates a Charity account that receives one fifth of all tax revenues that must be given away as predeclared by every citizen (anyone except oneself).

It requires federal, state and local governments to fund their entire operation from this single tax and from no other source. It repeals the 16th Amendment and the income tax.

It eliminates recurring property taxes on any new purchases. Because of the exclusive funding of this single tax provision, state, federal and local governments cannot substitute any plan to circumvent the tax limit; though they can exact fines for misbehavior and fees for externalities, they must surrender any money they collect to a special fund (it is called the Assigned National Distribution fund) which supplements every citizen's charity account to have it given away by the entire public.

In short, it puts the citizens back in control of government.

How can an average five percent gross receipts tax replace all of the taxes we are now paying?
It can't.

But it will increase increase the growth of the economy, decrease the ratio of government to our Gross National Product (GDP) from its current bloated 35 to 40% down to 25% (which is still higher than it needs to be but very close to the ideal rate of 21.9% that will provide the best growth and standard of living for our country) and it does have a transition plan to facilitate retirement of public debt and with it interest expense.

The nine trillion dollar debt run up by Congress will be retired with a transition plan that is part of the package.

The transition... How to get us out of debt.
Any property you own before the amendment is passed will still have recurring property tax on it until you sell it. This is due to the ex post facto provision of the United States constitution. But if you sell your property and buy another house or car, your purchase comes under the protection of the ClampIt amendment and you can't be taxed again on that property again.

A special transition provision of ClampIt allows citizens to sell their property (say your existing home) to themselves to stop any recurring property tax, thus you will get hit with a 5% tax (the default) on the gross value. To most, this is nevertheless a good deal; to some others, it may not be, but it is your decision. This property turnover will generate an atypical bump of revenue. The proceeds from this repurchase transition plan is restricted to retire public debt. With the public debt eliminated, it will pull the ratio of government expense to GDP down to the objective 21.9%, thus making the 5% target default average tax rate a sound reality.

Why does a 5% gross transaction tax produce enough money to run government?
Well, most people don't realize that a 1% sales tax will generate the same amount of money as a 5% gross payroll tax. Why? Because it is off the top (typically gross receipts) and it turns over multiple times per year. The 1USATax (the name of the tax implemented by ClampIt) is on all transactions, not just retail, not just new goods only and not just material. This is why the rate can be so low. Since several huge transactional markets now pay no transaction tax at all (NYSE, NASDAQ, commodity, governments, charities etc.,) and foreign imports pay very little compared to domestic production, the base is greatly expanded - nearly by a factor of five. Even so, the tax is reasonable and fair. It does not soak the rich; it merely protects the poor and thus forces the tax base out across the total economy.

It also does not abandon the sick, senior citizens, or those who Fate has tripped up. In particular, the former government functions of health care and retirement and welfare have been specifically funded and addressed. For example, the charity account eliminates the public addictive mentality of “deductions” and sets aside a budgeted amount for each citizen that must be given away. A full 20 percent of all tax collected is individually mandated to be given away by citizens. A like amount is mandated to be reserved for social security and traumatic health care. These are funded from the entire economy. Corporations and governments also have charity accounts, thus “fund raisers” can farm alms as they did before. The restrictions on government charity funds are the same (they cannot give it to themselves). This enables these funds to serve as temporary ballasts for any inequity that may exist, but mainly it takes the process of charity such as foreign aid can be just passed along to the American public along with election financing as an appeal to the Charity account, thus bringing it under fixed ratio budget control. More importantly, recipients of American Charity will be responsive to American public opinion, for what they give can be taken away overnight. Who designed this? Well, a bunch of business managers, mathematicians, honest accountants, professors and a very few politicians. It was scientifically designed to be as simple as possible. It will have hard foes, mostly from those that are in, or profit by, the tax business and those who feel big government is the solution. That's why we will need each and every honest American's help to get it passed.