The Transform America Transaction Fee A Presentation to the President’s Advisory Panel on Federal Tax Reform by Jim Baker Chairman, Baker & Company, LLC

May 11, 2005 Transform America Transaction Fee Presentation 2 Overview The Transform America Transaction Fee is a new revenue generating idea that would collect a fee on transactions regardless of payment method. It would apply to retail and wholesale sales, business to business purchases and financial or other transactions, including intermediate interchanges, with payers becoming liable for the fee at the point of control. The Fee could be assessed as a percentage or on a fixed, tiered, or progressive basis. Potential exclusions include cash transactions under $500, employee salaries/wages and savings transactions.

May 11, 2005 Transform America Transaction Fee Presentation 3 Major Features Simplicity---the Transaction Fee eliminates the federal tax system as we know it—income, payroll, corporate profits and capital gains---thereby drastically reducing the burden and cost of compliance in a transparent. Fairness---the Transaction Fee proposal shares the burden widely, including capture of underground activity and foreign transactions---resulting in rate of 0.4%, achieving revenue neutrality based solely on the transactions that move through the Federal Reserve. Flexibility---the proposal allows for variation in rate structure and applicability, thereby providing a mechanism to achieve policy goals, including encouraging homeownership and charity.

May 11, 2005 Transform America Transaction Fee Presentation 4 Major Features Economic Impact---Promotes long-run economic growth by lowering tax and compliance costs, while allowing policy makers flexibility through variation in fee rate and applicability. The proposal will: Motivate firms to undertake projects and workers to supply labor. Discourage short-term trading in favor of long-term investments. Decrease the burdens on small businesses, allowing these entrepreneurs---the life blood of our economy---to focus on the identification and satisfaction of customer needs.

May 11, 2005 Transform America Transaction Fee Presentation 5 Conclusion The Transaction Fee holds tremendous promise for achieving the goals of the President’s initiative. Importantly, the methodology proposed for its implementation reflects a thoughtful approach that would allow for the resulting policy to have mechanisms in place. to address national priorities.