[Para 120]              Systems of taxation traditionally exclude certain types of activities and offer special treatment to others.  The money movement tax system essentially has no tax returns and does not offer an opportunity for the taxpayer, himself, to declare favored tax activities and deduct donations.  However, the money transfer taxation system can make provision for special situations.  Some of the more common special situations are addressed here and provide concepts that can be applied whenever and wherever needed.   

[Para 121]              Optionally, the tax treatment of traditionally tax-favored entities is changed in a way consistent with the overall goal of simplifying taxation or to accommodate the needs of such tax favored entities.  Traditionally, donations to charitable or non-profit organizations have been tax-deductible.  Because this new tax collection system no longer requires the filing of individual tax returns, charitable contributions no longer provide tax-deductible items as a direct financial benefit to the taxpayer.  Of course, it would be possible to permit the transfer of money to certain organizations without deducting a tax percentage.  However, such special exceptions to the tax collection system would be inconsistent with goals of achieving uniformity and simplicity in the tax system.  Donations to support charity would remain possible at the taxpayer's discretion, although without creation of special processing for such donations, a donation would be subject to tax on the money movement transaction.  

[Para 122]              Optionally, this money movement tax system can provide for a standard share, for example 10%, of the total 5% tax revenue, to be reserved for payments made to causes chosen by the individual taxpayer.  Such payments at the direction of the taxpayer can support traditionally deductible contributions to charitable and beneficial organizations such as charities, political parties, election funds, and the like in a method compatible with the desires of the individual citizen or taxpaying entity.  The parties to any money transaction can be permitted to take advantage of the computerized aspect of the tax system by identifying a beneficiary charity at the time of making a money movement transaction.  According to one method of supporting such organizations, the charity obtains a tax code that is associated with its bank account.  An individual wishing to contribute to the charity submits this code as a data tag to a bank together with a transaction for deposit.  The code causes the bank’s automated data processing equipment to apply special treatment to the transaction.  Specifically, the code causes the bank to route an allowed share of the normal or 5% tax payment to the account of the indicated charity.  Thus, for example, an employee depositing a paycheck could donate 10% of 5%, which is 0.5% of the check, to a charity.

[Para 123]              According to an optional modification, the holder of a bank account is allowed to designate that a specified share of all taxes derived from transactions with the account will be shared with one or more charities designated by the account holder.  With the elimination of traditional income tax returns, this method of charitable support is best implemented by allowing each taxpayer to designate his chosen charities and other desired contributions.  Enabling legislation can authorize a contribution limit, either in a percentage or an absolute amount.  Thus, for example, an employer could mark its payroll account to donate 10% of 2.5%, which is 0.25% of payroll, to charity.  If this option is chosen, each side of a transaction may be limited to a percentage of its half of each transaction.  Thus, the employee depositing a paycheck may be similarly limited to donating 10% of 2.5% to charity. 

[Para 124]              The selected contribution may be deducted from the collected tax and subtracted from the share of one or more of the overlying tax jurisdictions.  For example, the two highest-level tax jurisdictions will be state and federal government.  Following traditional practice, shares intended for these two high level jurisdictions could be slightly reduced to allow for charitable contributions.    

[Para 125]              As another option, any local tax area or tax jurisdiction can authorize the collection of a supplemental amount or surcharge to benefit charity.  This charitable support would be collected along with tax amounts for the tax jurisdictions, treating local charity as another tax jurisdiction.  The charitable share can be set according to the reported needs of local charity or at a level corresponding to traditional donations from the tax area.  Thus, the local tax rate can be increased to include the expected contribution.  With a special fund collected for charity, each tax jurisdiction will receive its full allocation, without deductions; and the parties to a money movement transaction need not or cannot redirect to charity any portion of their transaction taxes.

[Para 126]              As an example, if an employed citizen wished to donate the maximum tax-free contribution to a charity XYZ, he could do so by filing a notice of charitable contribution to XYZ at 100% of the permitted amount with his bank.  This information would be coded as an attribute of his account, to which he deposits his wages.  Correspondingly, as the bank collected the standard percentage of tax from deposits to the account, the bank's processing system would react to the coded charity information to record and reserve 100% of the legislatively permitted charitable percentage from that citizen's bank account deposits.  Such a charitable percentage would be a sub-component of the transaction tax, included within the tax percentage taken from each transaction.  The bank, or a higher administrative authority, would collect and transfer the reserved funds to the charity on a regular basis.  The tax-supported aspect of this contribution would generally be proportional to the citizen's income, while being limited in percentage.  Similar results and limitations are found under the present income tax system, and it appears that charities currently are satisfactorily supported. 

[Para 127]              Another optional method of funding charity is to allow the bank or other tax agency to calculate the donor’s intentions from the donor’s indicated percentages of 100%.  A pre-established entitlement limit such as 10% may cap the total available deduction from any one taxpayer.  A cap on donations to any one charity may help to diversity of donations among several causes.  For example, the individual charity cap may be 25% of the donor’s total available entitlement, which would require that the donor elect at least four charities if he wished to use his entire donation entitlement.  Any unused part of the total entitlement could be directed to a legislatively chosen public cause, such as reducing the national debt. 

[Para 128]              If a donor elects 100% donation to a single chosen charity, the bank’s tax software would calculate the allowable donation.  This sample instruction would result in application of the individual charity cap, such as 25% of total available entitlement being given to a single chosen charity.  The election of additional charities results in all donations being pro rated against the entitlement limit.  Thus, four donations of 100% would result in four charities receiving 25% of the entitlement limit.  Five donations of 100% would result in five charities receiving 20% of the entitlement limit.  Thus, the donor can designate any number of charities to receive his donation on a relative basis between 0-100, while allowing the tax software to calculate the pro ration. 

[Para 129]              This new system of supporting charity can be expected to raise more charitable contributions than conventional systems.  Often citizens have good intentions to contribute to charitable causes but fail to act upon them.  This problem is overcome because the tax collection system empowers each citizen to direct a limited personal fund of predetermined size or percentage to charitable causes, without obvious cost to the citizen.  In addition, a compilation of the population’s choices to receive this discretionary fund would provide an accurate database showing public sympathies and favorite causes.  This database would provide an accurate picture of public opinion on many subjects.  Funding political campaigns from this source diminishes the influence of special interest groups and gives more political weight to the opinions of the popular majority. 

[Para 130]              Further, the money movement tax collection system may provide that any part of the charitable share of collected funds is lost by default to the tax jurisdictions if a taxpayer fails to direct the prospective contribution to a charity or cause of his choice.  The ready availability of funds for charity would offer a strong incentive for each citizen to select and support charitable causes.  The potential loss of otherwise readily available funds can motivate charitable organizations to more strongly promote themselves and their works.  The transfer tax demonstrates likelihood that it will improve the welfare of society.  It may increase the involvement of the individual citizen in choices to support a wide range of programs to benefit the general welfare, whether in areas of religion, environment, health, education, or the like.