NESARA

NESARA 

The National Economic Stabilization and Recovery Act 

107th CONGRESS 

1 st Session 

H. R. ________________ 

(This bill has not yet been introduced into Congress) 

To amend the Federal Reserve Act of 1913, as amended; and the Internal Revenue Code of 1939, as 

amended; in order to secure for the American people their unalienable right to Life, Liberty, and Property. 

IN THE HOUSE OF REPRESENTATIVES 

_____________________ for himself, _____________________, 

_________________, _________________, _________________, 

introduced the following bill; which was referred to the committee on 

____________________ 

A BILL 

To amend the Federal Reserve Act to provide for the American people a constitutionally accurate, sound, 

safe, and honest medium of exchange; and, 

To amend the Internal Revenue Code enacted on February 10, 1939, as amended, to abolish the collection 

of revenue based on income and to establish a constitutional tax system within the classes of imposts, 

excises and duties; 

So that the endeavors of the American people in agriculture, industry and commerce may prosper. 

TITLE: NATIONAL ECONOMIC STABILIZATION AND RECOVERY ACT 

Be it enacted by the Senate and House of Representatives of the United States of America in Congress 

Assembled, 

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Table of Contents 

Purpose.........................................................................................................................................................4 

What is wrong with America?...................................................................................................................4 

Can We Really “Fix” America? Can One Bill Repair The Damage? .......................................................4 

Executive Summary ....................................................................................................................................5 

Monetary Policy Reform...........................................................................................................................5 

Fiscal Policy Reform.................................................................................................................................5 

What NESARA Does Not Immediately Do ..............................................................................................5 

Detailed Summary–Part I Banking and Monetary Reform....................................................................6 

Immediate Relief and Results ...................................................................................................................6 

The Federal Reserve System.....................................................................................................................6 

Monetary Policy ........................................................................................................................................6 

Banking .....................................................................................................................................................6 

Detailed Summary–Part II National Sales and Use Tax..........................................................................8 

Immediate Relief and Results ...................................................................................................................8 

The Income Tax ........................................................................................................................................8 

Sales and Use Tax .....................................................................................................................................8 

Part I. Banking and Monetary Reform...................................................................................................10 

Section 1. Definitions..............................................................................................................................10 

Section 2. Findings..................................................................................................................................13 

Section 3. Congressional Control Of The United States Monetary System............................................14 

Section 4. Provisions For United States Currency ..................................................................................14 

Section 5. Reformation Of The Federal Reserve System........................................................................18 

Section 6. Reformation Of The Federal Reserve Banks..........................................................................21 

Section 7. Regulation Of Commercial Banks And Other Financial Institutions.....................................22 

Section 8. Excise Tax Imposed On Monetization-Fee Or Interest Income .............................................23 

Section 9. Regulation Of The Exchange Value Of Treasury Credit-Notes.............................................24 

Section 10. Authorization For Limited Bank Charters............................................................................25 

Section 11. Regulation Of Postal Money Orders ....................................................................................25 

Section 12. Crime Defined And Punishment Established.......................................................................26 

Section 13. All Inconsistent Acts Repealed ............................................................................................26 

Part II. National Sales and Use Tax.........................................................................................................27 

Section 1. Definitions..............................................................................................................................27 

Section 2. Findings..................................................................................................................................29 

Section 3. Federal Income Tax Abolished ..............................................................................................30 

Section 4. Revision Of The Internal Revenue Service............................................................................30 

Section 5. National Sales And Use Tax Imposed....................................................................................31 

Section 6. Liability For And Disposition Of The National Sales And Use Tax......................................32 

Section 7. Recovery Of Taxes, Penalty, And Interest .............................................................................35 

Section 8. Crime Defined And Punishment Established.........................................................................38 

Section 9. All Inconsistent Acts Repealed ..............................................................................................39 

Appendix A ................................................................................................................................................40 

Part I. Banking and Monetary Reform Explanation and Details.............................................................40 

Appendix B ................................................................................................................................................51 

Part II. National Sales and Use Tax Explanation and Details .................................................................51 

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Appendix C ................................................................................................................................................61 

Imagine Legislation That… ....................................................................................................................61 

Terminates or Drastically Reduces Mortgage Debt ............................................................................61 

Promotes Universal Home Ownership................................................................................................61 

Restores High-Paying Productive Jobs ...............................................................................................64 

Increases Benefits to Senior Citizens ..................................................................................................64 

Eliminates Federal Income Taxes .......................................................................................................65 

Restores Financial Privacy ..................................................................................................................66 

Enables Single Parents to Support Their Families ..............................................................................66 

Restores Inner Cities as Vital Economic Areas...................................................................................68 

Benefits Americans with an Unprecedented Economic Boom ...........................................................69 

Provides 500 Billion Dollars for Infrastructure Projects.....................................................................69 

Eliminates Bank Failures ....................................................................................................................70 

Please Support the NESARA Institute ....................................................................................................75 

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Purpose 

• To provide monetary reform by amending the Federal Reserve Act of 1913. 

• To provide fiscal reform by amending the Internal Revenue Code of 1939. 

• To secure for the American people their unalienable right to Life, Liberty, and Property. 

What is wrong with America? 

• The income gap between the rich and poor continues to widen 

• Earnings for the poorest fifth of American families rose less than 1% between 1988 and 1998 

• Earnings for the richest fifth of American families rose more than 15% between 1988 and 1998 

• Income tax preparation costs Americans more than $225 billion and more than 5 billion hours per 

year in nonproductive labor 

• Social woes and problems continue to escalate 

• Income tax laws continue to erode privacy rights 

• Asset forfeitures continue to rise due to inequitable monetary policy and tax laws 

• The American Dream is quickly disappearing 

• Unsound monetary and fiscal policies encourage waste and graft 

• Public and private debt continue to rise 

• Current banking practices and policies no longer support the people but special interests 

• Current monetary and fiscal policy provides no mechanism to stop or defeat inflation 

Can We Really “Fix” America? 

Can One Bill Repair The Damage? 

NESARA will: 

• Reduce social inequalities and problems by doubling the average standard of living 

• Eliminate trillions of dollars of public and private debt 

• Return control of the currency to the public 

• Reduces the cost of using public currency 

• Provide new banking rules that are equitable and fair to all 

• Provide $500 billion of new public works projects 

• Replace the income tax with a fair tax 

• Improve the balance of trade problems 

• Rebuild American industry with high-paying, productive jobs 

• Eliminate inflation 

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Executive Summary 

Monetary Policy Reform 

• Establishes three types of United States currency: standard silver coin, standard gold coin and 

treasury credit-notes 

• The United States Treasury buys and cancels all outstanding capital stock of the former Federal 

Reserve Banks 

• The privately owned Federal Reserve System becomes a public entity, the United States Treasury 

Reserve System 

• A new Board of Governors of the Treasury Reserve System uses a specific law-mandated plan to 

maintain and stabilize the exchange value of the currency 

• The new Board assumes all powers and responsibilities of the former Federal Open Market 

Committee 

• The existing regional Federal Reserve Banks become Treasury Reserve Banks and continue 

clearinghouse operations and other bank service functions under the direction of the Office of the 

Comptroller of the Currency 

• All commercial banks must exchange their income-producing government obligations for treasury 

credit-notes 

• Only treasury credit-notes may be held as bank reserves 

• Fundamental changes are imposed on the repayment of all outstanding fractional reserve loans on 

secured property—principal must be repaid before the monetizing-fee is paid 

• A progressive federal excise tax is imposed on the privilege of making commercial loans of currency 

for profit 

• Commercial financial institutions such as credit unions are provided, subject to some restriction, with 

opportunities to operate with fractional reserves 

Fiscal Policy Reform 

• Amends the existing federal income tax system 

• A national retail sales (excise) tax is imposed upon non-exempt retail activities of commerce 

• The Internal Revenue Service is reorganized as the National Tax Service to administer the collection 

of the new tax 

What NESARA Does Not Immediately Do 

• Eliminate all payroll taxes, such as Social Security and Medicare taxes 

• Eliminate constitutional excise taxes on regulated activities 

• Immediately eliminate the entire national debt 

• Immediately halt inflation 

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Detailed Summary–Part I Banking and Monetary Reform 

Immediate Relief and Results 

• Eliminates approximately ¼ of the nation’s debt 

• Eliminates some private debt, especially for many home owners 

The Federal Reserve System 

• The Federal Reserve Act of 1913 is amended 

• The Federal Reserve System is abolished and replaced by a new Treasury Reserve System 

• Control of the currency is moved from private control of the Fed to public control of Congress and 

the Treasury 

• Functions of the Federal Open Market Committee are transferred to the Board of Governors of the 

new Treasury Reserve System 

• A new mechanism, the Treasury Reserve Account, is created to provide the Treasury Reserve System 

a better method to fine tune the money supply, effectively eliminating inflation 

• The previous three mechanisms for controlling the money supply are maintained: 1. Setting reserve 

requirements. 2. Setting the national discount rate. 3. Purchasing U.S. Treasury securities on the open 

market. 

Monetary Policy 

• People are provided with several alternatives for money 

• Constitutional money is restored 

• Currency becomes debt free as the people stop paying interest payments for their use of a public 

utility 

• Unlike previous policy, the new Treasury Reserve Board is provided one very specific mandate: 

maintain a stable currency 

• Expansion of the economy is returned to the free market 

• Private coinage is encouraged 

• Exchange ratios for the various currencies published at least weekly 

• Printing of redeemable gold and silver certificates allowed 

• Postal money orders available in denominations of gold and silver coin 

Banking 

• Returns the banking industry to serving public interests 

• For secured loans, compound interest is outlawed and replaced with a monetization fee 

• Provide stricter banking controls through excise taxes to discourage high or runaway monetization 

fees 

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• Secured loans require principal to be paid in full before collecting monetization fees 

• Eliminates the facade for banking insurance (FDIC) 

• Except for fraud and criminal activities, virtually eliminates bank failures 

• Banks are prohibited from using as reserves anything but Treasury credit-notes 

• Commercial paper can no longer be used as reserves, only Treasury credit-notes can be used, 

effectively removing banks from influencing monetary policy 

• Checking accounts against gold and silver deposits are prohibited, such accounts are custodial only 

• Commingling of funds among the various money accounts without owner’s permission is prohibited 

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Detailed Summary–Part II National Sales and Use Tax 

Immediate Relief and Results 

• Workers maintain better control of their earnings 

• Production is no longer taxed, but consumption 

• Encourages production thus revitalizing industry in America 

• Encourages rebuilding of inner cities 

• Discourages wasteful uses of natural resources 

• Exposes the true cost of government 

• Greatly eliminates the struggle between tax “protesters” and bureaucracy 

• Allows the “underground” to resurface and become a viable contribution to production of goods and 

services 

• Greatly restricts the influence of special interests and lobbyists 

The Income Tax 

• The Income Tax Act of 1939 is amended 

• People need no longer fear the IRS 

• Billions of hours of nonproductive labor are eliminated 

• Mounds of paper work are eliminated 

• The cost of the income tax is no longer hidden and embedded in the cost of doing business and passed 

down the chain with the consumer paying the final tab 

• Most likely eliminates state income tax plans because state income taxation piggybacks on federal 

income taxation 

• The IRS is reformed into the National Tax Service 

• Volumes of complicated tax code are history 

• Eliminates personal income taxes 

• Eliminates corporate income taxes 

• Eliminates gift taxes and estate taxes 

• Eliminates capital gains taxes 

Sales and Use Tax 

• Tax rate of 14% 

• Government entities are exempt 

• Government mandated expenses such as licenses, permits, passports, are exempt 

• Sales of bullion, coin and currency are exempt 

• Sales made by or to nonprofit schools are exempt 

• Sales of prescription drugs are exempt 

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• Real estate rents and leases are exempt 

• Sales of groceries are exempt 

• Sales of plants, livestock and fish used in the production of food for human consumption are exempt 

• Insurance sales are exempt 

• Segregated portions of labor in service contracts are exempt 

• Incidental or occasional sales such as garage or rummage sales are exempt 

• Sales for the purposes of recycling are exempt 

• Meals provided by companies at company expense are exempt 

• Sales that are nonprofit in nature are exempt 

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Part I. Banking and Monetary Reform 

Section 1. Definitions 

Definitions for terms used in this part are equivalent to those of the United States Constitution and the 

Coinage Act of 1792 or are explicitly stipulated below. 

Accounting unit dollar: Token dollar; imaginary accounting unit used to denominate United States 

currency. 

Barter: Wealth traded by direct exchange. 

Bill of credit: Paper document issued as legal tender by the government on its authority and credit, 

redeemable in specie at a future day, and designed to circulate as money. 

Coin: A piece of metal with its commodity type, weight and fineness stated on its face; an item of 

intrinsic value based in the unconditional, historical domain and often used as a medium of exchange. 

Credit: Imaginary demand. Reliance on the truth or reality of something; belief; faith. 

Credit-note: Paper document denominated in token dollars; United States Treasury credit-note. 

Currency: That which circulates as a medium of exchange; anything that is in immediate, continuous and 

widespread use as money. 

Dollar: A unit of weight, as construed in the U.S. Constitution and in the Coinage Act of 1792, equal to 

371 and 1/4 grains; equivalent to 24.0566 grams or 0.77344 troy ounces. 

Eagle: A gold coin containing one troy ounce of gold; an easily recognizable standard United States coin 

which may be used as money. 

Exchange value: Instantaneous parity of a thing at the time of the exchange. 

Expediency: That which is apt or suitable to an end in view. 

Federal Reserve Note: Paper document denominated in token dollars; a token note having only exchange 

value; a type of U.S. currency adopted by custom and through the imposition of legal tender laws; a direct 

obligation of the United States; fiat money; scrip. 

Fiat money: Paper documents or token coins, normally issued by governments and made legal tender by 

fiat or statutory law, not redeemable in specie; an item of exchange value based in the conditional, future 

domain; accepted by the issuer as compensation for taxes, fees, duties or debts; accepted by others in 

anticipation of future exchanges. 

Fiat: A sanction; decree. 

Free market: One in which any individual may exchange their products or services by competitive 

bidding, open to all, without constraint. 

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Gold eagle: Eagle. 



Gold certificate: A document certifying that a like amount of its face denomination in (gold) eagles is on 

deposit with and held in trust for its immediate redemption at the U.S. Treasury or at a designated agent 

of the U.S. Treasury. 

Interest: Compensation paid to a creditor for loss of the use of their own currency. 

Intrinsic value: Inherent value usually related to cost of production, more properly related to marginal 

utility. 

Irredeemable: Not convertible into specie at the pleasure of the holder; inconvertible; not terminable by 

payment of the principal. 

Lawful: Authorized; sanctioned; not contrary to nor forbidden by law; constitutional. 

Lawful money: Lawful money of account; specie: silver dollars, eagles. 

Legal: Done or performed in accordance with the forms and usages of law, or in a technical manner. An 

Act may be legal but, if not constitutional, it is not lawful. 

Legal-tender: Default medium of exchange; forced use of a government specified medium of exchange 

when parties to a mercantile transaction fail to specify a specific medium of exchange. 

Medium of exchange: Currency; an intermediate used during trade or commerce; an expediency 

accepted in an exchange; that which is used as money in an exchange. 

Monetization fee: Payment required for the monetization of debt; pseudo interest. 

Money: A psychological creation; a concept; the mental image of that which is used as a medium of 

exchange. 

Note: Certified claim on wealth; a written or printed paper acknowledging a debt and promising payment. 

Payment: Discharge of an obligation or debt by delivery of value, usually lawful money. The execution 

and delivery of negotiable papers [instruments] is not payment unless it is accepted by the parties in that 

sense. (UCC § 3–410) 

Scrip: Provisional certificate; evidence that the holder or bearer is entitled to receive something. 

Seigniorage: The difference, which may be positive or negative, between the face value of specie (coin), 

silver or gold certificates, or fiat money and its commodity value in a free market. 

Silver dollar: A coin containing a dollar weight—371 and 1/4 grains—of silver; an easily recognizable 

standard United States coin which may be used as money. 

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Silver certificate: A document certifying that a like amount of its face denomination in dollars of coined 

silver is on deposit with and held in trust for its immediate redemption at the U.S. Treasury or at a 

designated agent of the U.S. Treasury. 

Source: Point of origin or creation. 

Specie: Coin, usually of silver or gold. 

Tender: Any offer to settle a debt or obligation with any accepted medium of exchange accompanied by 

means for fulfillment of that offer. 

Token coin: A piece of metal intended for use as currency, issued at a nominal or face value normally far 

in excess of its commodity value; United States clad coins and subsidiary coins of base alloys. 

Token dollar: Imaginary accounting unit dollar; debt; an artificial creation, irredeemable in specie. 

Token: Something that serves as what it is not. 

Treasury bill: Obligation of the U.S. Treasury for a specified term of three, six or twelve months from 

the date of issue, bearing no interest but sold at a discount. 

Treasury bond: Paper document issued by the government as evidence of long-term indebtedness. 

Treasury certificate: Obligation of the U.S. Treasury generally maturing in one year on which interest is 

paid by coupon. 

Treasury credit-note: United States currency; paper document denominated in token dollars, designed to 

circulate as money, having exchange value, irredeemable, with limited legal-tender character, authorized 

by the Congress of the United States, issued by the U.S. Treasury bearing no interest and spent into 

circulation through voluntary acceptance; an obligation of the United States; fiat money. 

Treasury note: Obligation of the U.S. Treasury, with a maturity of one to five years and interest paid by 

coupon. 

Unit: Any specified or determinable amount or quantity adopted as a standard of measurement. Unity; 

one. 

Units of Measure—Common Equivalents: Accurate to one part per million or better; included for 

reference only; 

• 1 pound, Troy = 373.2417216 grams; 

• 1 pound, Troy = 12 ounces, Troy; 

• 1 pound, Troy = 5,760 grains; 

• 1 grain = 0.06479891 grams 

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The Congress finds that — 



Section 2. Findings 

(1) an excessive debt, both public and private, is the cause of much of this nation’s economic distress. 

(2) outdated banking, monetary and fiscal practices, supported by national statutes, codes and regulations, 

led to the creation of a large portion of this debt. 

(3) the nation’s privately owned central banks of the Federal Reserve System exercise significant control 

over the national economy through manipulation of monetary policy. 

(4) the private character of the Federal Reserve System was recognized in the Act creating the system 

when Congress reserved to itself “[t]he rights to amend, alter, or repeal” the authorizing legislation. (38 

Stat. 251, 275) 

(5) the reservation of “[t]he right to amend, alter, or repeal” the Act establishing the Federal Reserve 

System displays Congressional concern to obviate any possibility that the private parties comprising the 

Federal Reserve System might acquire, directly in or through application of the statute, any rights, 

powers, privileges or immunities that the courts could later hold were constitutionally immutable. 

(6) the federal courts have also recognized that, although the Federal Reserve System may perform 

various functions purportedly on behalf of the national government, it is not an agency of the United 

States. Lewis v. United States, 680 F.2d 1239, 1240 (9th Cir. 1982) 

(7) the Supreme Court of the United States noted in 1896 that “National banks are instrumentalities of the 

Federal government, created for a public purpose, and as such necessarily subject to the paramount 

authority of the United States.” Davis v. Elmira Savings, 161 U.S. 275 

(8) the Board of Governors of the Federal Reserve System and the Federal Open Market Committee were 

given a mandate to “maintain long run growth of the monetary and credit aggregates commensurate with 

the economy’s long run potential to increase production, so as to promote effectively the goals of 

maximum employment, stable prices, and moderate long-term interest rates.” 

(9) the performance of the Federal Reserve System, particularly in pursuit of its mandate to “promote 

…stable prices and moderate long-term interest rates,” has been considerably less than satisfactory. A 

1950 dollar is worth only 18 cents in 1990, losing 82 percent of its value in 40 years. 

(10) changes in the economic behavior of the American people, particularly since World War II, have 

greatly reduced the ability of the Federal Reserve System to regulate monetary policy. 

(11) Federal Reserve System regulators struggle to maintain stability, hampered by conflicting goals and 

grossly inadequate monetary tools. 

(12) the authority of Congress to issue irredeemable, legal tender paper currency, or to delegate such a 

power, finds no basis in Article I, § 8, cl. 5 of the United States Constitution, which grants Congress the 

power “To coin Money, [and] regulate the Value thereof.” 

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(13) the constitutional power “To borrow Money” found in Article I, § 8, cl. 2 does not authorize 

Congress to issue “Bills of Credit” or to delegate such a power. 

(14) reconstruction of the national banking and monetary system can begin based on the unquestionably 

constitutional premises that: 

(a) Congress has the power and duty to provide the nation with a sound monetary system; and, 

(b) Congress has the power to borrow money; and, 

(c) Congress has no power or privilege to emit bills of credit, nor to delegate such a power; and, 

(d) Congress has the power and duty to protect commerce from irresponsible banking practices. 

(15) the reform of the current monetary system as outlined in this Act is necessary to ensure the American 

people of their unalienable rights to Life, Liberty, and Property, and to provide for them a constitutionally 

accurate, sound, safe, and honest medium of exchange. 

Section 3. Congressional Control Of The United States Monetary System 

(A) The monetary system of the United States shall be under the control of Congress. 

(B) It shall be administered within the Department of the Treasury of the United States by the Secretary of 

the Treasury and by other government officers. 

Section 4. Provisions For United States Currency 

(A) Congress hereby directs the Secretary of the Treasury to authorize the production and immediate 

distribution of United States Treasury credit-notes, denominated in 1, 5, 10, 20, 50, and 100-token dollar 

units, in sufficient quantity to replace all outstanding United States legal tender paper currency of every 

type. 

(B) The following characteristics, among others, define the United States Treasury credit-notes: 

(1) paper document denominated in token dollars 

(2) an obligation of the United States 

(3) created by authorization of the United States Congress 

(4) issued by the United States Treasury bearing no interest 

(5) placed in circulation through voluntary acceptance 

(6) designed to circulate as money 

(7) irredeemable in specie 

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(8) having exchange value 



(9) having limited legal-tender character 

(C) Congress hereby declares that, from the date of passage of this Act, United States Treasury creditnotes 

are legal-tender for all debts—public, private, and personal—where such debts are not explicitly 

stated and understood by the parties involved to be dischargeable in some other stipulated medium of 

exchange. 

(D) All existing forms of United States legal tender paper currency of whatever type, denominated in 

dollars and produced on or before the date of passage of this Act, are exchangeable or replaceable at a 

face value of one for one for the new United States Treasury credit-notes. Federal Reserve Notes, 

National Bank Notes, and State Bank Notes will no longer be printed. 

(E) Congress hereby directs the Secretary of the Treasury to authorize the production of standard silver 

and gold coins from the following sources: 

(1) coinage at the public mints of all government-owned silver and gold bullion except for minimum 

amounts which may be required under the Strategic and Critical Materials Stock Piling Act (50 USC 

98 et seq.); and, 

(2) coinage at the public mints of silver and gold bullion acquired on the world market by the 

Secretary of the Treasury at not more than the then current average world price; and, 

(3) unlimited coinage at the national mints of privately owned bullion; and, 

(4) encouragement of private coinage. 

(F) Congress hereby directs the Secretary of the Treasury, under Article I, § 8, cl. 5 of the United States 

Constitution, to establish and implement procedures and necessary regulations to encourage each of these 

sources to its maximum extent. 

(G) United States Coinage 

(1) The standard unit of the domestic monetary system shall be a lawful United States constitutional 

silver dollar coin, containing 371 and 1/4 grains of silver, as construed in the United States 

Constitution and the Coinage Act of 1792. The Secretary of the Treasury shall provide for the minting 

of 1, 1/2, 1/4, and 1/10-dollar pieces, containing weights of silver in these exact proportions to the 

standard silver dollar. 

(2) The Secretary of the Treasury shall provide for the minting of standard gold coins. A standard 

gold coin, called the eagle, will contain 1 troy ounce of gold. The Secretary of the Treasury may, by 

discretion, provide for companion-pieces containing 1/10 troy ounce of gold, the 1/10 eagle; and 1/4 

troy ounce of gold, the 1/4 eagle; and 1/2 troy ounce of gold, the 1/2 eagle. 

(3) Despite any other provision of law, the Secretary of the Treasury shall provide for the minting and 

issuance of standard gold and standard silver coins of the following character: 

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(a) consist of an alloy of — 

(i) the specified weight of the precious metal; plus 

(ii) other metal, weighing not more than 1/10 of the total weight of the coin, included to 

increase the coin durability; 

(b) a silver dollar will contain 371 and 1/4 grains of silver, being a minimum of 90 percent silver 

by weight, with the 1/2, 1/4, and 1/10dollar pieces containing weights of silver in exact 

proportions to the standard dollar; 

(c) an eagle will contain 1 troy ounce of gold, being a minimum of 90 percent gold by weight, 

with 1/2, 1/4, and 1/10eagle pieces containing weights of gold in exact proportions to the standard 

eagle; 

(d) have a standardized design which remains unchanged for thirty years — 

(i) symbolic of Liberty on the obverse side; and 

(ii) of an eagle on the reverse side; 

(e) have inscriptions — 

(i) indicating denomination, such as “One-half Dollar” or “One Eagle”; and 

(ii) actual type and weight of precious metal content, such as “371 & 1/4 Grains Silver” or 

“One Troy Ounce Gold”; and 

(iii) “Liberty”; and 

(iv) “United States of America”; 

(f) are marked — 

(i) to identify the mint of origin; and 

(ii) with the first year of the decade of minting or issuance except that all coins minted before 

the year 2010 will be marked “2000”; 

(g) all standard silver coin will have a twelve-sided polygon design with reeded edges; 

(h) all standard gold coin will have a sixteen-sided polygon design with reeded edges; 

(4) To compensate for abrasion of the lawful coinage, the “Value” of any particular coin is equal to its 

actual weight divided by its specified total weight expressed in appropriate terms of dollars or eagles. 

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(5) The Secretary of the Treasury shall immediately open the public mints to unlimited coinage of 

both metals, levying a charge, denominated in treasury credit-note dollars, for seigniorage at the 

minimum level necessary to fund the mints’ operations. 

(6) The Secretary of the Treasury shall determine and publish at least weekly, but more often if he 

deems necessary, the exchange-ratios between — 

(a) a treasury credit-note dollar and a United States standard silver dollar and 

(b) a treasury credit-note dollar and a United States eagle, 

such ratios being calculated by adding the current average world market price, denominated in 

treasury credit-note dollars, for the bullion equivalent weight of the standard coin to the mint 

seigniorage charge to produce a standard coin. 

(7) All existing laws or regulations authorizing governmental seizure of precious metals or 

prohibiting the recovery and use of the bullion content of lawful coins are hereby repealed. 

(H) Private Coinage 

(1) As part of the duty, under Article I, § 8, cl. 5 of the United States Constitution, to supply the 

country with an adequate coinage, Congress requires the Secretary of the Treasury to, upon request of 

United States wholly owned and operated private mints, have prepared and make available at cost, 

dies for the minting of standard silver and gold coin of the United States. 

(2) The Secretary of the Treasury is hereby directed to create, subject to the approval of Congress, the 

necessary policies, procedures and regulations to ensure that the quality of standard silver and gold 

coinage produced by private parties equals or exceeds the public standard. Any penalties provided 

will apply equally to officers of the public mints. 

(I) The Secretary of the Treasury may issue silver and gold certificates, denominated in dollars and 

eagles, respectively. 

(1) The silver series shall include 1, 5, and 10-Dollar Silver Certificates of the following character: 

(a) They are printed on a distinctive paper of silver color. 

(b) They have inscriptions — 

(i) “United States of America”; and 

(ii) “In God We Trust”; and 

(iii) indicating year of issue; and 

(iv) indicating denomination, such as “Five Dollar Silver Certificate”; and 

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(v) indicating promise of redemption, such as “The United States Treasury will pay face 

value to the bearer on demand in standard silver dollar coin.” 

(2) The gold series may include 1, 5, and 10-Eagle Certificates of the following character: 

(a) They are printed on a distinctive paper of gold color. 

(b) They have inscriptions — 

(i) “United States of America”; and 

(ii) “In God We Trust”; and 

(iii) indicating year of issue; and 

(iv) indicating denomination, such as “Ten Eagle Certificate”; and 

(v) indicating promise of redemption, such as “The United States Treasury will pay face 

value to the bearer on demand in standard gold coin.” 

(3) These certificates shall represent only standard coined silver and gold actually on deposit with the 

United States Treasury, or with designated Treasury agents, and must be redeemed on demand. 

(4) Any failure to redeem silver certificates or gold certificates issued under the provisions of this Act 

upon any demand 

(i) shall cause an immediate audit by two independent qualified public auditors at the expense of 

the Treasury and 

(ii) will be prima facie cause for the removal of the Secretary of the Treasury. 

(J) All accounts of record of all monetary transactions of whatever type, subject to the jurisdiction of the 

United States, are hereby required to show the form or forms of currency used. The use of the term 

“dollar” or the symbol “$” without other qualifiers will designate United States Treasury credit-notes or 

its subdivisions such as clad token coins and subsidiary token coins of base alloys. The terms “silver 

dollar,” “silver $,” “dollars silver” or “$ silver” without other qualifiers will designate standard silver 

dollar coin containing 371 and 1/4 grains of silver and its appropriate subdivisions. The term “eagle” 

without other qualifiers will designate standard gold coin containing 1 troy ounce of gold and its 

appropriate subdivisions. 

Section 5. Reformation Of The Federal Reserve System 

(A) The Federal Reserve Act of 1913, as amended, is hereby further amended, as per its provisions for the 

dissolution of and recovery of assets of the Federal Reserve System. 

(B) Administration of the Federal Reserve System is hereby vested in the United States Treasury in a new 

department of the Treasury, hereby established and called the United States Treasury Reserve System or 

by the short title of Treasury Reserve System. 

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(C) A Board of Governors of the Treasury Reserve System is hereby established and charged with the 

administration of the Treasury Reserve System, to exercise all powers and duties granted within the 

provisions of this Act and those powers and duties, some of which are subject to modifications by this 

Act, previously specifically granted to the Board of Governors and to the Federal Open Market 

Committee of the Federal Reserve System. This Board will consist of thirteen officers including a 

Director of the Board plus one Governor of the Board from each of the existing twelve Federal Reserve 

Bank Districts, hereafter called United States Treasury Reserve Districts. 

(1) All officers of the Board of Governors of the Treasury Reserve System will be appointed by the 

President of the United States with the advice and consent of the Senate, the initial selection of all 

thirteen officers commencing with the passage of this Act and following the guidelines set forth 

herein. Selection shall be made without discrimination because of race, creed, color, sex, or national 

origin. No individual who is or has been a Senator or Representative in Congress shall be an officer of 

the Board of Governors of the Treasury Reserve System. 

(2) The officer who serves as Director of the Board of Governors of the Treasury Reserve System: 

(a) shall be a United States citizen; and, 

(b) shall be selected from the nation at large; and, 

(c) shall be a person of tested banking or economic experience; and, 

(d) shall receive a salary equivalent in amount to the salary of a member of the United States 

Senate; and, 

(e) shall maintain an office within the District of Columbia; and, 

(f) shall have no specific term of office, being replaced at the pleasure of the President of the 

United States with the advice and consent of the Senate. 

(3) Each officer who serves as a Governor on the Board of Governors of the Treasury Reserve 

System: 

(a) shall be a United States citizen; and, 

(b) shall have been a resident for at least two years of the Treasury Reserve District which they 

represent; and, 

(c) shall be actively engaged in their Treasury Reserve District in commerce, agriculture, the 

medical arts, education, industry, services, or consumer or labor affairs; and, 

(d) shall not at the time of their selection, nor at any time during that period of service, be or have 

been an officer, director, employee, or a direct stockholder of any bank; and, 

(e) shall not have held State elected or appointed office; and, 

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(f) shall not be an Officer of the Court, a Member of the American Bar Association, nor a 

practicing Attorney; and, 

(g) shall maintain an office within the Treasury Reserve District which they represent; and, 

(h) shall receive a salary equivalent to the salary of a member of the United States House of 

Representatives; and, 

(i) shall, on good behavior, serve a minimum term of four years, being replaceable at the pleasure 

of the President of the United States with the advice and consent of the Senate except that, after 

initial selection of all thirteen officers, no more than four of the twelve Governors may be 

replaced in any one four-year period or in any one presidential term of office. 

(4) A Lieutenant Governor will be selected for each of the twelve Treasury Reserve District Offices 

in the same manner and under the same guidelines as are Governors except that, after the initial 

selection, more than four new selections for that office are permitted in any one presidential term 

when the purpose of each additional selection is to fill an office which becomes vacant. Each 

Lieutenant Governor— 

(a) shall receive a salary equivalent in amount to 85 percent of the salary of a member of the 

United States House of Representatives; and, 

(b) shall assume the powers, responsibilities, duties and salary of the Office of the Treasury 

Reserve District Governor upon the resignation or during any period of incapacity of the 

Governor of the District or in the event that the holder of that office is convicted of a felony. 

(5) All officers of the Board of Governors of the Treasury Reserve System will receive their written 

Delegations of Authority from and be sworn into office by the Secretary of the Treasury. 

(6) All officers of the Board of Governors of the Treasury Reserve System are hereby charged to 

administer the affairs of the nation’s monetary system with the sole purpose of maintaining a longterm, 

stable exchange value for United States Treasury credit-notes. 

(a) All actions undertaken by the Board will require an affirmative vote, recorded as part of the 

public record in the District of Columbia Office of the Director of the Board of Governors, by 

nine of the thirteen officers. 

(b) The officers need not be physically present in order to cast their vote. 

(D) A Treasury Reserve Account which will be administered at the sole discretion of the Board of 

Governors of the Treasury Reserve System is hereby established. 

(E) The Federal Open Market Committee of the existing Federal Reserve System is hereby abolished, its 

powers and responsibilities being transferred to the Board of Governors of the Treasury Reserve System. 

(F) All rights, titles, properties, interests, and every claim of the Board of Governors of the Federal 

Reserve, of all Federal Reserve Banks, of all member banks, of all Federal Reserve agents, and of all 

individuals, in and upon the Federal Reserve System is hereby transferred to and vested in the United 

20



States Government to be held in and administered by the United States Treasury under the Treasury 

Reserve System. 

Section 6. Reformation Of The Federal Reserve Banks 

(A) The word “Federal” within the titles of the twelve existing Federal Reserve Banks is hereby changed 

to “United States Treasury” as “Federal Reserve Bank of New York” becomes “United States Treasury 

Reserve Bank of New York.” 

(B) At the written request of the Board of Governors of the Treasury Reserve System, the Secretary of the 

Treasury is hereby directed to authorize the production of United States Treasury credit-notes for the 

Treasury Reserve Account in sufficient quantity to complete the exchanges or replacements specified by 

this Act. On request of the Board of Governors or at the discretion of the Secretary of the Treasury, 

treasury credit-notes may be produced in any desired denominations larger than $100.00 provided that 

their use is restricted to the Treasury Reserve Banks, the Treasury Reserve Account, and the General 

Account of the United States Treasury. 

(C) All securities, notes, bonds or other evidences of indebtedness, whatever the source, type or issue, 

held by the twelve United States Treasury Reserve Banks shall be delivered to the Office of the Director 

of the Board of Governors of the Treasury Reserve System and exchanged for United States Treasury 

credit-notes from the Treasury Reserve Account at an equivalent face value of one for one. These creditnotes 

may be used for the ordinary operating expenses of the Treasury Reserve Banks. 

(D) All evidences of indebtedness and obligations of the United States other than United States Treasury 

credit-notes, whatever the type or issue, received in the Office of the Director of the Treasury Reserve 

will be delivered to the Secretary of the Treasury whereupon they shall be canceled. 

(E) All United States Treasury Reserve Banks are hereby declared to be Treasury agents. The Secretary of 

the Treasury shall distribute the standard gold and silver coin of the United States among the twelve 

Treasury Reserve Banks as it becomes available to the Treasury. Any individual may trade treasury 

credit-notes for standard gold and silver coin at any Treasury Reserve Bank at the current exchange-ratio 

on an as available basis. 

(F) United States Treasury Reserve Banks shall continue their normal operations under the Office of the 

Comptroller of the Currency except that they are prohibited from purchasing or holding for their own 

account income-producing obligations of the United States or those of other nations. This Act does not 

change their present clearinghouse functions. 

(G) The Office of the Comptroller of the Currency is hereby directed to revise or create, subject to the 

provisions of this Act and the approval of Congress, the necessary policies, procedures and regulations to 

promote the normal operation of the United States Treasury Reserve Banks. Fees charged for 

clearinghouse functions and other such banking services at all Treasury Reserve Banks will be uniform 

and approved by the Comptroller of the Currency. Treasury Reserve Banks shall not issue checks against 

nor otherwise make dispersals from accounts which contain no funds. 

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Section 7. Regulation Of Commercial Banks And Other Financial Institutions 

(A) All persons and every national banking association holding capital stock in former Federal Reserve 

Banks are hereby required to deliver that stock to the Office of the Director of the Board of Governors of 

the Treasury Reserve System. A compensation of one-hundred dollars ($100) plus one-half of 1 percent 

per month from the period of last dividend, if earned, will be paid from the Treasury Reserve Account in 

United States Treasury credit-notes for each share. All stock in former Federal Reserve Banks is hereby 

canceled, declared irredeemable 90 days after this Act becomes law. 

(B) All securities, notes, bonds or other evidences of indebtedness or obligations of the United States 

other than United States Treasury credit-notes, whatever the type or issue, held by any bank subject to the 

jurisdiction of the United States, whether as bank reserves or for the banks’ investment account, shall be 

delivered to its district’s Treasury Reserve Bank which will forward them to the Office of the Director of 

the Board of Governors of the Treasury Reserve System. They will be exchanged at a face value of one 

for one, plus earnings, if any, current to the date this Act becomes law, for United States Treasury creditnotes. 

The banks may receive compensation on a dollar for dollar basis from their District Treasury 

Reserve Bank in treasury credit-notes or as a deposit to a Treasury Reserve Bank account in their name. 

(C) Every bank subject to the jurisdiction of the United States is hereby prohibited from purchasing or 

holding for their own investment account income-producing obligations of the United States, such as 

Treasury bills, bonds, certificates, or notes, or those of other nations. Only United States Treasury creditnotes 

will be counted as bank reserves. 

(D) No financial institution under the jurisdiction of the United States making commercial loans of 

currency for profit may grant a loan to any person, or to members of their immediate family, while that 

person is a director, officer or employee of that financial institution nor shall a financial institution grant a 

loan to itself. 

(E) All financial institutions shall maintain separate accounts of record based on currency type. The form 

of currency used in any account of record will determine whether that account is an eagle (gold) account, 

a silver dollar account, or a credit-note dollar account. One type of account of record will not be 

commingled with another type of account of record. No funds of any type of account will be converted to 

funds of another type of account without written authorization of the owner of the funds indicating the 

owner’s agreement to a specific exchange-ratio. 

(F) All tenders in repayment which have been previously made or which are made on any secured loans 

outstanding on and after the date of passage of this Act with any financial institution making such loans 

on a fractional reserve basis will be credited to repayment of the loan principal prior to any credits being 

applied to any monetization-fee on that loan. Compound monetization-fees or charges on monetizationfees 

earned are prohibited. A service charge may be imposed by the lender for each tender in payment 

recorded, retroactively and on future tenders in payment, provided it does not exceed a total of 25 dollars 

monthly for any one loan. All new secured loans made on a fractional reserve basis may — 

(1) be subject to a maximum origination fee of 50 dollars or 1 percent of the principal loan amount, 

whichever is greater; and, 

22



(2) be issued with a prepayment of discount points up to a maximum of 5 percent of the principal 

amount of the loan, the allowed maximum being proportionally decreased at the rate of 1 percent for 

each 1 percent increase in the loan interest rate above 7 percent. 

(G) Commercial banks may open and maintain accounts for their customers in any type of currency if: 

(1) the accounts are kept segregated by currency type; and, 

(2) they retain as reserve 100 percent of the deposited standard gold or silver coin or its equivalent in 

Treasury gold or silver certificates; and, 

(3) all gold and silver accounts are custody accounts only, the ownership of the funds deposited 

remaining vested in the depositor; and, 

(4) checkable accounts or travelers checks on gold accounts or silver accounts are not allowed; 

however, gold or silver funds on deposit may be transferred between like accounts within a bank or 

between like accounts of different banks within banking systems by a Lawful Money Bank Transfer 

Order properly authorized by the owner of the funds. 

(H) No bank may advertise itself as a “full service bank” if it fails to offer its customers choices of gold 

accounts, silver accounts, and treasury credit-note accounts. 

(I) In case of a bank failure or closing, regardless of the reason, the holders of gold and silver accounts 

will have immediate preferential treatment in the return of their deposits or a settlement of equal value. 

(J) The Office of the Comptroller of the Currency is hereby directed to revise or create, subject to the 

provisions of this Act and the approval of Congress, the necessary policies, procedures and regulations to 

regulate the service operations of all banks subject to the jurisdiction of the United States. 

Section 8. Excise Tax Imposed On Monetization-Fee Or Interest Income 

(A) An excise tax is hereby imposed on the monetization-fee or interest income of all financial 

institutions or persons, subject to the jurisdiction of the United States, who make commercial loans of 

currency for profit. The amount of the excise tax is calculated upon the annualized rate of the 

monetization-fee or interest: 

(1) For loans secured with physical property — 

(a) No excise tax imposed on income received at rates less than 5 percent; plus, 

(b) An excise tax of 10 percent on the portion of income received at rates between 5 percent and 

12 percent; plus, 

(c) An excise tax of 20 percent on the portion of income received at rates exceeding 12 percent. 

(2) For unsecured loans — 

(a) No excise tax imposed on income received at rates less than 10 percent; plus, 

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(b) An excise tax of 20 percent on the portion of income received at rates between 10 percent and 

20 percent; plus, 

(c) An excise tax of 40 percent on the portion of income received at rates exceeding 20 percent. 

(B) The excise taxes hereby imposed will be deposited within three working days of receipt of that 

income with any authorized federal depository which will transfer these funds to the Treasury Reserve 

Account. 

Section 9. Regulation Of The Exchange Value Of Treasury Credit-Notes 

(A) The Office of the Comptroller of the Currency will establish a method for calculating and publish at 

least weekly a United States Treasury Credit-Note Exchange-Value Index which will track the exchange 

value of treasury credit-notes against a composite list of not less than 12 nor more than 24 commonly 

traded items, including labor rates, rents, cost of professional services and basic commodities, excluding 

gold and silver. The initial list will be prepared by the Comptroller of the Currency with the approval of 

Congress and, once approved, will not be changed more than once in any five-year period and then only 

with the consent of Congress. The exact method used for calculating the Treasury Credit-Note Exchange- 

Value Index will remain fixed and will be published as part of the public record. The initial value of the 

Treasury Credit-Note Exchange-Value Index will be set at 100.000 as of the date this Act becomes law. 

(B) The Board of Governors of the Treasury Reserve System will administer the affairs of the nation’s 

monetary system by adjusting the aggregate amount of the nation’s currency and credit to maintain the 

Treasury Credit-Note Exchange-Value Index within a range of 97 percent to 103 percent of its initial 

value by using four primary regulation tools: 

(1) By setting the percentage of reserves required of the commercial banks. Commercial banks will 

not be penalized should their reserves fall below the percentage required provided — 

(a) the bank grants no new loans for 90 days after any day on which its reserves were below the 

requirement; and, 

(b) the bank does not call for immediate repayment of any outstanding loans which are 

performing within normal limits; and, 

(c) the reserves of a commercial bank do not fall below 50 percent of the reserve requirement, at 

which point the bank would be declared insolvent. 

(2) By setting the national discount interest rate, the interest rate at which commercial banks borrow 

funds from Treasury Reserve Banks. 

(a) Commercial banks may obtain loans from their district Treasury Reserve Bank at the national 

discount interest rate in exchange for their best acceptable commercial paper. 

(b) District Treasury Reserve Banks may obtain funds for these loans from the Treasury Reserve 

Account, paying that account one-half of the interest income earned as a fee for using these funds. 

(3) By purchasing income-producing United States Treasury obligations in the open market. 

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(4) And by impounding funds within the Treasury Reserve Account or by transferring funds from the 

Treasury Reserve Account to the General Account of the United States Treasury or by depositing 

funds with commercial banks. All funds within the Treasury Reserve Account are maintained 

separately from all other United States Treasury funds and may not be transferred, appropriated or 

expended by the United States Treasury except at the sole discretion of the Board of Governors of the 

Treasury Reserve System. 

Section 10. Authorization For Limited Bank Charters 

(A) Currently operating financial institutions such as credit unions may obtain charters as limited national 

banks to operate on a fractional reserve basis to grant loans within the local community if they — 

(1) apply to the Office of the Comptroller of the Currency; and, 

(2) meet the financial requirements imposed on commercial banks and the necessary policies, 

procedures and regulations imposed by the Office of the Comptroller of the Currency; and, 

(3) have a paid-up capital of at least five million dollars; and, 

(4) grant, under these limited operating provisions, only loans secured by physical property. 

(B) To meet the provisions of this section and to increase efficiency, several financial institutions located 

within a Treasury Reserve District may, at their request, be combined into a single organization or they 

may be allowed to operate in partnership with an existing bank. 

Section 11. Regulation Of Postal Money Orders 

(A) To meet the currency provisions of this Act, postal money orders will hereafter be issued in three 

types denominated in — 

(1) silver dollars in the standard currency units of 1, 1/2, 1/4, and 1/10 dollar, each with an aggregate 

maximum limit of 1,000 silver dollars; and, 

(2) eagles in integer units, no fraction of an eagle being allowed, each with a maximum limit of 10 

eagles; and, 

(3) any appropriate amount of treasury credit-note dollars with a maximum limit of 1,000 dollars 

each. 

(B) Postal money order blanks shall have distinctive color and markings for each of the three types of 

standard currency, those to be denominated in standard silver or gold coin being similar in appearance to 

their respective silver certificates and gold certificates. 

(C) Postal money orders shall be issued only for the type and amount of currency actually tendered. 

(D) The fee for issuing any postal money order shall be one dollar. 

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(E) Except in unusual circumstances, postal money orders shall be redeemable in the designated currency 

at any United States Post Office within the jurisdiction of the United States within three working days of 

their submittal for exchange. 

Section 12. Crime Defined And Punishment Established 

(A) Any person convicted of willfully violating the monetary and fiscal responsibility provisions of this 

Act resulting in aggregate losses exceeding 5,000 dollars in any 12-month period shall be deemed guilty 

of a felony and shall be subject, on each conviction, to a fine not exceeding 5,000 dollars, or a term of 

imprisonment of not more than 5 years, or both. 

(B) Any person convicted of any willful violation of this Act that results in the production or circulation 

of substandard silver or gold coin shall be deemed guilty of a felony and shall be subject on each 

conviction to a fine not exceeding 10,000 dollars, or a term of imprisonment of not more than 20 years, or 

both. 

(C) Any person providing information leading to the conviction of one or more individuals for the 

violation of any provisions of this Act shall be paid from the United States Treasury the sum of 10 eagles. 

(D) Any person who is not paid from the United States Treasury lawful money on demand for United 

States Silver Certificates or for United States Eagle Certificates according to the provisions of this Act 

shall be paid from the Treasury the sum of 5 eagles. 

Section 13. All Inconsistent Acts Repealed 

(A) All Acts or parts of Acts inconsistent with the provisions of this part are hereby repealed. 

26



Part II. National Sales and Use Tax 

Section 1. Definitions 

Definitions for terms used in this part are equivalent to those of the United States Constitution or are 

explicitly stipulated below. 

Business: Includes all activities engaged in or caused to be engaged in with the object of gain, benefit or 

advantage, direct or indirect. 

Buyer: Purchaser 

Charitable organization: Any entity organized and operated exclusively for charitable, philosophical, 

scientific, testing for public safety, literary or educational purposes, or to foster national or international 

amateur sports competition, or for the prevention of cruelty to children or animals, provided that no part 

of the entity’s net earnings goes to the benefit of any private shareholder or individual. 

Coin: Monetized bullion or other forms of money manufactured from gold, silver, platinum, palladium, 

or other metals now or in the future and used as a medium of exchange in the United States or in any 

foreign nation. 

Commerce: Any kind or type of exchange of goods, productions, or property, or the rights to property 

offered for a consideration to the general public at large. 

Contrived Sale: A commercial transaction executed in an extraordinary manner for the purpose of 

evading the national sales and use tax otherwise due. 

Groceries: Food or drink advertised or marketed for human consumption and sold in the same form, 

condition, quantities, and packaging as is commonly sold by grocers, such as: cereals and cereal products; 

milk and milk products; meats and meat products; fish and fish products; eggs and egg products; 

vegetables and vegetable products; fruits and fruit products; sugars, sugar products and sugar substitutes; 

coffees and coffee substitutes; teas, cocoa and cocoa products, carbonated and non-carbonated soft 

(nonalcoholic) drinks; spices, condiments and salt; or any combinations of food products or food product 

substitutes, whether sold prepared or unprepared. The term does not encompass chewing gum, cocktail 

mixes, alcoholic drinks, proprietary medicines, lozenges, tonics, ice, vitamins and other dietary 

supplements, or food or food products not for human consumption such as pet food. Nor does it 

encompass food or drink served or furnished in or by cafes, restaurants, lunch counters, cafeterias, 

delicatessens, hotels, drugstores, social clubs, nightclubs, cabarets, resorts, snack bars, caterers, carryout 

shops, and other like places of business, whether fixed or mobile, such as pushcarts, motor vehicles or 

other mobile facilities, at which prepared food or drink is regularly sold; nor food or drink vended by 

machines for a vendor; nor food or drink furnished, prepared, or served for consumption on or near the 

premises of the retailer although such food or drink is sold on a “take out” or “to go” order and is bagged, 

packaged, or wrapped and taken from the premises of the retailer. 

Manufacture: The operation of producing a new product, article, substance, or commodity different from 

and having a distinctive name, character, or use from its constitute raw or prepared materials. 

27



Person: Any individual, firm, partnership, joint adventure, corporation, estate, or trust, or any group or 

combination acting as a unit, but not a governmental unit, and the plural as well as the singular number. 

Personal property: Everything subject to ownership, not denominated as real estate; an individual’s right 

or interest in things personal, either corporeal, meaning moveable and tangible things such as animals, 

furniture, merchandise, etc., or incorporeal, meaning rights to intangible things such as personal annuities, 

stocks, shares, patents, copyrights, etc. 

Precious metal bullion: Any refined precious metal, such as gold, silver, platinum, and palladium, which 

is in a state or condition where its value depends primarily upon its precious metal content and not its 

form. 

Profit: A benefit, advantage or gain, particularly a pecuniary gain of excess returns over expenditures, 

accruing to an owner through the use or exchange of their property, or their rights to property, other than 

an owner’s personal labor. 

Property: Everything that is the subject of ownership, corporeal or incorporeal, tangible or intangible, 

visible or invisible, real or personal. 

Property rights: Any type of right to specific property. 

Purchase: The transfer of property or property rights from one person to another by voluntary act or 

agreement in exchange for a valuable consideration. 

Purchase price: The cost or consideration paid by the purchaser, exclusive of any direct tax imposed by 

territorial, state, or local government and exclusive of the national sales and use tax. 

Purchaser: Person who acquires property or rights to property in commerce for a valuable consideration; 

buyer; vendee. 

Real estate: Land and those things erected or growing upon it, such as buildings, fences or crops. The 

term embraces items such as light, plumbing and heating fixtures when permanently attached. 

Retailer: Person doing a retail business, known to the trade and public as such, and selling in commerce 

to any user or consumer; also called vendor or seller. 

Retail sale: All sales other than wholesale sales. 

Sale: The commercial exchange of property or property rights for money, for other property or property 

rights, or for a consideration, either immediate or over a period of time, as in an installment or credit 

transaction, rent or lease. The term does not include gifts to immediate family members; nor does it 

encompass transfers of assets among persons holding ownership interests in those assets providing such 

transfers are in direct proportion to their interest in either settlement or rearrangement of those interests— 

such as: the transfer of assets between a partner and a partnership in the formation or dissolution of the 

partnership; the transfer of assets between a shareholder and a corporation in the formation or dissolution 

of the corporation; the transfer of assets between parent and subsidiary corporations; or the repossession 

of personal property or property rights by a person with an ownership interest—and the purpose of such 

transfers is merely an exchange of assets, not to avoid the national sales and use tax otherwise due. 

28



School: Any institution or person offering training or educational services to the public. 

Seller: Any person who transfers property or property rights by sale in commerce; a merchant, a retail 

dealer, a supplier, a retailer, a vendor; one who offers a service or buys to sell. 

Tangible personal property: Corporeal personal property 

Tax: Either a tax payable by the purchaser of property or of rights to property subject to taxation, or an 

aggregate amount of taxes due from the taxpayer, as the context may require. 

Taxpayer: Any person obligated to account to the National Tax Service for taxes payable, to be 

collected, collected, or due. 

Vendee: Purchaser 

Vendor: Seller 

Wholesale sale: A sale by manufacturers, producers or wholesalers to retail merchants, jobbers, dealers, 

or other manufacturers, producers or wholesalers for ultimate resale but not sales made to users or 

consumers not for resale, even when made by or to a recognized manufacturer, producer or wholesaler, 

the latter sales being deemed retail sales. 

Wholesaler: Person doing regularly organized wholesale or jobbing business, known to the trade as such 

and selling to retail merchants, jobbers, dealers, or other wholesalers for resale. 

The Congress finds that — 

Section 2. Findings 

(1) contrary to popularly held belief, the progressive income tax is actually regressive because it is often 

easily passed through as a hidden tax in the price of goods and services. 

(2) the progressive income tax falls most heavily and unfairly on working middleclass citizens who pay 

the tax twice, once when it is withheld from their wages and again as a hidden tax in the price of essential 

goods and services. 

(3) a progressive income tax is counterproductive in that it discourages industry and productive activity. 

(4) taxes based on personal income reduce or eliminate the incentive for recipients of government aid to 

become productive citizens. 

(5) shifting taxes from productive activity to consumption will encourage the former and discourage the 

latter. 

(6) individuals of modest means can be protected from the adverse effects of federal taxation by removal 

of the hidden elements of current tax policies on productive activity and by exempting groceries, rent, 

insurance, medicines, and some categories of previously used articles from consumption taxes. 

29



(7) an income tax, being essentially a uniformly imposed annual tax, provides only a poor means for the 

regulation of commerce. 

(8) the very nature of the income tax, being administered as a commercial code rather than as positive 

law, invites constant congressional lobbying by powerful special interest groups for tax provisions that 

benefit themselves, often at the expense of others less able to influence legislation. 

(9) to remain constitutional, the current income tax system, as applied to individuals, relies on voluntary 

compliance for its success. 

(10) voluntary compliance with the federal income tax system is steadily decreasing, the number of nonfilers 

currently estimated at ten million, making the system increasingly non-enforceable. 

(11) a huge “underground” and thus untaxed economy is depriving the government of billions of dollars 

of revenue annually. 

(12) the reform of the current federal income tax system, as outlined in this Act, is necessary to eliminate 

its counterproductive and abusive aspects, to promote social welfare through a more equitable distribution 

of the national tax burden, and to improve regulation of the national commerce, all for the benefit of the 

American people. 

Section 3. Federal Income Tax Abolished 

(A) All federal income taxes, regardless of their nature and regardless of the nature of the entity taxed, 

with the exception of Social Security and Medicare payroll taxes, are hereby abolished as of 12 o’clock 

midnight on the date this Act becomes law. 

(B) All federal income tax liabilities that were contractually created to become due and payable at some 

unspecified future date, such as those involving property transfers or individual retirement accounts, 

which are not due and payable as of the date this Act becomes law, are hereby abolished. 

(C) All federal income tax liabilities that were due and payable on or before their abolition remain due 

and payable. 

Section 4. Revision Of The Internal Revenue Service 

(A) The Secretary of the Treasury shall reorganize the Internal Revenue Service, which shall hereafter be 

known as the National Tax Service, to administer the collection of the national sales and use tax. 

(B) The National Tax Service shall be structured by Regions and Districts, with Regions being defined by 

recognized state and territory boundaries, and Districts being defined by federal Congressional districts; 

with appropriate Delegations of Authority issued annually to a National Executive Director, to each 

Regional Executive Director and to each District Director. 

(C) The Secretary of the Treasury shall supervise the organization of the National Tax Service, creating 

such rules, regulations and procedures as are consistent with law and as are required to secure the efficient 

collection of the national sales and use tax. 

30



(D) The Secretary of the Treasury is hereby charged to structure the National Tax Service and to organize 

its rules, regulations and procedures to make the system as paperless as possible and to take maximum 

advantage of state sales and use tax systems. 

(E) The functions of the existing Internal Revenue Service shall remain in place and continue operation, 

concurrent with the new National Tax Service, for one year from the date on which the income tax is 

abolished, to complete and close the books on all income tax liabilities that were due and payable on or 

before the date of their abolishment. Outstanding income tax liabilities that cannot be cost-effectively 

collected within this period will be discharged by writing them off as uncollectible. 

(F) The Secretary of the Treasury is hereby authorized to expend the additional money necessary to 

accomplish the objectives set forth herein, these added expenditures not to exceed in amount the actual 

expenditures for federal revenue collection in the previous year. 

Section 5. National Sales And Use Tax Imposed 

(A) There is hereby levied, and there shall be collected and paid, a tax of 14 percent upon the 

consideration or the purchase price paid or the fair market value of the retail sale or use of all property or 

rights to property exchanged in commerce within the jurisdiction of the United States of America, 

excepting those items specifically excluded from this national sales and use tax by Act of Congress. 

(B) Exemptions: 

(1) All sales to the United States government, to its departments and institutions, and to its political 

subdivisions, when acting in their governmental capacities only; 

(2) All sales of licenses, permits, passports, visas and all charges for public services or user fees made 

by the United States government or the governments of the States or Territories of the United States 

and their political subdivisions, when acting in their governmental capacities only; 

(3) All sales of precious metal bullion, coins, and currency; 

(4) All sales made to or by charitable organizations in the conduct of their regular activities or 

charitable functions and where their sales are not for profit and are not unduly competitive with sales 

made by others subject to the tax; 

(5) All sales made to or by nonprofit schools where the items purchased or sold by the school are not 

for pecuniary gain, are required for normal rather than extraordinary operation, and where all sales 

made to the public—such as books sold at a school-operated book store or tickets to public events or 

food service at school-operated cafeterias, snack bars, or student unions—remain taxable; 

(6) All sales of drugs dispensed by prescription; of all corrective eyeglasses, contact lenses, or hearing 

aids; of all therapeutic agents, devices, appliances, or their related accessories or materials when 

furnished, prescribed or recommended by any licensed practitioner of the medical arts for the 

treatment or relief of any human impairment or disability; 

31



(7) All sales in the nature of rents or leases of real estate for which a written agreement exists 

providing for the exclusive use by any person for any continuous period of not less than sixty 

consecutive days; 

(8) All sales of groceries; 

(9) All sales of plants, livestock and fish customarily used in the production of food for human 

consumption; embraces—all sales of neat cattle, sheep, lambs, poultry, swine, and goats; all sales of 

livestock for breeding purposes; all sales of live fish for stocking purposes; all sales of feed for 

livestock; all sales of seeds, orchard trees or other plants for food production; 

(10) Incidental or occasional sales, not exceeding three events per year, of used tangible personal 

property where the primary motive for the transaction is trade rather than profit through commerce 

and where the transactions are made through use of “want ads” or as a part of a “yard” or “garage” 

sale; 

(11) Incidental or occasional sales for the purpose of recycling materials; 

(12) Fifty percent of the purchase price paid for the retail sale of all used tangible property exchanged 

in commerce, excluding remanufactured items sold with warranties exceeding 90 days; 

(13) Ninety percent of the purchase price paid for all secondary sales of commercial investment 

securities of whatever type, excluding the transferable securities of the United States government and 

all its political subdivisions which are exempt from the tax; 

(14) All sales of insurance or surety bonds; 

(15) Meals provided by employers to employees at their places of employment at no charge or at 

reduced charges which are considered as partial compensation for their labor; 

(16) The identified and segregated labor portion of written retail contracts, such as professional 

service, construction, maintenance and service industry contracts; 

(17) Real estate transactions to the extent that the national sales tax has been paid, or would have been 

paid had this Act been in force, coincidental with the previous retail transaction or for transactions in 

progress when this Act becomes law; 

(18) All sales of printed matter of a periodical nature, such as newspapers, magazines, news letters, 

directories and sales catalogs that are nonprofit in nature or whose primary purpose is to promote 

sales subject to the national sales and use tax or to carry paid advertisements subject to that tax. 

Section 6. Liability For And Disposition Of The National Sales And Use Tax 

(A) Every seller dealing in commerce shall be liable and responsible for collecting the national sales and 

use tax lawfully due and remitting it to the National Tax Service. Purchasers are liable for payment of the 

tax to the seller. The tax upon a credit sale of moveable property is due and payable in full at the time of 

the sale. The tax upon a credit sale or a contract for sale of immovable property where the purchase price 

is paid in installments is due and payable on each installment payment. If any seller transfers, sells, 

32



assigns, or otherwise disposes of an account receivable, they shall be deemed to have received the full 

balance of the consideration of the original sale and shall be liable for the remittance of the tax on the 

balance of the total sale price not previously reported. 

(B) The national sales and use tax is to be collected by the seller from the purchaser only at the retail, end 

or final transaction and not from wholesalers, or from intermediate sales of items directly used for or 

incorporated into the manufacture of a product to be ultimately sold at retail, or from sales made to 

exempt entities such as those made by contractors or subcontractors to the United States government, to 

its departments and institutions and its political subdivisions when acting in their governmental capacities 

only, or sales made to qualified exempt organizations. 

(C) There is no limit to the number of times a particular article may be subject to the national sales or use 

tax. Each time it returns to the stream of commerce, the purchaser must pay and the seller collect and 

remit the tax unless the sale is exempt. 

(D) The burden of proving that any particular person is liable for payment, collection or remittance of the 

national sales and use tax shall be on the National Tax Service. 

(E) Tax payments made by a purchaser to a seller and documented by written receipts or certificates 

amount to payments by the purchaser to the National Tax Service, discharging their tax liability. 

(F) In case of a dispute between the purchaser and seller about whether any particular sale is exempt from 

the national sales and use tax, the seller shall collect and the purchaser shall pay such tax and the seller 

shall then issue to the purchaser a receipt or certificate showing the name of the seller and the purchaser, 

the item or items purchased, the date, price, amount of tax paid, and a brief statement of the claim of 

exemption. The purchaser may then apply, within sixty days of the date of the sale, to the District 

Director of the National Tax Service of the district in which the purchaser resides or in which the sale was 

made for a refund of taxes paid. It is the duty of the District Director, or a duly qualified deputy, to 

resolve the question of exemption and to provide written notice of such determination and the appropriate 

refund plus interest calculated at the rate of 12 percent annually, where applicable, to the purchaser within 

sixty days of the date of the application for refund, subject to review within one year by a court of 

competent jurisdiction. 

(G) Excess national sales and use tax inadvertently collected must be remitted to the National Tax Service 

when not refundable. 

(H) Credit Certificates equal to 10 percent of any contribution valued at $250 or more made to qualified 

charitable organizations shall be issued by the National Tax Service if the charitable organization is 

recognized by the National Tax Service, if it applies for the Credit Certificate in the donor’s name, and if 

it submits proof of the contribution with each application. These certificates are applicable to any national 

sales and use tax liability. 

(I) Remittances discharging a seller’s national sales and use tax liability shall be made in full to the 

National Tax Service at any authorized federal depository on or before the tenth day of each month for all 

taxable transactions occurring during the previous month. Any seller doing business in two or more 

locations which are in different districts may elect to make consolidated deposits and file consolidated 

reports in a single district. 

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(J) Summary documentation, also called a return or report, of monthly tax remittances may be submitted 

(postmarked) to the District Director of the National Tax Service of the district in which a tax deposit was 

made not less than five working days after the tax due date. 

(K) Each seller who, acting as agent for the National Tax Service, submits timely summary 

documentation for remitted tax is allowed to deduct 1 percent of tax deposits timely made to offset their 

expense in its collection and remittance. They shall also be subject to a penalty of 2.5 percent per month, 

cumulative each month to a maximum of 15 percent, for late deposits. Besides the penalty, late deposits 

shall be subject to interest charges at the rate of 1 percent per month. Inadvertent clerical errors are 

subject to interest but not penalty charges. 

(L) Credit Certificates issued by the National Tax Service are transferable in commerce and shall be 

accepted for tax payments at full face value at authorized federal depositories or may be remitted for tax 

liabilities with the summary documentation. 

(M) Any seller dealing in commerce who sells their business, or stock of goods, or quits business, shall be 

liable to file a final return with the National Tax Service within thirty days of such action. The seller’s 

successor in the business, if any, becomes liable for the collection and remittance of taxes on future sales 

and for taxes due and not remitted on current sales, unless they hold a receipt or certificate showing that 

the taxes were paid. 

(N) In cases of unusual circumstance, such as a natural disaster or a personal hardship, penalty or interest 

charges or any portion thereof on late deposits may be waived by a District Director of the National Tax 

Service or by Executive Order of the President of the United States. 

(O) Certificates of National Sales and Use Tax Exemption, identified by number and valid for twelve 

months, shall be issued to qualified and approved purchasers or sellers within sixty days of the application 

date made to a District Director of the National Tax Service. The District Director shall provide forms for 

such application and for the certificates and shall have the authority to verify that the purchaser or seller 

is, in fact, entitled to exempt status. 

(P) Sellers who make sales exempt from the national sales and use tax with valid exemption certificates 

issued by the National Tax Service, except those made to the United States government, are required to 

maintain records of such sales by item, date of sale and exemption certificate number for two years from 

the date of the sale. Sellers may, at their option, provide an itemized summary report to the National Tax 

Service of their exemption certificate sales on the same basis as if the sales had been subject to the tax. 

Each reporting seller making timely reports shall receive a Credit Certificate applicable to national sales 

tax liabilities equal to 0.15 percent of the total amount of exempt sales reported, except those made to the 

United States government, to cover the expense in the collection of data and the submission of the 

itemized summary report. 

(Q) Fifteen percent of the total amount of monies collected by the National Tax Service each month shall 

be immediately deposited to the Treasury Reserve Account and may not be transferred, appropriated or 

expended by the United States Treasury without authorization of the Board of Governors of the Treasury 

Reserve System. 

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Section 7. Recovery Of Taxes, Penalty, And Interest 

(A) All sums of money imposed by the national sales and use tax and paid by a purchaser to a seller shall 

be and remain public money, the property of the United States Treasury, and the seller shall hold the same 

in trust for the sole use and benefit of the national government until deposited at an authorized federal 

depository. 

(B) If a person neglects or refuses to pay, collect or remit the national sales and use tax as required, a duly 

qualified Officer of the National Tax Service shall make an assessment, based upon such information as 

may be available, of the amount of taxes due for the period for which the taxpayer is alleged delinquent 

and shall add thereto the appropriate penalty and interest on such delinquent taxes and shall within ten 

days of the date of the determination deliver a written Assessment / Preliminary Notice of Deficiency of 

the estimated taxes, penalty and interest to the alleged delinquent taxpayer by first-class certified mail to 

their last known address on file with the National Tax Service. 

(1) The Assessment / Preliminary Notice of Deficiency shall indicate and include: 

(a) the name of the alleged taxpayer, 

(b) their last known address on file with the National Tax Service, 

(c) the date of the Assessment / Preliminary Notice of Deficiency, 

(d) a statement about the alleged taxable activity upon which the alleged tax is due, 

(e) the amount of the tax and the date on which it was due, 

(f) any penalties and interest due and the date of the accrual thereof. 

(C) An alleged delinquent taxpayer may, within thirty days of receiving an Assessment / Preliminary 

Notice of Deficiency, request a hearing with a duly appointed Officer of the National Tax Service to 

review the facts of the case. 

(1) The hearing, when requested, shall be held within thirty days of the request date. 

(2) The District Director, or a duly qualified deputy, shall, within ninety days of the date of an 

Assessment / Preliminary Notice of Deficiency, review the facts of the case, including the records of 

any hearing(s) held, and shall make a Preliminary Determination based upon the best available 

information. 

(3) Written notice of the Preliminary Determination shall be delivered to each person receiving an 

Assessment / Preliminary Notice of Deficiency by first-class certified mail to their last known address 

on file with the National Tax Service. A Preliminary Determination may dismiss the Assessment / 

Preliminary Notice of Deficiency, or may revise and reissue an Assessment / Preliminary Notice of 

Deficiency, or may issue a Final Notice of Deficiency. 

(4) A Final Notice of Deficiency shall indicate and include: 

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(a) the name of the taxpayer, 

(b) their last known address on file with the National Tax Service, 

(c) the date of the Final Notice of Deficiency, 

(d) the amount of the tax and the date on which it was due, 

(e) any penalties and interest due and the date of the accrual thereof, and 

(f) a notice of lien that the National Tax Service claims a first and prior lien on the taxpayer’s 

business property as provided by law. 

(D) A person receiving a valid Final Notice of Deficiency from a District Office of the National Tax 

Service may, within thirty days of receiving such notice, challenge the notice by: 

(1) remitting the amount of the alleged tax, including any penalties and interest, and filing a written 

appeal for refund stating the pertinent facts of the case and the reason(s) for the refund request with 

the Regional Executive Director of the National Tax Service, or; 

(2) posting a third-party surety or a cash bond for the alleged tax, excluding any penalties and interest, 

with the National Tax Service and filing suit for relief with a court of competent jurisdiction, or; 

(3) claiming inability to post bond or inability to pay the tax, penalty or interest without suffering 

undue damage and petitioning a court of competent jurisdiction for a review of the facts in the case 

and, at the court’s discretion, immediate dismissal of all or any part of the alleged liability. 

(E) The Regional Executive Director, or a qualified deputy, shall, within sixty days of the date of an 

appeal for refund of taxes paid under a Final Notice of Deficiency, review the appeal and issue a Final 

Determination. No penalties shall accrue after the date of filing this appeal. A Final Determination shall 

either affirm, revise or dismiss the Final Notice of Deficiency. Revisions or dismissals in favor of the 

applicant shall be accompanied with an applicable refund of excessive monies paid, if any, plus the 

interest due on such monies calculated at the rate of 12 percent annually. The issuance of a Final 

Determination by the National Tax Service, whether or not accompanied by a refund, shall not be 

construed to prohibit any person from seeking relief for damages from courts of competent jurisdiction. 

(F) Taxpayers who are successful in obtaining relief, including partial relief, in courts of competent 

jurisdiction from false allegations of national sales and use taxes owed shall be awarded by the court 

monies equal to the sum of their legal fees plus twice the amount of tax relief ordered by the court. 

Taxpayers who are unsuccessful in obtaining relief in courts of competent jurisdiction from allegations of 

national sales and use taxes owed shall be subject, at the court’s discretion, to the payment of court costs, 

of all legal fees, and, in cases where surety rather than cash bonds were posted with the National Tax 

Service, the accrued amount, as of the date of the court’s decision, of penalties and interest on taxes owed. 

(G) The National Tax Service may treat any taxes, penalties and interest shown on an unchallenged Final 

Notice of Deficiency that is more than sixty days old as a debt due the National Tax Service. The District 

Director, or a duly qualified deputy, may issue a Notice of Levy against the business goods and business 

fixtures of any seller dealing in commerce, said Notice of Levy being delivered by registered mail to the 

36



seller at the seller’s last known address or posted at the seller’s place of business. A Notice of Levy shall 

indicate: 

(1) the name of the taxpayer, 

(2) their last known address on file with the National Tax Service, 

(3) the date of the Notice of Levy, 

(4) the amount of the tax and the date on which it was due, 

(5) any penalties and interest due and the date of their accrual. 

(H) In an attempt to settle the alleged tax debt expressed in a Final Notice of Deficiency, ten days after 

the delivery or posting of a valid Notice of Levy, the District Director, or a duly qualified deputy, may file 

a certified copy of the Notice of Levy with any appropriate local Clerk’s or Recorder’s Office. 

(1) Collection of any alleged tax debt by levy may not proceed until a warrant for distraint is issued 

by a court of competant jurisdiction. A warrant of distraint may be issued only upon presentment of 

facts to create probable cause and supported by a sworn or affirmed oath. The presentment of facts 

and oath shall become part of the record against the alleged taxpayer. 

(2) Upon issuing a warrant of distraint the District Director, or a duly qualified deputy, may request 

the Attorney General or any District Attorney to commence action for recovery of taxes, penalty and 

interest due, or may issue a warrant directed to the local Sheriff or to the chief law enforcement 

officer of any political subdivision of the States or Territories of the United States, authorizing the 

Officer, as provided by law and subject to the additional limitations listed herein, to levy upon, seize 

and sell sufficient business goods and business fixtures of the seller as may be found within the 

Officer’s jurisdiction. Local Sheriffs or chief law enforcement officers shall be entitled, for the 

execution of valid warrants, to such fees as are allowed by law for similar services. 

(I) The national sales and use tax shall be a first and prior lien upon the business accounts, business 

goods, and business fixtures of any seller dealing in commerce, excepting any stock of perishable goods 

sold or for sale in the ordinary course of business, and shall take precedence, except as otherwise 

provided herein, on all such business property over other liens or claims of whatsoever kind or nature. 

(1) No notice of lien shall be filed without proper certification. Certification shall indicate and 

include: 

(a) that an Assessment / Preliminary Notice of Deficiency was properly issued, 

(b) that a hearing was held within 30 days or that a hearing was not requested, 

(c) that the District Director reviewed the facts within 90 days of the hearing, 

(d) that a Preliminary Determination was issued, 

(e) that a Final Notice of Deficiency was issued. 

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(J) The real or personal property, not used in business, of a seller dealing in commerce, shall be exempt 

from tax levies and liens against that seller if such property can be reasonably identified as not being used 

in business. 

(K) The real or personal property of an innocent third party owner who has made a bona fide lease to a 

seller dealing in commerce shall be exempt from tax levies and liens against that seller if such property 

can be reasonably identified from the lease description and that the lessee has no present or future 

ownership rights to the property listed. 

(L) The national sales and use tax for any period, including any associated interest and penalties, shall not 

be assessed, nor shall any Notice of Levy be issued, or warrant for collection issued, or suit for collection 

begin, nor any other action to collect the same be commenced more than two years after the date on which 

the tax was payable or due. 

(1) No collection action of any kind, other than suits in courts of competent jurisdiction, shall 

continue more than three years after the date on which the tax was due. 

(2) A Notice of Levy, even when valid and properly filed, is automatically invalid three years after 

the date when the taxes indicated were due. 

(3) Before the period of limitation expires, the taxpayer and the District Director, or a duly qualified 

deputy, may agree in writing to an Offer in Compromise in partial settlement of taxes due or to an 

extension of the limitation for a specified period, and that period may be subsequently similarly 

extended. 

(M) The remedies of liens and levies against personal property and of garnishment shall not apply to the 

collection of assessed national sales and use taxes, or to penalties and interest imposed thereon, nor shall 

such collection action be taken against the stockholders, other than the responsible officers, of a 

corporation nor against the partners of a partnership, other than the general partner or the responsible 

officers of the partnership. 

(N) All liabilities for the national sales and use tax plus any imposed penalties and interest are 

immediately dischargeable in an action of bankruptcy by a court of competent jurisdiction. 

Section 8. Crime Defined And Punishment Established 

(A) It is unlawful for any seller to suggest in any way, directly or indirectly, that the national sales or use 

tax imposed on any subject transaction will be assumed or absorbed by the seller, or that it will not be 

added to or included within the purchase price, or that if added to or included within the purchase price it, 

or any part of it, will be refunded. Any seller convicted within three years of the date of this offense shall 

be deemed guilty of a misdemeanor and shall be subject upon each conviction to a fine of not more than 

one thousand dollars, or a term of imprisonment of not more than six months, or both. 

(B) Any person knowingly participating in one or more sales taxable under this Act and willfully failing 

to pay or to collect and remit the tax, or collecting and willfully failing to remit the tax to the National 

Tax Service, or of participating in a contrived sale, or conspiring to evade the tax, even when the tax is 

disputed, where the cumulative amount of the tax in any consecutive twelve-month period, excluding 

interest and penalties, equals more than one hundred dollars but less than one thousand dollars, shall, if 

38



convicted within three years of the offense, be deemed guilty of a misdemeanor and shall be subject upon 

each conviction to a fine of not more than one thousand dollars, or a term of imprisonment of not more 

than six months, or both. 

(C) Any person knowingly participating in one or more sales taxable under this Act and willfully failing 

to pay or to collect and remit the tax, or collecting and willfully failing to remit the tax to the National 

Tax Service, or of participating in a contrived sale, or conspiring to evade the tax, even when the tax is 

disputed, where the cumulative amount of the tax in any consecutive twelve-month period, excluding 

interest and penalties, equals more than one thousand dollars shall, if convicted within three years of the 

offense, be deemed guilty of a felony and shall be subject upon each conviction to a fine of not more than 

five thousand dollars, or a term of imprisonment of not more than two years, or both. 

(D) Any person knowingly making fraudulent use of, or of conspiring to fraudulently use, a Certificate of 

National Sales and Use Tax Exemption, whether or not for monetary gain, shall, if convicted within three 

years of the date of this offense, be deemed guilty of a felony and shall be subject upon each conviction to 

a fine of not more than five thousand dollars, or a term of imprisonment of not more than two years, or 

both. 

Section 9. All Inconsistent Acts Repealed 

(A) All Acts or parts of Acts inconsistent with the provisions of this part are hereby repealed. 

39



Appendix A 

Part I. Banking and Monetary Reform Explanation and Details 

In a battle of knowledge between the lawyer-politicians and the public, the people fight unarmed. An elite 

group dominates through legal finesse. It holds the high ground, establishing rule with nothing more than 

technical words written on paper and a few simple principles adopted from Lex Mercatoria, nowhere 

officially recorded. Its real power emanates from control of America’s institutions, primarily those 

dealing directly with monetary and fiscal policy. Misuse of this power for its own purposes, with 

considerable encouragement from voters expecting to get something for nothing, led to the nation’s 

current economic predicament. The easiest way out of this mess requires new monetary and fiscal 

policies. Both systems desperately need renovation. 

Monetary policy controls money creation. Most of these rules have changed little since 1913 when they 

were first implemented. Despite the modern appearance of the buildings and shiny new computers of the 

nation’s financial institutions, our monetary system is antiquated. Modern computers process numbers 

faster but do not improve the system’s outdated fundamental operations. 

The proposed bill, the National Economic Stabilization and Recovery Act, increases the efficiency of the 

monetary system and immediately eliminates part of the national debt. One way or another, that $20 

trillion debt, impossible to pay, must soon be discounted. Under current economic conditions and 

systems’ rules, this requires either general depression or hyperinflation. Both methods wipe debt off the 

books; both are painful processes. NESARA proposes a third method. By changing the rules it offers an 

engineered solution to the problem rather than insisting on additional sacrifice from those who have little 

more to contribute. 

Modification of the nation’s monetary system starts with the definitions in Section 1 of Part I, Banking 

and Monetary Reform. Words often have legal definitions that differ from popular or colloquial usage. 

“Dollar” is a unit of measurement, specifically, a unit of weight equal to 371 and 1/4 grains. A price of 

ten dollars is semantically equivalent to a price of ten gallons. Gallons? Gallons of what? Practical 

applications demand an additional clarification. Individuals usually supply the answer through ignorance 

in the form of assumed knowledge. Their stock seems unlimited. 

Words build sentences. Sentences frame ideas. Ideas lawfully expressed in statutes become law. Changing 

definitions of words after the fact corrupts the law. The lawyer-politicians make effective use of this tactic 

with one exception—their attacks on the U.S. Constitution. 

In order for it to have reasonable construction the words in the Constitution must be taken at their obvious 

historical meaning. In 1824 Chief Justice Marshall wrote, “As men, whose intentions require no 

concealment, generally employ the words which most directly and aptly express the ideas they intend to 

convey, the enlightened patriots who framed our constitution, and the people who adopted it, must be 

understood to have employed words in their natural sense, and to have intended what they have said.”1 

On occasion, the lawyer-politicians, attempting to evade clear constitutional intent by changing the 

meaning of a word, encounter someone like Justice Mahion Pitney of the 1920 Supreme Court. He 

1 Opinion of Chief Justice John Marshall, Gibbons v. Ogden, 22 U.S. 1, 6 L Ed 23, p. 68 

40



declared that “Congress cannot by any definition it may adopt conclude the matter, since it cannot by 

legislation alter the Constitution, from which alone it derives its power to legislate, and within whose 

limitations alone that power can be lawfully exercised.”2 

Definitions are important. Misunderstanding the meaning of words used in the proposed bill might result 

in an incorrect interpretation of the statute’s intent when it becomes law. Furthermore, all definitions must 

conform to those used in the Constitution. Pay close attention to the specific definitions given for “bills of 

credit,” “eagle,” “interest,” “lawful,” “legal,” “legal-tender,” “money,” “payment,” “seigniorage,” 

“specie” and “tender.” All of the ideas found in NESARA are based on the simple legal definitions of a 

few dozen words. 

Section 2 of Part I lists some obvious items as likely findings of Congress. The purpose of this section is 

to state the relevant facts about the issue addressed and explain why a new law is needed. New laws 

should not be passed without serious justification because their current total volume exceeds the ability of 

any human to know, let alone comply with all of them. 

Section 3 of Part I acknowledges congressional control of the United States monetary system. This 

authority originates with the Constitution, contained in its monetary powers and disabilities 

• Article I, §8, cl. 2—The Congress shall have the Power …To borrow Money on the credit of the 

United States[.] 

• Article I, §8, cl. 5—The Congress shall have the Power …To coin Money, regulate the Value thereof, 

and of foreign Coin, and fix the Standard of Weights and Measures[.] 

• Article I, §8, cl. 6—The Congress shall have the Power …To provide for the Punishment of 

counterfeiting the Securities and current Coin of the United States[.] 

• Article I, §10, cl. 1—No State shall …coin Money; emit Bills of Credit; make any Thing but gold and 

silver Coin a Tender in Payment of Debts… 

Clearly the nation’s monetary system is under the control of Congress. 

In Section 4 of Part I Congress exercises its monetary power, directing the United States Treasury to 

produce three new kinds of currency: treasury credit-notes, standard silver coin, and standard gold coin. 

Treasury credit-notes “in sufficient quantity to replace all outstanding United States legal tender paper 

currency of every type” will become the bulk of the nation’s currency. All printing of previously 

authorized paper currency is now prohibited. Natural circulation and the resultant wear and tear will 

eventually eliminate the old paper currency, predominantly Federal Reserve Notes, except those items 

held as collectibles. Existing gold and silver certificates will not be redeemed in specie but are still usable 

under their current legal tender status. The bill authorizes but does not mandate production of new silver 

certificates and new gold certificates that are redeemable. It also provides general specifications and 

limitations for their production along with remedies for failure to meet those limitations. 

Congress further directs the Secretary of the Treasury to begin maximum production of standard United 

States gold and silver coin according to the general instructions provided. A standard design unchanged 

for thirty years and the marking of all coins produced within a decade with the same date works to limit 

an excessive exchange value for the coins as collectibles and to promote their circulation. 

2 Eisner v. Macomber, 252 U.S. 189, 64 L Ed 521 (1920) 

41



NESARA opens the public mints to unlimited coinage. Anyone may bring gold or silver bullion to these 

mints to be coined. A charge, called seigniorage, keeps them self-supporting. It raises the exchange value 

of the standard coin to a point above the exchange value of its bullion content, another way of protecting 

its circulation. In addition, seigniorage makes feasible the operation of private mints in competition with 

government mints, assuring the efficiency of both. The Secretary of the Treasury is directed to promote 

and regulate such operations. 

Notice that unlimited coinage at the national mints of privately owned bullion has the effect of monetizing 

not just U.S. owned precious metal, but the entire world supply. By honestly following this simple plan 

the United States will become the monetary capital of the world, its currency immediately acceptable at 

the published exchange-ratios anywhere on the planet. And this is accomplished at no cost to the 

government. 

The benefits of a moral monetary system extend beyond the borders of any nation. Imagine what would 

have happened if the United Nations had adopted this plan and obtained its financial support from a small 

tax on the international trade of its members. Undoubtedly, the world today would be a far different place. 

Maintaining three types of currency in simultaneous circulation requires practical solutions to two 

problems: One is nomenclature; the other is regulation of their exchange-ratios. 

The term “dollar” has been corrupted by popular use so far beyond its original constitutional meaning that 

its recovery seems improbable. Under these circumstances the most appropriate solution is to assign the 

term “dollar” or the symbol “$” without other qualifiers to designate United States Treasury credit-notes 

or its subdivisions such as clad token coins and subsidiary token coins of base alloys. In contrast, 

terminology designating standard silver coin must contain the word “silver” as a qualifier. The term 

“eagle” seems adequate to identify the new standard gold coin. Specific historical coins can be identified 

by date and description. 

To avoid the problems often encountered with fixed exchange-ratios, Congress directs the Secretary of 

the Treasury to determine and publish the exchange-ratios between the various currencies. This method, 

established as a matter of law, discharges Congress’s constitutional obligation to “regulate the Value 

thereof.” 

Treasury credit-notes enjoy a limited legal-tender status as a default medium of exchange. If parties to a 

mercantile transaction fail to specify a specific medium of exchange, such as standard silver dollars or 

eagles, the courts must assume they intended to use treasury credit-notes. Of course, as the issuing agent, 

the government must accept them in payment of all taxes and fees. 

Other provisions of this section give the new coinage a distinctive shape, useful for the visually impaired, 

and specify the method to compensate for abrasion. NESARA also repeals all existing laws authorizing 

government seizure of precious metals or prohibiting the recovery and use of the bullion content of lawful 

coin. This enables artists to use either the coin itself or its metal content in their works. It also encourages 

public enforcement of the regulation of their exchange-ratio because the coins may be melted to recover 

the intrinsically valuable bullion without penalty. 

Section 5 of Part I identifies the Federal Reserve Act of 1913 as the Act amended by this bill, using its 

original provisions for the dissolution and recovery of assets of the Federal Reserve System. In effect, this 

section transfers all rights and ownership of whatever kind that anyone may have in the Fed, everything 

42



from the dust on its chandeliers to the spiders under its foundations, to the United States Government. It 

assimilates the existing Federal Reserve System into the United States Treasury as the United States 

Treasury Reserve System and creates a new Board of Governors. The character of this new Board is 

established by specifying that twelve of its thirteen officers are ordinary citizens representing their 

districts, a design patterned after the jury system. 

To encourage only conservative actions, NESARA reduces the current wide range of sometimes 

confusing and often conflicting objectives imposed on the existing Federal Reserve System to the single 

objective of maintaining a long-term, stable exchange value for the new treasury credit-notes. Every 

action by the new Board of Governors requires an affirmative vote by nine of its thirteen officers. 

Some of the Board’s prerogatives are expanded. The existing Federal Open Market Committee of the 

Federal Reserve System is abolished, its powers and responsibilities transferred to the new Board of 

Governors. Also, a special account within the United States Treasury Reserve System called the Treasury 

Reserve Account is established, to be administered at its sole discretion. 

Section 6 of Part I renames the twelve existing private Federal Reserve Banks as Treasury Reserve 

Banks, now public entities. It establishes a requisition and accounting method for the Treasury to track the 

production and distribution of treasury credit-notes. Denominations larger than $100 are allowed, 

provided their circulation is not public. 

All financial instruments held by the twelve United States Treasury Reserve Banks shall be delivered to 

the Office of the Director of the Board of Governors of the Treasury Reserve System and exchanged for 

treasury credit-notes from the Treasury Reserve Account at an equivalent face value of one for one. These 

treasury credit-notes may then be used for the ordinary operating expenses of the Treasury Reserve 

Banks. This will effectively eliminate or keep the necessary charges for their services very low for an 

extended period. It also provides one method of slowly releasing them into general circulation, preventing 

economic shock. Once these funds have been expended, the Treasury Reserve Banks must charge a 

sufficient amount for their services to remain self-supporting. 

As the obligations of the United States are received in the Office of the Director of the Treasury Reserve 

System, they will be delivered to the Secretary of the Treasury. Appropriate action by the Secretary 

cancels them out of existence. Notice that all commercial instruments other than those of the United 

States, such as private commercial paper and the financial instruments of other nations, remain under the 

control of the Board of Governors of the Treasury Reserve System. 

The Office of Comptroller of the Currency becomes responsible for regulation of the United States 

Treasury Reserve Banks. Except for an absolute prohibition against making dispersals from accounts that 

contain no funds, they continue normal operations. Their exact status is deliberately left as an open 

question. The Comptroller of the Currency may operate them under commercial contracts or the current 

staff might become government employees. It is contemplated that, at some future time, their physical 

assets and ordinary banking functions might be sold back into the private sector. This option should be 

kept open. 

United States Treasury Reserve Banks now operate as direct agents of the Treasury. They obtain the 

standard gold and silver coin from the Treasury as it becomes available. Individuals may exchange their 

paper currency for coin at the published ratios. 

43



Section 7 of Part I compensates the former owners of the private Federal Reserve Banks for cancellation 

of their outstanding capital stock. They are paid in newly printed treasury credit-notes at the price 

previously fixed by law. Stock not redeemed in 90 days becomes worthless. 

All government obligations, both foreign and domestic, held by the nation’s commercial banks are 

exchanged for treasury credit-notes, on a dollar for dollar basis, with their district Treasury Reserve 

Banks. Ultimately, the Secretary of the Treasury cancels the U.S. obligations. The new law prohibits 

commercial banks from purchasing or holding the income-producing instruments of the United States, or 

those of other nations, effectively eliminating much of their influence on monetary policy. 

These actions amount to a direct reduction of the public debt, and at virtually no cost. To see how this is 

accomplished, follow the money’s path. The Treasury prints new money, swapping it for the 

government’s income-producing obligations held by the old Federal Reserve System. When this system is 

absorbed into the Treasury, it gets that money back, essentially paying itself for its own obligations with a 

small printing cost. Using this money again, the Treasury buys its income-producing obligations currently 

held by more than ten thousand of the nation’s banks, either as fractional reserves or for their own 

investment accounts. The Secretary of the Treasury then cancels these government obligations, 

eliminating billions of dollars of public debt. 

By limiting commercial bank reserves to treasury credit-notes, which produce no direct income, the 

national economy remains largely unaffected. Most of the exchanged treasury credit-notes rest quietly in 

bank vaults as reserves, out of the stream of commerce. Because they are not in public circulation, they do 

not bid the price of consumer goods higher. 

Swapping treasury credit-notes for the government’s income-producing obligations is remarkably fair. It 

prevents taxpayer support of the banks through double use of the same funds, first as income producers 

for the banks and then as an expansion base for the banks’ monetization of the public’s debt. From now 

on, commercial banks must earn their living through direct service to the community, not at taxpayers’ 

expense. 

Similarly, the private debt of the American people can be reduced by astronomical amounts simply by 

requiring repayment of principal on secured loans before a bank begins to earn the monetization-fee and 

by prohibiting compounded monetization-fees. These rules would only apply to financial institutions that 

make secured loans on a fractional reserve basis. Such loans are nothing more than monetization of the 

borrower’s own debt, an extension, not of bank credit, but of the national credit through the bank’s license 

to create money. 

44



Current loan equations based upon compounded interest: 

where: 

T = total amount of debt 

P = principal; equal to the original investment 

i = interest rate per interval, expressed as a decimal 

n = number of equal intervals 

where: 

R = amount of periodic payment 

L = amount of the loan 

i = interest rate per interval, expressed as a decimal 

n = number of equal payments 

( ) n 

i 

T = P 1+ 

i 

R = L 

− 

1 − 

New loan equations based upon simple monetization fee: 

b 

( ) n 

1 + i 

1+ 

Rr 

= 

1+ 

2nfm 

2n 

1 

n = 

Rr 

fm 

+ 2 

2Rr 

fm 

C f = nRr 

= 1+ 

2R 

M b = LRr 

C = nM = LC 

where: 

Rr = repayment rate, $ per $ per month 

n = number of equal payments, months 

fm = bank monetizing-fee per month, expressed as a decimal 

Cf = cost factor for the loan 

L = amount of the loan 

Mb = base monthly payment 

Cb = base cost for the loan 

b 

f 

r 

45



Applying these rules to outstanding loans immediately reduces the private debt of the American people. 

Lowering the debt-service burden associated with secured loans allows an ordinary working family a 

modern lifestyle it can afford. It also assures that the banks fulfill a very necessary “public purpose” 

which, as the Supreme Court noted in 1896, was the reason for their creation by the government. 

Banks are compensated for this midstream change in rules in several ways—by a monthly service charge 

not exceeding 25 dollars, retroactively and on future loans, and by origination fees and points on new 

loans. Discount points are limited to a maximum of 5 percent of the principal loan amount and reduced 

proportionally as the annualized rate of the monetization-fee increases. This encourages low rates. 

Under these rules, and in the absence of fraud, bank failures and taxpayer bailouts become a thing of the 

past. It will be almost impossible to suffer loss on a secured domestic loan with the principal paid up 

front. And, in contrast to the perpetual expansion of compounded interest charges, the new repayment 

equations always converge to zero under any repayment plan. Defaults occur only if the borrower fails to 

make the payments specified in the original contract or to arrange for new terms through renegotiation. 

The Office of the Comptroller of the Currency is responsible for the day-to-day regulation and normal 

operation of the nation’s commercial banks. With all regular banking operations controlled from this 

office, the Board of Governors of the Treasury Reserve System can concentrate on monetary policy. 

Several restrictions are imposed by Congress on all financial institutions operating within the jurisdiction 

of the United States. To avoid the appearance of impropriety they may not grant loans to themselves nor 

to their directors, major stockholders, officers or employees or to members of their immediate families. 

To reduce public confusion, and the opportunity for mismanagement of funds, separate accounts of record 

must be maintained for each type of currency. Converting funds between any two of the three different 

types of accounts requires the written authorization of the owner. 

All gold and silver accounts are custody accounts only, the ownership of these funds remaining vested in 

the depositor. These specie accounts earn no income because they can never be used as fractional reserves 

for credit expansion or as the basis for loans. A financial institution may even impose service charges for 

their maintenance. Checkable accounts or travelers checks on gold or silver accounts are strictly 

prohibited, blocking another avenue for fraudulent activity. 

On the positive side, gold and silver accounts help satisfy Congress’s moral and constitutional obligations 

for creating a lawful currency system. Individuals not wishing to participate in a fractional reserve money 

system have a clear alternative. If a financial institution fails, the owners of gold and silver accounts 

receive preferential treatment for recovery of their funds. Such accounts may also prove useful in 

international trade. 

This bill forces no one to use hard currency. A casual look at the figures and that impractical dream of the 

‘goldbugs’ evaporates like dew in the hot morning sun. The United States holds a trifle more than 260 

million troy ounces of gold as monetary reserves, roughly 28 percent of the world’s total, or about one 

eagle for every citizen. Selling it at $400 per ounce, above the current market price, raises only a little 

more than $100 billion. That amount pays approximately five months interest on the nation’s outstanding 

debt. 

What about silver? True, the U.S. Treasury owns more silver than gold but it is worth much less. The 

world’s total reserve base is only about 420,000 metric tons. Coin all of it into silver dollars, nearly 17.5 

46



billion of them, and sell them at $4 each, a little more than the current market price. The total, $70 billion, 

will not pay the interest charge on the national debt for four months. 

Merely hinting that the United States intended to sell all its gold and silver at market prices would drop 

their value into the cellar. Mining stocks would plummet. Gold and silver mines would close as their 

operation became unprofitable. It would be much cheaper to mine the U.S. Treasury. 

Monetizing all the nation’s gold and silver will not pay any portion of the national debt. Bank accounts in 

lawful money will be restrictive, earn no interest and may suffer the insult of maintenance charges. It is 

most unlikely that specie will return to general circulation. Much of it remained in bank vaults even while 

the nation was on various metallic standards. Facing these difficulties, why bother with a complex system 

using three types of currency? 

With a cast of characters selected and the stage set, use your imagination and let the play begin. Suppose 

that Congress instructs the Treasury to sell small-denomination, nontransferable interest-bearing gold and 

silver savings bonds to U.S. citizens through their bank specie accounts. These bonds are redeemable in 5 

to 20 years, interest paid annually, calculated in specie but paid in treasury credit-notes at the current 

exchange-ratio. Americans could exchange their paper currency for lawful money, deposit it in a specie 

bank account, then convert those funds to interest-bearing gold or silver savings bonds. 

This immediately creates a tremendous circulating market for the Treasury’s gold and silver coin, most of 

which never leaves its vaults. The sale of $50 billion in specie bonds at par removes that amount in paper 

currency from general circulation. Because they are nontransferable, the bonds never enter the stream of 

commerce and cannot replace the paper currency. Nor can they be used as bank reserves. Due to the 

expansion factor built into the fractional reserve monetary system, the nation’s available currency and 

credit drops, perhaps by $500 billion. 

At the least this move is sharply deflationary, and probably recessionary. Since the nation’s aggregate of 

currency and credit is only about $3,000 billion, the government would have to increase the money supply 

before the economy collapsed. Suppose Congress decides to accomplish this by redistributing the 

proceeds from the bond sales as restricted bank reserves, setting the restricted reserve requirement at 10 

percent. State and local governments could borrow funds for infrastructure projects from local banks 

equal to 10 times the reserve amounts, provided taxpayers agree to new taxes to repay the loans. 

Everybody wins. The federal government, using the bullion now collecting dust at the Treasury, redirects 

a significant portion of net national production toward rebuilding a crumbling America—new roads, 

bridges, and other public facilities including water supply and waste disposal plants. Bankers earn a fee 

for handling the transaction. Voters get back into the loop. Proposed projects die without local approval. 

And, because principal is repaid before the monetization-fee, low debt-service factors on long-term 

projects keep the cost down and taxes low. 

If this strategy seems vaguely familiar, it should. Jay Cooke would recognize it as the flip side of his plan 

to finance the Civil War. In this instance the government leverages its gold and silver to generate billions 

of dollars for much-needed capital improvements. Wise selection of public projects will increase national 

efficiency, ultimately lowering the nation’s debt. The financing technique employed is an adaptation of 

the Guernsey plan. It keeps local bankers and voters directly involved where it counts the most, their 

pocketbooks. 

47



Other versions of this general strategy may apply in international commerce. A foreign nation—China, 

Russia, India, South Africa—having gold and needing technological assistance and investment capital for 

infrastructure projects might find both in an American corporate partner. Suppose that the foreign gold is 

delivered to the U.S., coined and deposited in a gold account. With Congressional approval, those funds 

are converted to gold savings bonds, the proceeds being designated as restricted bank reserves for a loan 

to finance a specified project. 

Everybody wins again. The foreign partner gets an infrastructure project—a national communications 

system, power production or transmission facilities, a water or sewage treatment plant, heavy construction 

equipment, etc.—financed at a very low debt-service burden. An American corporation gets a major 

international sale, creating local jobs and reducing this nation’s trade deficit. The bank earns its fee and, 

after loan repayment, the gold is returned with interest, or perhaps recycled into a new project. 

When conventional solutions fail, consider creative alternates. Fair deals work for everybody. Foreign aid 

projects that benefit the American taxpayer while helping others make good sense. 

Section 8 of Part I imposes a progressive excise tax on the monetization-fee or interest income of all 

financial institutions or persons who make commercial loans of currency for profit. These provisions raise 

revenue for the government but also, and perhaps more important, discourage excessive debt-service 

burdens. This tax is especially appropriate for those financial institutions that use a government-issued 

license to operate a fractional reserve system. 

In Section 9 of Part I Congress creates a United States Treasury Credit-Note Exchange-Value Index. 

This index, initially set at 100, tracks the exchange value of treasury credit-notes. Congress then directs 

the Board of Governors of the Treasury Reserve to adjust the sum of the nation’s currency and credit to 

maintain that value, setting the target range between 97 and 103. These provisions eliminate the 

conflicting goals of monetary policy. 

The Board of Governors administers monetary policy through four major regulation tools: 1) by setting 

the percentage of reserves required of commercial banks; 2) by setting the national discount interest rate, 

the rate at which commercial banks may borrow funds from their district Treasury Reserve Banks; 3) by 

purchasing income-producing United States Treasury obligations in the open market; and 4) by 

impounding and extinguishing funds within the Treasury Reserve Account or by transferring funds from 

the Treasury Reserve Account to the United States Treasury. 

To curb some problems inherent in fractional reserve systems, NESARA provides for new or modified 

regulation tools. 

One of the most troubling problems is associated with the credit expansion and contraction multiplier 

factor. A 5 percent reserve requirement sets it at 20, the reciprocal of the reserve percentage expressed as 

a decimal number (1 divided by 0.05 = 20). Most of the trouble occurs during periods of monetary 

contraction, the Great Depression being a notable example. As the nation’s total stock of money falls, the 

banks, forced below their reserve requirements, call in loans. To improve their loan/reserve ratio they may 

call in loans from some of their best, most solid customers. Local bankers do not repossess the family 

farm out of malice. Heaven forbid they should ride a tractor for a living! They are compelled to act by 

banking rules they never wrote. 

48



Few people protest a large multiplier factor during monetary expansion, with the economy booming and 

money flowing freely. But on the downside, good hardworking people get hurt. Unable to pay off their 

loans, they go broke, slowing down the economy and making a bad situation worse. Engineers call this 

system nonlinear and describe it as operating with a negative stability factor. People ruined by it call the 

system an atrocity. 

A more charitable attitude blames inadequate design. One set of uniform rules applied despite condition 

or consequence explains a large part of the problem. To improve the character of fractional reserve 

systems, change the rules. 

Banks that temporarily fall below their reserve requirements, particularly when the cause is a sudden shift 

in national monetary policy, are not necessarily insolvent. Under NESARA’s rules they are not penalized 

if they make no new loans until 90 days after their reserve ratio recovers and if they do not call for 

immediate repayment of any outstanding loans that are performing within normal limits. A bank is 

declared insolvent only when its reserves fall below 50 percent. 

To improve its reserve ratio a bank may borrow funds from its district Treasury Reserve Bank at the 

national discount interest rate set by the Board of Governors. Each district Treasury Reserve Bank may 

obtain these funds from the Treasury Reserve Account, paying that account one-half of the interest 

income earned as a fee for their use. This provides a source of income to the Treasury Reserve Banks, 

possibly reducing their charges for other banking services. 

A fifty-fifty split of interest income between the Treasury Reserve Banks and the Treasury Reserve 

Account is arbitrary, there being no compelling reason for Treasury Reserve Banks to pay a fee. Other 

figures in the bill, such as the amount of excise tax imposed on monetization-fee or interest income and 

the target range for the Treasury Credit-Note Exchange-Value Index, are equally arbitrary. Congress must 

set the final numbers which should be based on studies of computer simulations of the economy. 

The Board of Governors may purchase income-producing United States Treasury obligations from the 

open market with treasury credit-notes. Their former prerogative of selling these obligations vanished 

with the requirement to transfer all they receive to the Secretary of the Treasury for cancellation. Buying 

on the open market adds treasury credit-notes to the economy, increases bank reserves and expands 

national credit through use of the multiplier factor. It also reduces the national debt because of the 

cancellation process. But, under NESARA’s new rules, the Board of Governors cannot reverse the 

process since they cannot sell what they do not have. This prohibits them from increasing the national 

debt, an option best left in the hands of an elected Congress and its authorized agent, the United States 

Treasury. 

To offset this loss, NESARA gives the Board of Governors a powerful new regulation tool. They may 

impound and extinguish funds within the Treasury Reserve Account or disburse them in one of several 

ways, effectively using the multiplier factor to contract or expand national credit. 

The Treasury Reserve Account functions as a currency reservoir, acting as a shock absorber during 

periods of rapid economic change. Part of the national sales tax collection is diverted to this account, 

making it a potent tool for fine tuning the economy. Control of these funds enables the Board of 

Governors to execute national monetary policy without the usual abrupt shifts in interest rates or in the 

reserve requirements for commercial banks. 

49



During periods of national prosperity,—a thriving economy, government revenues increasing and 

expenditures for public support programs decreasing—funds accumulating in the Treasury Reserve 

Account could be used to retire part of the national debt. Keynesian economists, those who advocated 

deficit spending in times of depression, now have the opportunity to test the second half of their theory, 

using surpluses to pay off debt in times of abundance. 

Section 10 of Part I provides a method for eliminating the unfair advantage that banks operating on a 

fractional reserve basis have over other financial institutions, such as limited membership credit unions 

serving their local communities. NESARA enables them to operate on a restricted fractional reserve basis, 

either individually or as an association, by meeting certain minimum requirements and obtaining a limited 

bank charter. Alternately, they may achieve the same objective as a partner with an existing bank. 

In Section 11 of Part I Congress authorizes new types of postal money orders conforming to the three 

types of standard currency. A distinctive color for each type helps prevent misunderstandings. Because 

postal money orders must be purchased with cash, those denominated in silver dollars or eagles are issued 

only in integer units of standard coin. 

Maximum limits are set on each postal money order purchased by type: 1,000 silver dollars, 10 eagles, 

and 1,000 treasury credit-note dollars. Regardless of type, the fee for each is one dollar. Note that the use 

of the term ‘dollar’ without other qualifiers designates a treasury credit-note or its subdivisions in clad or 

base metal coin. Except in unusual circumstances, any United States Post Office within the jurisdiction of 

the United States is required to redeem postal money orders in the designated currency within three 

working days of their submittal for collection. Examples of reasonable exceptions include “inability to 

perform” such as during catastrophic events fires — earthquakes, storms, etc. — or with post offices 

located aboard U.S. ships at sea. 

Section 12 of Part I deals with enforcement of the Act. Willful violation of its monetary and fiscal 

responsibility provisions resulting in aggregate losses exceeding 5,000 dollars in any 12-month period is a 

felony. The penalty for each conviction is a fine not exceeding 5,000 dollars, or a term of imprisonment 

of not more than 5 years, or both. Each conviction for willfully counterfeiting or circulating substandard 

silver or gold coin earns a fine not exceeding 10,000 dollars, or a term of imprisonment of not more than 

20 years, or both. Though not the death penalty imposed by the Founding Fathers in the Coinage Act of 

1792, this is definitely enough to get one’s attention. 

Other provisions of this section encourage citizen enforcement. A reward of 10 eagles is offered for 

providing information leading to the conviction of one or more individuals in willful violation of its 

provisions. The redemption by the United States Treasury on demand in specie of any new United States 

Silver Certificates or United States Eagle Certificates produced under this legislation is paramount for a 

moral monetary system. Congress therefore directs that the Treasury shall pay a penalty of 5 eagles for 

any failure in this regard. 

Section 13 of Part I simply repeals all previous legislation or any parts of previous legislation 

inconsistent with the provisions of this part. 

50



Appendix B 

Part II. National Sales and Use Tax Explanation and Details 

The most important action Congress can take to put America on the road to recovery is to replace the 

federal income tax with a uniform excise tax on consumption. Only one myth stands in the way—the 

misconception that a national retail sales tax is always regressive, that it falls hardest on those who must 

spend most of the money they earn out of necessity, not choice. Discrediting that myth destroys the 

income tax. 

Consider the fabled poor family of four. At a minimum wage of $5.15/hour, two full-time wage earners 

provide an annual income of $21,424, (2 workers x $5.15/hour x 40 hours/week x 52 weeks/year = 

$21,424). 

According to the March 1999 Current Population Survey by the U.S. Census Bureau, this annual salary 

places the family in the 2nd Quintile ($12,040 to $25,560) of income, and provides only $4,724 more than 

the $16,700 Poverty Guideline set by the U.S. Department of Health and Human Services for 1999. 

This hard-working family’s income is only 28% above the poverty level. With careful money 

management the family members squeeze by each year, living modestly day-to-day. For them real 

middle-class status is a distant dream. Yet millions of Americans earning less envy this family as does 

most of the rest of the world earning much less. 

With standard deductions, filing jointly, and standard child care credit, this family pays no federal income 

tax. 

Suppose Congress replaces the income tax with a 14% national sales and use tax; but exempts the 

necessities of life such as groceries, rents or leases of real estate, insurance, and medical items and 

services. Unlike other families earning a higher income, abolishing the federal income tax immediately 

adds no extra income to this family’s monthly income. 

Of course, this family will be affected by the new federal retail sales and use tax. If 90% of the family’s 

income is spent on necessities—nontaxable items, a reasonable figure for a poor family, the taxes actually 

paid becomes 14% of the remainder, or $299.94 ($21,424 x 10% x 14%). 

At first glance, this appears to be an annual net loss of $299.94, making a national sales tax a bad choice, 

but what about those hidden embedded income taxes and the cost of collection? 

When spending money for necessities the family pays directly for the goods and services received, and 

pays indirectly all of the hidden embedded costs of the income tax. The hidden embedded cost of the 

income tax affects all purchases. Assuming the national sales tax system is a mere 2.5% more efficient 

than the current income tax system (a conservative estimate), this family will avoid an additional $535.60 

of hidden embedded taxes (2.5% x $21,424), providing an annual net savings of $235.66 per year (– 

$299.94 + $535.6). 

As does every family and person, people near or below the poverty line, about 14% of the nation, daily 

pay income taxes and their associated collection costs hidden in the price of necessities. Eliminating these 

hidden embedded costs effectively increases everyone’s standard of living by at least 2.5%. 

51



Furthermore, replacing the current income tax with a 14% national sales and use tax provides an 

approximate 4.85% rise in true purchasing power for every additional quarter per hour earned by 

workers. For purposes of discussion, ignore for the moment the hidden embedded effects of the income 

tax. If the two wage earners of the family earn only $6.07/hour, this family starts paying a federal income 

tax. With a 14% national sales and use tax, the two wage earners in the fabled family of four need earn 

only $6.61/hour each to see the sales tax directly offset current federal income taxes and realize a rise in 

effective purchasing power. 

The hidden embedded effects of the income tax cannot be ignored. Therefore, in addition to a true rise in 

purchasing power caused by the higher wage, a minimal 2.5% rise in purchasing power is caused by only 

2.5% improved efficiency in the tax system. A higher efficiency causes an even higher rise in purchasing 

power. 

Regardless of the wage earned when the fabled family of four starts paying a federal income tax, 

converting instead to a national sales tax causes purchasing power to rise significantly. 

Remember that the primary purpose of the 1942 Victory Tax was to control consumption, not to raise 

revenue efficiently. The tax evolved into a potent tool for political power brokers. Their power rests on 

their ability to manipulate the system, to give special favors to their supporters and contributors. Thus, 

politicians have an overriding vested interest in maintaining the current system even at the cost of a 

reduced standard of living for the American people. A national sales and use tax is a moral tax because 

political lobbyists and power brokers cannot as easily manipulate the revenue collection and spending 

schemes. 

Another proposal for protecting lower income groups is with a periodic cash allotment. A payment of 

$500 per year to every man, woman and child comprising the lowest 20 percent of the nation’s income 

distribution would cost the government $26 billion annually, roughly the amount of the food stamp 

program. Under this plan a poor family of four receives cash payments of $2,000 per year. 

That $26 billion seems like a large sum until compared to an estimated cost of $100 billion just to collect 

the corporate income tax. Abolish all income taxes, pay the allotment and the nation nets a $74 billion 

reduction in hidden corporate tax collection costs. 

Increasing the efficiency of the tax collection system reduces everyone’s burden. Think of the income tax 

system as an ordinary job such as digging a ditch. Because of some silly bureaucratic rule, the first hour 

every morning is spent throwing dirt into the ditch. The rest of the day you work to remove that dirt and 

continue digging. Each day you follow the same procedure, wasting your efforts the first hour plus 

working an additional hour to recover. 

In frustration you might decide to skip work for the first two hours every day. At the end of each day the 

net gain in length of the ditch remains the same. A more ingenious plan is to report for work every day 

one hour late, avoiding the bureaucrat’s silly rule. The result is higher efficiency, digging more ditch with 

less work. 

Obviously, even old familiar things are not always what they seem. Conventional wisdom is based on 

perspective. In this light the definitions in Section 1 of Part II, National Sales and Use Tax give explicit 

legal meaning to some selected prosaic words. Notice the complexities of seemingly simple words like 

“groceries” and “sale.” 

52



Do all items of food and drink marketed for human consumption qualify as groceries? Not necessarily. If 

you select and purchase an assortment of doughnuts over the counter at a bakery or delicatessen, even if 

the facility is located within a grocery store, you pay a national sales tax. Buy similar prepackaged items 

from the shelves of a grocery store and you avoid the tax. The distinction exists in intent. When a facility 

acts as a manufacturer, selling its food or drink products for human consumption through a grocery store, 

no national sales tax is imposed. 

Is a sale always a sale—in every exchange of property for a valuable consideration? One might be 

inclined to think so until learning that some courts have held that love and affection can be a valuable 

consideration. It is not the intent of NESARA to tax noncommercial transactions even when they have the 

appearance of being a sale. Typical examples include property exchanged between family members, as 

when parents ‘sell’ the old family car to one of their children. The same idea extends in principle to the 

‘legal families’ of partnerships and corporations. In both cases the offer is never made to the public nor 

with a motive of profit. These types of transactions are not considered sales unless they are contrived or 

structured for the purpose of avoiding the tax. 

The word “coin” provides another good example of viewpoint. Though used as a noun in both Parts I and 

II of the bill, its definition changes with circumstances. The monetary considerations of Part I call for 

emphasizing its self-identifying intrinsic value and current use as a medium of exchange. Part II expands 

this definition in the time domain and deletes all self-identifying requirements. Here the definition easily 

recognizes the coins of antiquity, modern coinage, or any future coins, provided they are of metal and 

during any period were officially sanctioned by some nation as a medium of exchange. 

Section 2 of Part II lists some probable Congressional findings, several being intuitively obvious to the 

most casual observer. They boil down to a stern criticism of the nation’s so-called progressive income tax 

system. By almost any measure it is an appalling failure. Any one of its counterproductive features 

supplies ample justification for its elimination. 

One item is conspicuously absent from the list—the fact that nobody understands the eight volumes of 

fine print comprising the Internal Revenue Code, including its authors, the Congress. And it is unlikely 

that they will care to note that less than two dozen pages of simple rules replaces and outperforms their 

incomprehensible tax system. 

Section 3 of Part II abolishes the national income tax as of 12 o’clock midnight on the date the Act 

becomes law. Expect the vested interests, primarily the lawyer-politicians and tax lobbyists who derive 

power and make a living from tax law manipulation, to complain that this action is too sudden, to demand 

a transition period. They will fight a holding action, insisting on phasing out the income tax as if flogging 

you a little bit less each day is somehow better for you than just quitting. Their actual intention emulates a 

pattern set in Europe—reduce the income tax, add consumption taxes, then raise the income tax, ending 

with both. 

All income tax liabilities that were not due and payable when the Act becomes law vanish. Technically, 

millions of people owe taxes on gains they supposedly made when selling property or on deferred 

income, perhaps invested in retirement accounts. Taxes on those paper gains, gains that were largely 

imaginary because of inflation, are abolished. On the other hand, any taxes due and payable on a specific 

date before the Act becomes law are still due and payable. 

53



Section 4 of Part II places responsibility for reorganization of the Internal Revenue Service as the 

National Tax Service with the Secretary of the Treasury. Congress directs the Secretary to structure the 

National Tax Service along recognized state and territory boundaries and to create any rules, regulations 

and procedures required for efficient collection of the national sales and use tax. Districts are also 

organized according to Congressional districts, thereby providing more accountability of District 

Directors to representatives. A practical approach makes use of existing state sales tax systems where 

available and keeps paperwork to a minimum. 

Cost being relatively unimportant, this project has no detailed budget. By the time the bean counters could 

generate an accurate estimate the job will be complete. The situation is akin to having a bursting 

appendix. America needs an appendicitis operation this afternoon—discussions of costs, if any, will come 

later. Congress allocates initial funding for the project equal to actual expenditures for federal revenue 

collection in the previous year. 

During the first year after the Act becomes law, the Internal Revenue Service continues to function, 

closing the books on outstanding income tax liabilities. Any that cannot be cost-effectively collected 

within that year will be discharged by writing them off. 

This reverses the standard IRS policy that cost is never a consideration in collection efforts. The only 

purpose for spending large sums in attempts to collect small sums was public intimidation. Americans 

were annually treated to well-publicized examples of what could happen to them if they failed to pay their 

taxes voluntarily. Morality aside, the policy might have been justified if it worked. It failed, and in the 

process drove a significant portion of the economy underground. With the abolishment of the income tax 

system it goes into history’s trash can, exactly where it belongs. 

Section 5 of Part II imposes a national sales and use tax of 14 percent on the retail sale or use of all 

property exchanged in commerce within the jurisdiction of the United States. The first requirement of this 

tax is that it replaces dollar for dollar all revenue lost with the demise of the income tax. 

Congress must set the actual tax rate, 14 percent being a judicious suggestion based on computer 

simulations of the national economy. With the anticipated increase in economic productivity and tender 

hopes for prudent government, that initial rate drops. After a few years one estimate puts it as low as 7 

percent, others at around 9 percent. All estimates are established on various assumptions for many factors. 

Experts argue over the validity of their assumptions and the impacts of numerous factors in their 

economic models. Most agree on one thing—the size of a uniform tax rate generating a given amount of 

revenue depends on the volume of taxable sales. 

Exemptions are fun. Eliminating many of life’s necessities from the national tax base nullifies much of 

the argument that a sales tax is always regressive. It gives Congress opportunities to tinker with tax law, 

one of its favorite pastimes. But it also puts Congress on the horns of a dilemma—with sales volume a 

constant, every item deleted from the tax base means that it must raise the tax rate or settle for less 

revenue. Hold revenue constant and the delight of tax exemptions comes with the distress of higher tax 

rates, a very visible tax that the public pays each day of the year. 

Why not exempt everything? A radical thought but perhaps not unreasonable. Abolish all income taxes, 

forget replacing them with a national sales tax, and the nation still has an annual income of over $570 

billion from other sources. That amount covers every penny spent by the federal government in 1979 and 

leaves a $67 billion surplus. In other words, all federal income taxes now collected, an amount equal to 54 

54



percent of the annual budget, pays only the extra cost heaped on the public by Congress in the last 17 

years. Do not hold your breath in expectation. The facts merely show how far and fast the nation slipped 

downhill and the potential for improvement. 

Sales to federal, state and local government agencies, when acting in their official capacities, are not 

taxable transactions. Neither are sales of licenses, permits, passports, visas and all charges for public 

services or user fees made by these agencies. If raising additional revenue is the intent, charges for each 

item can be increased. Without competitive alternatives the public has no choice but to pay. Other types 

of sales by government agencies, such as the disposal of surpluses at an auction, are taxable unless 

excluded by further exemptions. 

Under NESARA, all sales of precious metal bullion, coins and currency are untaxed. Taxing these 

exchanges skews the monetary system by degrading the standards. Imagine going into a bank with two $5 

bills to ‘buy’ a $10 roll of quarters and being charged a national sales tax on the transaction. The same 

principle applies to exchanges involving treasury credit-notes, precious metal bullion, silver dollars, and 

eagles, and equally to trades in international currencies. Congress has a constitutional responsibility to set 

standards and regulate values but must be careful not to pollute its own efforts. 

Sales made to or by charitable organizations in the conduct of their regular activities or charitable 

functions are normally exempt from the tax. They must not be for profit or unduly competitive with sales 

made by others subject to the tax. A church engaged in charitable activities might legitimately raise funds 

to support those activities with an occasional fair or carnival, no taxes due. It cannot open an amusement 

park in competition with one across town and claim exemption because of its charitable status, even if 

every penny collected goes to its charitable efforts. The same reasoning applies to nonprofit schools. 

Government’s genuine interest in supporting such organizations does not extend to encouraging their 

unfair participation in the realm of commerce. 

Exempting several categories of life’s necessities—groceries, insurance, qualified rents or leases of real 

estate, and medical items and services—converts a regressive tax into a progressive one. Under this 

system poor people, spending most of their money for the essentials, pay little if any tax while the rich 

pay lots of tax. 

Some argue that the rich spend more money on food so they get an excessive benefit from that exemption. 

Not necessarily true. No matter how rich you are, the amount of food that you can eat is limited. Rich 

people eat out more and in fancy restaurants where they pay the tax. Even when they buy expensive 

groceries and eat at home that money is not lost to the tax system. It continues to circulate in the economy 

and is inevitably used to buy taxable items. 

One dollar taxed at 14 percent and circulated through the economy ten times provides the government 

with $1.40 in revenue. That seems strange. How can the amount of revenue exceed the taxable base? 

Simple. There are no limits on total revenues when the government constantly spends those tax dollars 

back into circulation maintaining the base. With a fixed uniform tax rate the important consideration is 

dynamic, that is, the speed at which a given volume of money circulates through taxable items. Do not be 

concerned if the government fails to tax a few transactions. This is a rigged game and it is going to win. 

Tax rates are adjusted so that the government always get its share. 

Rents or leases of real estate for periods longer than 60 days are excluded from the national sales tax for 

some of the same reasons that groceries were eliminated. Rich people own their homes. Poor people are 

55



more likely to rent or lease. The same relationship presumably exists between many small businesses and 

their larger, richer competitors. Failure to eliminate this category of taxable items discriminates against 

the poor. 

Exempting qualified medical items and services from the national sales tax benefits both rich and poor. 

An argument that the rich gain more than the poor is no reason to penalize the poor. Taxing anything 

discourages its consumption to some extent, though it affects some items more than others. If the post 

office doubles the cost of stamps few people will reduce their volume of mailings by half to break even. 

Poor people often have considerable difficulty affording adequate health care. NESARA provides two 

kinds of relief—elimination of the income tax and an exemption from the national sales tax. Without the 

income tax, the working poor have more money. Moreover, prices of medical items and services decrease 

compared with other goods and services as competition removes previously hidden costs. A sales tax 

exemption adds frosting to the cake. 

Incidental or occasional sales, when the primary motive is not profit, are not taxable transactions. The 

federal government has no interest in your yard or garage sale if you are not actively engaged in 

commerce. It does encourage recycling materials. This justifies a 50 percent tax break on retail sales of 

used tangible property—used cars or equipment, parts acquired at scrap yards, merchandise from 

secondhand stores, etc.—excluding remanufactured items sold with warranties longer than 90 days. The 

latter are treated as new items and taxed at the full rate. 

NESARA treats sales of insurance or surety bonds as necessities, exempting them from the national sales 

tax. Poor people frequently have greater needs for insurance than do the rich. Secondary sales of 

commercial investment securities in the stock and bond markets are another matter. These transactions are 

taxable. 

By taxing only 10 percent of the purchase price paid for stocks and bonds at the uniform national sales tax 

rate of 14 percent, the effective tax rate is reduced to 1.4 percent. This is a fair tax, largely paid by 

wealthy people just relieved of income and capital gains taxes. It is low enough to prevent capital flight 

from the country and high enough to raise substantial amounts of revenue. Also, this tax discourages 

market speculation, the constant moving of money to make money in the short run rather than into longterm 

productive investments. 

NESARA encourages new commercial investment because initial issues of stocks and bonds are not 

subject to the national sales tax, only trades in the secondary market. Initial investments build businesses; 

secondary trades simply swap ownership. Securities of the United States government and all its political 

subdivisions are never taxed even in the secondary market. This gives them a slight advantage over 

commercial investments, restoring some of their competitive edge lost with the abolishment of the income 

tax. Income from all investment securities, government and private alike, is now tax free. 

Meals provided by employers to employees at their places of employment at no charge or at reduced 

charges are not subject to the national sales tax. They were often considered as partial compensation for 

labor, once taxed as income, now abolished. Of course, if the employees will not eat there, maybe you 

should go somewhere else too. 

NESARA exempts the identified and segregated labor portion of written retail contracts, such as 

professional service, construction, maintenance and service industry contracts, from the national sales tax. 

56



Technical consultants, lawyers, accountants, engineers, surveyors and architects normally sell their labor. 

Taxable material costs for such things as copies of blueprints and specifications are often inconsequential 

when compared to the total charge. When these services are supplied to industry, the labor costs pass 

through into the price of the final product. Taxing that product effectively taxes the original labor. Taxing 

both the service and the final product amounts to double taxation. 

This exemption could be applied to certain categories of personal maintenance and repair bills with large 

labor components that can be easily identified and segregated—for instance, having your carpet cleaned 

or taking your car to a shop for repair. You pay the tax on materials but not on direct labor. Rent a 

limousine and pay the tax on the rental but not on the driver’s labor identified and billed separately. Buy 

an airline ticket; pay the tax. The pilot’s labor can be identified but not segregated because total ticket 

sales are unpredictable. What if you rent a taxi? Pay the full tax—no written contract. Decisions are not 

difficult if you know and follow the rules. In these cases the objective is simply to give the taxpaying 

public a break on designated expenditures, not to avoid double taxation. 

Labor is property. When sold directly into commerce at retail it is a legitimate subject of sales taxation. 

Many services have high direct labor components—beauty salons, barber shops, dance instruction, dry 

cleaners, pet grooming, and tattooing just to name a few—all subject to the full tax. In the coming battle 

over exemptions, direct retail labor exclusions will likely be an early casualty. Fortunately, as the taxable 

base increases, Congress can cut the uniform tax rate and still raise the same amount of revenue. Either 

way the public wins. 

Real estate sales are taxable but credit is allowed for taxes paid on previous retail transactions or for taxes 

that would have been paid had NESARA been in force. A home purchased for $100,000 several years ago 

and sold for $150,000 after NESARA becomes law has a $50,000 taxable base. If it sold for less than 

$100,000 no national sales tax would be due. For purposes of establishing an initial taxable base, 

transactions in progress when the Act becomes law may be considered as completed. 

Under NESARA, new real estate developments suddenly become more expensive, older properties more 

valuable. This inevitably slows the mad dash to abandon existing property. A new $200,000 suburban 

home carries a $28,000 national sales tax burden. Many people could achieve the same increase in 

standard of living, spend less money and avoid most of these taxes by playing This Old House with an 

older property. The net effect revitalizes inner cities and older neighborhoods at little or no cost to the 

government. In fact, federal, state and local governments all collect revenue from these activities while 

avoiding the expense of supporting new expansion projects. Taxpayers win by spending less, avoiding 

some sales tax, but also with lower property taxes due to more efficient use of the existing infrastructure. 

NESARA continues the longstanding government policy of exempting from sales taxes qualified sales of 

printed periodical materials such as newspapers, magazines, news letters, directories and sales catalogs. 

To qualify, they must be nonprofit or contribute in some way to raising revenue. 

Section 6 of Part II attaches the liability for payment of the national sales and use tax to every purchaser 

and for its collection and remittance to every seller. The mere act of initiating a taxable sale in commerce 

within the jurisdiction of the United States makes one an agent for the National Tax Service. There are no 

forms to fill out or sign, no coupons to clip or box tops to send in. Getting into this game is ridiculously 

easy. 

57



To get out, remit the tax due in full at any authorized federal depository on or before the tenth day of the 

month following the month in which the taxable sale was made and do not initiate any more taxable sales. 

Keep the receipt. That piece of paperwork is all that is necessary to prove the seller’s liability was 

discharged. The same holds true for the purchaser’s receipt from the seller. 

Obviously, the tax bureaucrats will insist on standard forms and taxpayer identification numbers. But 

these items are only for the convenience of maintaining auditable records. They have nothing at all to do 

with establishing or discharging one’s liability under the law. The burden of proving that liability falls on 

the National Tax Service. 

Three elements prove a government tax case—a taxable sale occurred; it was within the government’s 

jurisdiction; and you participated. The government need only establish liability, avoiding any requirement 

to prove a negative, that is, to produce a witness that will swear he saw you not pay or remit the tax. You 

evade the charge by defeating any element in the government’s case. Prove that the sale was exempt from 

the tax or that it was not within the government’s jurisdiction or that you were neither a seller nor a 

purchaser in the transaction. Failing that, you had better have a receipt. 

Governments take few chances on collecting their money. Taxes on credit sales of moveable property are 

payable in full at the time of the sale. Taxes on immovable property paid for in installments are due as the 

seller receives each installment. If a seller disposes of an account receivable, the balance of the tax is 

immediately due. 

There are no limits to the number of times a particular article may be subject to the national sales or use 

tax if it returns to the stream of commerce. Each time the purchaser must pay and the seller must collect 

and remit the tax unless the sale is exempt. But taxes are collected at the retail, end or final transaction 

and not from wholesalers, or from intermediate sales of items directly used for or incorporated into the 

manufacture of a product to be ultimately sold at retail. Maintenance tools and office supplies purchased 

by a chemical manufacturer are taxable even if bought from a recognized wholesale dealer. Pipe, valves, 

pumps, catalyst and solvents directly used in its processes to make chemicals are exempt. Electric power 

to its office buildings or to run its pumps is taxable but power used directly in its industrial processes, 

such as electroplating and metals refining, is exempt. 

Should a dispute occur between the purchaser and seller about whether any particular sale is exempt from 

the tax, the purchaser must pay it. The law provides ways to challenge that collection and, if successful, to 

get the money back plus interest. Excess taxes inadvertently collected must be remitted to the National 

Tax Service when not refundable. 

NESARA abolishes the federal income tax and along with it tax policies that stimulated contributions to 

charitable organizations. It restores some of that loss by issuing Credit Certificates applicable to national 

sales and use tax liabilities for donations to qualified organizations. To obtain the certificates, worth 10 

percent of all donations valued at $250 or more, the organization must be recognized and approved by the 

National Tax Service. It must also apply for each Credit Certificate in the donor’s name and certify the 

contribution. The Credit Certificates can be sold in commerce and will be accepted by the government for 

tax payments at full face value. 

Summary documentation, also called returns or reports, of the seller’s monthly tax remittances may be 

voluntarily submitted to the National Tax Service. If timely, meaning within five working days after the 

tax due date, the seller may deduct 1 percent of their tax deposit to offset expenses for collection and 

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keeping records. If everyone files, sellers will divide $6 billion annually. What at first seems like a lot of 

money comes to only $600 per year when split equally among 10 million sellers. Of course the big 

companies get most of it but they also do most of the work. 

Failure to make tax deposits within the ten-day designated period can be costly. Penalties for late deposits 

are set at 2.5 percent per month and continue to accumulate each month for a maximum of six months or 

15 percent. In addition, interest charges are added at the rate of 1 percent per month without an upper 

limit. Expect the government’s accountants to compound those interest charges. They really want tax 

money deposited on time. This tax system provides little enough forgiveness except for inadvertent 

clerical errors, which are subject to interest but not penalty charges, and unusual hardship circumstances. 

In the latter case, penalty or interest charges or any portion of either may be waived by the National Tax 

Service or by Executive Order of the President of the United States. 

Sellers who go out of business must file a report with the National Tax Service within thirty days. Anyone 

acquiring the business or its stock of goods becomes liable for taxes due and not remitted unless the buyer 

has a receipt showing that the taxes were paid to the seller. By continuing in business new owners become 

liable for the collection and remittance of taxes on future sales. 

Qualified and approved purchasers or sellers may apply for and obtain Certificates of National Sales and 

Use Tax Exemption from the National Tax Service. These certificates, valid for 12 months, are identified 

by serial number. Their use is voluntary—one can never be penalized for participating in an exempt 

transaction—but desirable because they simplify nontaxable commerce. 

Revenuers appreciate Exemption Certificates because they make tracking nontaxable sales easier. When 

they are used in commerce, the seller becomes liable for maintaining sales records for two years from the 

date of the sale. To encourage their use and the reporting of exempt sales, the National Tax Service offers 

Credit Certificates applicable to tax liabilities equal to 0.15 percent of the total amount of exempt sales 

timely reported. This offer excludes sales made to the federal government; presumably records of these 

sales are already available to the National Tax Service. 

Every month 15 percent of the national sales tax collected is deposited in the Treasury Reserve Account. 

These funds may not be used by the government without authorization of the Board of Governors of the 

Treasury Reserve System. The Treasury Reserve Account joins the Siamese twins of fiscal and monetary 

policy at the hip. They live in Washington, D.C., in a glass house, largely ignored during periods of good 

behavior while a thriving nation runs smoothly. But family squabbles upset the neighbors who are sure to 

notice and complain. Continued disruptions tempt them to become personally involved, a situation 

everyone finds distasteful. 

Section 7 of Part II addresses occasions of negligence or refusal to pay, collect or remit the national sales 

and use tax as required by law. Conflicts will arise but should be minimal. Sellers have little reason not to 

collect the tax: A lawful statute, clearly worded and easily understood, requires that they collect it; 

Uniform taxes do not unduly affect their competitive position; They are not the ones paying the tax; and 

the government compensates them, at least in part, for obeying the law. Purchasers refusing to pay the tax 

are unlikely to obtain goods and services from sellers. No sale, no problem with the law. 

Simple procedures handle the difficulties that do occur. Each step taken by the National Tax Service is 

explicitly marked by the title of the notification document: Assessment / Preliminary Notice of 

Deficiency, Preliminary Determination, Final Notice of Deficiency, Final Determination, and Notice of 

59



Levy. One or more remedies are available at every stage for an alleged delinquent taxpayer to challenge 

the government’s assertion. 

Upon receiving either a Final Notice of Deficiency or a Final Determination, one may bypass the National 

Tax Service, placing the argument before a court of competent jurisdiction. The stakes get higher. Win, 

even partially, and the government must pay your legal fees plus twice the amount of tax relief ordered by 

the court. Lose and the court may order you to pay its costs and all legal fees in addition to the tax, 

penalties and interest. 

A Notice of Levy cannot be issued more than two years after the date on which a tax was payable or due 

and it automatically expires three years after the tax due date. During that period the National Tax Service 

may agree to an Offer in Compromise in partial settlement of taxes due or by mutual agreement extend 

the limitation period in hopes that the taxpayer might acquire the money and pay the debt. 

To avoid the many problems associated with collections under the current income tax system, NESARA 

clearly defines that a warrant of distraint be issued before continuing with any seizure. Additionally, 

because the national sales and use tax is collected only in activities of commerce, real and personal 

property is exempt from seizure and collections. Innocent third party owners of property are also 

protected, eliminating some of the repulsion with current asset forfeiture laws. 

The government prefers to obtain something for taxes due rather than nothing. It is one thing to drill for 

oil, quite a different matter when you know it will be a duster. Revenuers cannot use the remedies of 

garnishment against a delinquent taxpayer while the taxpayer can declare bankruptcy any time. Better for 

everyone to make the best of a bad situation, reach a compromise settlement if possible and move on. 

The provisions of Section 8 of Part II define four federal tax crimes and specify the punishment for 

convicted offenders. A seller who misrepresents or hides the national sales tax attempts to gain unfair 

competitive advantage or to defeat its visibility, a misdemeanor. Knowingly participating in a taxable 

transaction and willfully evading responsibility to pay, collect or remit the tax may be a misdemeanor or a 

felony depending on the amount of money involved. If the amount is over $100 but less than $1,000, the 

crime is a misdemeanor punishable by a fine of not more than $1,000 or a term of imprisonment of not 

more than six months, or both. For amounts over $1,000 the crime is a felony punishable by a fine of not 

more than $5,000 or a term of imprisonment of not more than two years, or both. Making or conspiring to 

make fraudulent use of a Certificate of National Sales and Use Tax Exemption is a felony. Conviction 

may subject you to either a fine of not more than $5,000 or a term of imprisonment of not more than two 

years, or both. 

Rudimentary procedures are more than sufficient to enforce the federal sales and use tax laws. Simple, 

understandable tax law invites public participation. People know what goes on and some will tell. Sting 

operations by revenuers will be almost as easy a handing out traffic tickets. To catch the bad guys they 

need only make a purchase in a taxable sale from a careless or imprudent seller trying to beat the system. 

Anyone smart enough to contemplate evading the tax or defrauding the government is smart enough to 

recognize that the risk exceeds the potential gain. 

Section 9 of Part II simply repeals all previous legislation or any parts of previous legislation 

inconsistent with the provisions of this part. 

60



Appendix C 

Imagine Legislation That… 

Terminates or Drastically Reduces Mortgage Debt 

The proposed National Economic Stabilization and Recovery Act, known as NESARA, is based on a new 

theory of money, its fundamental tenet being that all currencies are debt instruments, including gold and 

silver coin with substantial intrinsic value. Explicitly identifying the characteristics of currency clarified 

the process of its creation by commercial lenders. 

Using this information, NESARA amends the Federal Reserve Act of 1913 (as amended) to modify the 

nation’s monetary system. The effects of these modifications are dramatic: 

1. The national economy is stabilized through the use of new control mechanisms. 

2. Several revisions to current commercial lending rules and regulations eliminate massive amounts of 

public and private debt. 

3. Under NESARA, compound interest on secured loans made by commercial lenders on a fractional 

reserve basis is eliminated, being replaced by a monetization fee. Commercial lenders must credit all 

loan repayments in excess of their regulated service charges to the principal loan amount, collecting 

the entire principal before they can collect their monetization fee. 

Because the new rules apply to all existing secured loans made by commercial lenders operating on a 

fractional reserve basis, outstanding balances must be recalculated. In every case, the outstanding balance 

will be reduced and in many cases totally eliminated. 

Example: The recalculated outstanding balance will be zero for someone who has made 17 years of 

payments against a 30 year home mortgage loan at 8.5% interest. The lender will return the mortgage 

marked paid in full to the borrower saving 13 years of loan payments. 

Promotes Universal Home Ownership 

NESARA replaces compounded interest on secured loans made on a fractional reserve basis with a simple 

monetization fee, thus making home ownership much more affordable. 

Replacing compound interest with a monetization fee is fair and equitable to all parties since borrowers 

pay less and lenders still receive a sizable stipend for their efforts. Unlike compound interest, which is 

calculated on the unpaid balance of a loan, NESARA’s monetization fee applies to the repaid principal of 

the loan, all principal being repaid before the fee is due. 

For example, under current banking practices and laws, a $100,000 loan at 7.9% interest repaid over 30 

years would cost the borrower a total of $261,649.95. The interest fee for that loan amounts to 

$161,649.95. 

61



With a straightforward monetization fee replacing compound interest, that same 30-year loan costs the 

borrower $178,791.49 (includes a monthly service fee of $25). Under NESARA, the monetization fee for 

the loan is $78,791.49. 

Furthermore, the monthly payment under the current banking system (excluding taxes and insurance) 

would be $726.81, whereas under NESARA that monthly payment would be $496.64. 

These numbers demonstrate how the new equations benefit borrowers. However, the new equations also 

benefit lenders. NESARA requires principal to be repaid before the monetization fee, greatly reducing 

risk for lenders. With principal repaid first, lenders free their reserves faster, thus providing more 

opportunities to loan money on a fractional reserve basis. Therefore, rather than making one loan every 

thirty years, lenders can make three loans every thirty years, increasing their profits and, incidentally, 

provide great service to their communities by increasing total home ownership. A win-win situation for 

all. 

Replacing compound interest with a straightforward monetization fee provides tremendous stability to the 

lending business. The buyer gains equity faster and at much lower cost while the lender makes higher 

profits at much lower risk. Reducing risk provides lenders with more incentive to loan, thus creating more 

opportunities for borrowers to own their own home. 

With NESARA’s new bank loan equations, home ownership suddenly becomes more affordable to all, 

encouraging universal home ownership. 

NESARA also changes the rules for home sales. Under NESARA, all current taxes on income are 

replaced with a national retail sales tax. 

After NESARA becomes law, a sales tax on real estate sales will be due only if the cost basis for the 

property increases. During the transition, the sales tax basis of all real estate will be the previous purchase 

price of the property. 

For example, the sales tax basis for a new $100,000 home will be $100,000. At 14%, the sales tax would 

be $14,000. If that same $100,000 home later sells again for $150,000, the subsequent sales tax basis 

would be $50,000 and at 14% the sales tax would be $7,000. 

If an existing home was purchased years ago for $110,000 and now sells for $120,000, the sales tax 

would be 14% of $10,000, or $1,400. If the home sold for $110,000, no sales tax would be due. Under 

these rules, the new sales tax on consumption discourages the runaway effects of continually rising 

property prices, makes existing homes much more desirable, and slows the mad dash to abandon existing 

property. 

What about inflation? NESARA is designed to end currency inflation. However, there will be an initial 

surge of home sales during the transition period as NESARA moves from bill to law. This action will 

superficially raise home prices simply because of supply and demand as people hurry to avoid the new 

sales tax. 

After NESARA becomes law, existing homes will probably sell for a little more than actual value, simply 

because the sales tax bite will be less on them than that for a new home of equal value. Initially this will 

encourage sales of existing homes over new homes and sellers will take advantage by increasing their 

62



prices. Buyers also will be willing to pay the slightly inflated prices in order to avoid the larger sales tax 

bite on new homes of the same relative value. 

In the end, however, once the effects of currency inflation are eliminated, real estate prices will shake out 

and settle down. Instead of appraisers having to always compensate for currency inflation, appraisals will 

reflect actual “replacement” value. Real estate appraisals suddenly have real meaning, particularly on 

multi-million dollar commercial or industrial property. 

As a bonus, because real estate prices finally stabilize, property owners can finally say good-bye to the 

effects of property taxes rising due to acquisition values and currency inflation. With price stabilization, 

the local costs of continual appraisals also drops, reducing overhead at the local government level, thus 

further reducing property taxes. 

Encouraging universal home ownership means NESARA discourages renting. As home prices fall and 

stabilize, landlords will be forced to respond to market pressures and lower rental fees. However, as home 

ownership becomes less expensive than renting, tenants will leave the lease behind in favor of ownership. 

For example, suppose you rent an apartment for $625/month. After ten years you have paid $75,000 with 

“nothing” to show for those payments. Let’s say another landlord down the street converts apartments to 

condos and sells each condo for $75,000. Under NESARA, with a 15-year payment schedule at 4.9%, the 

total cost will be $100,935.88 (includes a monthly service fee of $25) with monthly payments of $560.75. 

You save more than $64 per month and build equity at the same time. You could spend that $64 outfitting 

your new home. Of course, you also could apply that $64 toward your loan, reducing your total payments 

by almost three years. 

Let’s say after ten years you decide to sell the condo for $75,000. No sales tax is due and you’ve paid the 

lender almost all of the original principal. You roll over the original loan (you still owe some principal 

plus the monetization fee, a total of $32,145.29) and buy a nice $125,000 ranch home in the suburbs, 

using the $75,000 received from the sale of your condo as down payment and borrowing additional 

principal of $50,000. If the seller of the ranch home originally paid $125,000, no sales tax is due. At 4.9% 

and a new 15-year payment schedule on the $82,145.29 loan, your payments will be $611.80. You are 

still paying less than your original monthly rent and have quite a bit of equity too! 

By the way, why the low monetization fee (interest rate) in this example? NESARA imposes an excise tax 

of 10% on monetization fees between 5% and 12%, and an excise tax of 20% on fees higher than 12%. 

This is a fair tax because banks do not really loan money—they have been granted a special government 

license to create money, that is, to monetize debt. As such, banks perform a public service and the excise 

tax promotes that purpose. Therefore NESARA greatly encourages home ownership merely by promoting 

lower monetization fees! 

With many people owning homes instead of renting, what will smart apartment building owners do? They 

cannot reduce rent by an absurd amount. They can convert the building into condos and sell at a profit 

further encouraging home ownership throughout the land. Everyone wins! 

63



Restores High-Paying Productive Jobs 

In traditional manufacturing industries, economists have long recognized a direct relationship between 

business capital investment and wages. That is, more capital investment per worker increases worker 

productivity and drives labor rates higher. 

American industry, searching for higher profits through lower costs, shifted domestic investment and 

production to foreign lands where labor costs are much lower. This shift created a double jinx on formerly 

high-paying secure jobs in our once relatively stable industrial environment. That is, America suffers 

from less local investment coupled with more local unemployment. 

NESARA counters these effects in several ways: 

1. NESARA stimulates the national economy through debt reduction. This reduction of debt creates 

more disposable income and immediately increases the consumption of consumer goods which 

provides additional incentive for their production. 

2. Reduces the debt burden for previous domestic capital investment and lowers the cost for future 

domestic capital investment, thus stimulating expansion of domestic production facilities. 

3. The hidden embedded domestic production costs of an inefficient income tax system are eliminated, 

lowering the cost of domestic items. Nationally, the revenue is replaced dollar for dollar by a national 

sales tax. The combined effects of lower domestic production costs and the additional cost of a sales 

tax on imported items eliminates much of the free ride previously enjoyed by imported items, thus 

encouraging domestic production instead of foreign. 

Even though the exact magnitude of these projected outcomes are unpredictable, all proposed changes in 

NESARA are focused in the right direction to restore high-paying jobs, a statement typically untenable 

with many of the bills passed by Congress. 

Does the following statement sound familiar? 

Increases Benefits to Senior Citizens 

“The Social Security Administration (SSA) estimates that in 30 years it will only collect enough in taxes 

to pay about 75 percent of the benefits it will be liable to pay.” 

Scary, don’t you think? 

Does this mean that YOU will be receiving LESS than what Congress led you to believe? Will you have 

to continue working for a roof over your head or just to have something to eat? And what about your 

medical costs, which are certain to increase? 

Review that Social Security Administration statement again—closely. The SSA is talking about a 

potential problem 30 years from now! If you are just over-the-hill at thirty-something, collecting future 

benefits you are paying dearly for today may be of concern to you. But if you are sixty-something or 

seventy-something and trying to survive on meager Social Security benefits, you are much more likely to 

be concerned about next week than 30 years from now! 

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What then do you suppose all the media fuss is about? Perhaps the politicians are crying “WOLF!” 

attempting to frighten Seniors to gain personal political advantage or to drum up support for some pet 

project such as “privatizing” Social Security for Wall Street’s benefit. 

Well, if the politicians are looking for a project to support, a good one is available. A proposed Bill, The 

National Economic Stabilization and Recovery Act, called NESARA, promises to double the average 

standard of living for all Americans, including all Seniors, in only 20 years, 10 years before the projected 

potential problem. 

The argument is not who should receive what or when. These types of arguments clearly create “class 

wars.” Such fighting among the people is unnecessary. Whether you are a person receiving benefits now 

or thirty years from now should not be the issue. 

After NESARA passes, those who do not expect to draw benefits for another thirty years will have the 

resources to immediately help themselves and, at the same time, America gains the resources to increase 

benefits for those Seniors who need help now. 

One thing is for sure—the politicians will not be talking about providing only 75% of what was promised 

and paid for in advance! 

Eliminates Federal Income Taxes 

The proposed National Economic Stabilization and Recovery Act, known as NESARA, amends the 

Internal Revenue Code of 1939 (as amended), to eliminate all federal taxes based on income: personal, 

corporate, gift and capital gains. 

Under this new plan, volumes of complex tax code are replaced with a few pages of simple rules creating 

a national sales and use tax, on specified retail sales and changing the Internal Revenue Service, IRS, into 

the National Tax Service, NTS, to administer the new revenue system. 

Exemptions from the federal sales tax for the necessities of life make the tax a progressive tax, a 

characteristic often claimed for the federal income tax, but which, in reality, never existed. 

NESARA’s major goals are stated simply: 

1. To increase the efficiency of the federal revenue collection system through the elimination of billions 

of hours of nonproductive labor. 

2. To shift the largely hidden (regressive) tax burden on production to very visible taxes on 

consumption, revealing to the people the true cost of government. 

3. To eliminate constant Congressional temptation to tinker with income tax legislation for social 

manipulation and to maintain and enhance federal political power. 

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Restores Financial Privacy 

The current income tax invades and violates America’s privacy like no other legislation. Any person with 

access can learn anything and everything about you. The entire income tax system is nothing but a large 

roll of toilet paper stuck to the bottom of your shoe. The ultimate paper trail. 

How much money did you earn? How many children do you have? What do you do for a living? For 

whom do you work? How much did you earn in interest and dividends? How many bank accounts do 

have? What stocks do you own? Were you employed for the entire year? Were you injured for part of the 

year? Who provides your health insurance? Are you married? Single? Divorced? Widowed? Are you 

blind? A veteran? Do both parents work? 

Parents cannot obtain deductions for newborns without receiving a government number. That child is 

marked and tracked for the remainder of his or her life. 

Laws require every penny that can possibly be traced be recorded for the purposes of monitoring a 

person’s income stream. 

Americans cannot even die in peace because the IRS waits at the door like the grim reaper to collect its 

alleged due. 

The Constitution protects each citizen’s right to arbitrary searches and seizures. Yet, the entire income tax 

system permeates the lives of Americans like a virus from a horror film. 

Enough!!! 

The destruction of privacy is the destruction of freedom. 

The National Economic Stabilization and Recovery Act, NESARA, changes this picture. 

NESARA alters America’s fiscal policy, replacing the income tax with a national sales tax. 

The tax is paid just like many state sales taxes. The tax is paid at the cash register. Other than the sales 

receipt, there is no paper trail. America’s privacy is restored. 

Enables Single Parents to Support Their Families 

Many single parents find themselves strapped financially. Many live paycheck to paycheck, with little or 

no expectation of ever getting ahead. Such subsistence is not enjoying the fruits of one’s labor, but simply 

existing. The National Economic Stabilization and Recovery Act, NESARA, changes this picture. 

NESARA alters America’s fiscal policy by replacing the income tax with a national sales tax. 

Under the current income tax system, many low-income single parents pay little or no income tax, so why 

should single parents be interested in replacing the income tax with a national sales tax? Simply because 

NESARA is designed to eliminate the hidden costs of the income tax and to double the standard of living 

for everyone within one generation. 

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At a minimum wage of $5.15/hour, a single parent wage earner provides for her or his family an annual 

income of $10,712, ($5.15/hour x 40 hours/week x 52 weeks/year = $10,712). 

According to the March 1999 Current Population Survey by the U.S. Census Bureau, this annual salary 

places the family below the poverty level, providing $3,168 less than the $13,880 Poverty Guideline set 

by the U.S. Department of Health and Human Services for 1999. 

The family members squeeze by each year, subsisting day-to-day. For them real middle-class status is 

beyond a distant dream. 

With standard deductions and standard child care credit, this family pays no federal income tax. 

Suppose Congress replaces the income tax with a 14% national sales and use tax; but exempts the 

necessities of life such as groceries, rents or leases of real estate, insurance, and medical items and 

services. Unlike other families earning a higher income, abolishing the federal income tax adds nothing to 

this family’s monthly income immediately. 

Of course, this family will be immediately affected by the new federal retail sales and use tax. If 90% of 

the family’s income is spent on necessities—nontaxable items, a reasonable figure for a poor family, the 

annual taxes actually paid becomes 14% of the remainder, or $149.97 ($10,712 x 10% x 14%). 

At first glance, this appears to be an annual net loss for this family of $149.97, making a national sales tax 

a bad choice. But what about those hidden embedded income taxes and the cost of collection? 

When spending money for necessities the family pays directly for the goods and services received, and 

pays indirectly all of the embedded costs of the income tax. The hidden embedded cost of the income tax 

affects all purchases. Assuming the national sales tax system is a mere 2.5% more efficient than the 

current income tax system (a conservative estimate), this family will avoid an additional $267.80 of 

hidden embedded taxes (2.5% x $10,712), providing an annual net savings of $117.83 per year (–$149.97 

+ $267.80). 

As does every family and person, people near or below the poverty line, about 14% of the nation, daily 

pay income taxes and their associated collection costs hidden in the price of necessities. Eliminating these 

hidden embedded costs effectively increases everyone’s standard of living by at least 2.5%. 

Furthermore, replacing the current income tax with a 14% national sales and use tax provides an 

approximate 4.85% rise in true purchasing power for every additional quarter per hour earned by workers. 

With two children and child care costs of $5,000 per year this single parent wage earner starts paying a 

federal income tax with an hourly wage of $10.58/hour. At that wage the single parent would pay an 

income tax of only $6.96. At the same wage the single parent would directly pay $308.09 annually if a 

14% sales tax was imposed. However, because of the improved efficiency of the new sales tax system, 

and the elimination of hidden embedded income taxes, this family would see a net annual gain of 

$1,353.03! 

The hidden effects of the income tax cannot be ignored. Therefore, in addition to a true rise in purchasing 

power caused by the higher wage, a 2.5% increase in the efficiency of the tax system increases purchasing 

power by that same percentage on the total money earned. 

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Regardless of the wage earned, converting to a national sales tax causes an immediate and significant 

increase in everyone’s purchasing power. 

Restores Inner Cities as Vital Economic Areas 

Shifting from a policy of taxing production to taxing consumption suddenly makes the use of existing 

resources more efficient. By taxing what is consumed, people suddenly slow their consumption rate and 

begin to treasure the old rather than the new. 

Under NESARA, all real estate sales are subject to a new national sales and use tax. The basis for existing 

property will be the last sale price, for new structures the basis will be zero. Therefore new real estate 

developments suddenly become more expensive, older properties more valuable. This action inevitably 

slows the mad dash to abandon existing property. 

At 14%, a new $200,000 suburban home carries a $28,000 national sales tax burden. Many people could 

achieve the same increase in standard of living, spend less money and avoid most of these taxes by 

playing This Old House with an older property. 

With the new banking equations NESARA provides, the cost of borrowing money to purchase older 

homes drops dramatically. 

With no income taxes, consumers are provided more disposable income, and combined with a hope to be 

debt free and own a home, older properties become more attractive. 

The net effect revitalizes inner cities and older neighborhoods at little or no cost to the government. In 

fact, federal, state and local governments all collect revenue from these activities while avoiding the 

expense of supporting new expansion projects. Instead of local governments having to provide 

“brownfield” legislation, local governments can let citizens do the rebuilding. 

Taxpayers win by spending less, avoiding some sales tax, but also with lower property taxes due to more 

efficient use of the existing infrastructure. 

Revitalizing the inner city, at little or no expense by taxpayers, channels more private investment funds 

back to the older properties. 

Businesses too will be once again attracted to the inner city as property values stabilize and business 

expansion becomes less expensive using older property. Relocating businesses to the inner city creates 

complete neighborhoods. As businesses spend less on their own infrastructure, and production costs 

decrease by eliminating the costs of the income tax, the door is opened for businesses to begin offering 

higher wages. Higher wages motivate people to stay located in the neighborhood. 

As the inner city revitalizes, those areas once again become communities, where people take pride in their 

neighborhood. Restoring pride reduces stress. Building a community, where both homeowners and 

business relocate, reduces transportation and commuting costs, and pollution. 

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Benefits Americans with an Unprecedented Economic Boom 

The exact amount of public and private debt to be eliminated by NESARA is unknown. Estimates depend 

upon the assumptions of those making them, but numbers in the range of one trillion dollars are 

reasonable. 

The one sure expectation in this scenario: Americans suddenly free of massive amounts of debt will 

immediately go on a spending spree. Prices will naturally rise with the higher consumption of consumer 

goods, even in the face of a 14% National Sales Tax, and will reach epic proportions. Those higher prices, 

largely due to demand rather than an increase in the available quantity of money, encourage the 

production of more consumer goods and services. 

With full implementation of NESARA, all Americans enjoy an unprecedented economic boom, the 

economy expanding at a long term annual rate in excess of 5% and perhaps with short term growth surges 

at better than 8.5%. 

Unlike all previous expansions, monetary policy regulators need not kill this expansion with higher 

interest rates to fight inflation. NESARA provides regulators with powerful new tools to control the 

quantity of money in circulation. Properly using these new tools and the inherent self-regulation built into 

the new monetary system will automatically promote excellent economic stability. 

Increased production and competition in world markets along with the increased efficiency of the new 

revenue system will soon drive prices back down. Within about one year, elimination of the hidden costs 

in the old income tax system will put additional downward pressure on prices. 

Thanks to NESARA, all Americans experience a higher standard of living, the double beneficiaries of 

reduced debt servitude and increased consumption of consumer goods. 

Provides 500 Billion Dollars for Infrastructure Projects 

NESARA creates a new national monetary system, within the limits established by the Constitution, 

consisting of three types of currency: silver coin, gold coin and treasury credit-notes. 

New banking regulations, specifying how accounts in each of the currencies are to be handled, opens the 

door for some creative infrastructure project financing at the local level. 

Suppose Congress instructs the Treasury to sell small-denomination, nontransferable interest-bearing gold 

and silver savings bonds to U.S. citizens through their bank specie accounts. These bonds are redeemable 

in 5 to 20 years, interest paid annually, calculated in specie but paid in treasury credit-notes at the current 

exchange-ratio. Americans could exchange their paper currency for lawful money, deposit the coin in a 

specie bank account, then convert those funds to interest-bearing gold or silver savings bonds. 

This immediately creates a tremendous circulating market for the Treasury’s gold and silver coin, most of 

which never leaves the vaults. The sale of $50 billion in specie bonds at par removes that amount in paper 

currency from general circulation. Under the new banking rules, the bonds are nontransferable, thus the 

bonds never enter the stream of commerce and cannot replace the paper currency. Nor under the new 

banking rules can the bonds be used as bank reserves. Due to the expansion factor built into the fractional 

reserve monetary system, the nation’s available currency and credit drops, perhaps by $500 billion. 

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At the least this move is sharply deflationary, and probably recessionary. Since the nation’s aggregate of 

currency and credit is only about $3,000 billion, the government would have to increase the money supply 

before the economy collapsed. Suppose Congress decides to accomplish this by redistributing the 

proceeds from the bond sales as restricted bank reserves, setting the restricted reserve requirement at 10 

percent. State and local governments could borrow funds for infrastructure projects from local banks 

equal to 10 times the reserve amounts (provided local taxpayers agree to new taxes to repay the loans). 

Everybody wins. The federal government, using the bullion now collecting dust at the Treasury, redirects 

a significant portion of net national production toward rebuilding a crumbling America, new roads, 

bridges, and other public facilities including water supply and waste disposal plants. Bankers earn a fee 

for handling the transaction. Voters once again get back into the loop. Proposed projects die without local 

approval. Lastly, because principal is repaid before the monetization-fee, low debt-service factors on 

long-term projects keep the cost down and local taxes low. 

NESARA offers a tremendous opportunity to rebuild the national infrastructure. Congress initiates the 

plan, but the plan is administered and controlled at the local level where the people build their own 

prosperity. 

Just like the Founding Forefathers intended. 

Eliminates Bank Failures 

In the 1930s, regulatory policies encouraged savings and loan institutions (S&Ls), traditionally funded 

with short-term deposits, to make long-term fixed-rate mortgages to facilitate home ownership. In line 

with this policy, state laws imposed interest-rate ceilings on mortgages and Federal law banned 

adjustable-rate mortgages. 

This made excellent public policy until interest rates spiked in the 1980s and S&Ls lost so much money 

that many institutions failed. The initial legislative and regulatory response to the impending crisis? Wait 

and hope: Capital standards, the amount of cash the S&Ls were required to have, were reduced and 

insolvent institutions continued to operate. 

As the situation got worse, new legislation appeared. The Depository Institutions Deregulation and 

Monetary Control Act of 1980 (DIDMCA) and the Garn-St. Germain Act of 1982 granted expanded 

investment powers in hopes of recovery. 

Imagine yourself as the manager of one of these troubled institutions: Profitability is declining or already 

negative. Regulation, such as it is, is lax. With the new legislation, you have the power to raise more 

funds by promising additional yield to all of your depositors who are protected by flat-rate deposit 

insurance and you are suddenly able to legally invest in previously forbidden high-risk schemes which 

might produce higher returns. What are you likely to do? Forget caution; you take the risk and possibly 

survive. 

Because of continuing bailouts, by the mid-1980s the Federal Savings and Loan Insurance Corporation 

(FSLIC) was broke while failures continued. Regulators, attempting to protect their reputations and jobs, 

hid the problems from the public. Needing a solution without money, they arranged mergers between 

failed institutions and solvent ones, routinely offering non-cash incentives such as yield guarantees, 

promises difficult if not impossible to keep. 

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By the time the dust settled, direct cost to the taxpayers for the bailout was somewhere between $150- 

$200 billion. Add the cost of insurance premiums, always paid by somebody, and those numbers really 

move up. 

General economic instability and downright mismanagement hit the S&Ls hard. Meanwhile, the 

commercial banks, operating in the same environment, faced severe challenges of their own. 

Deregulating deposit pricing, the return offered for making the deposit, and expanding permissible 

investment activities for the S&Ls increased the level of competition at commercial banks. Money Market 

Mutual Funds, paying higher interest rates, siphoned off large volumes of their deposits. At the same 

time, commercial banks lost many of their major corporate clients, as the market then allowed obtaining 

short-term financing with commercial paper instead of bank loans. 

Other traditional commercial banking products fell under an attack of financial innovation and 

specialization. Their home mortgage business slowly drifted away and their letters of credit and forward 

contracts were replaced by exchange-traded derivatives. 

This was a long way from earlier and better times. The Federal Deposit Insurance Act of 1950 used a 

rebate system to cut the assessment rate on insured deposits from 8.7 cents per $100 to 3.7 cents per $100. 

FDIC insurance reserves were invested in Treasury securities and in 1961, for the first time, investment 

income exceeded assessment income. Insurance coverage was increased by the 1950 Act from $5k to 

$10k. (It increased to $15,000 in 1966, to $20,000 in 1969, to $40,000 in 1974 and to $100,000 with the 

DIDMCA.) The 1950 Act also provided for direct “open-bank assistance” to a failing insured bank 

whenever, in the opinion of the Board of Directors of the FDIC, its continued operation was essential in 

maintaining adequate banking services to the community. 

This last provision of the 1950 Act likely contributed to another shift in the regulators’ attitude which 

added to the scope of the problem. The Too Big To Fail (TBTF) Doctrine, based on the premise that the 

failure of a large institution could, through a domino effect, start banking runs that might bring down the 

whole monetary system, was implemented twice: First Pennsylvania Bank, with $8 billion in assets, in 

1980 and Continental Illinois National Bank, with $45 billion in assets, in 1984. 

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Total failures of insured deposit institutions hit a peak of 534 in 1989. 

Note: Data for S&Ls prior to 1980 not shown. 

Meanwhile, Congress did not just sit on its hands. In 1989 it enacted the Financial Institution Reform, 

Recovery, and Enforcement Act (FIRREA), with many of its provisions pointed at the FDIC. The former 

Federal Deposit Insurance Fund was renamed the Bank Insurance Fund (BIF). A new Savings 

Association Insurance Fund (SAIF) replaced the defunct Federal Savings and Loan Insurance Fund under 

FDIC management. And the FSLIC Resolution Fund of the Resolution Trust Corporation (RTC) created 

by FIRREA to resolve failed and failing savings associations problems and to manage savings association 

receiverships, was placed under FDIC management. 

With the Federal Deposit Insurance Corporation Improvement Act (FDICIA), enacted in December of 

1991, Congress addressed FDIC procedures and practices. The flat rate for deposit insurance, set by 

statute became a risk based assessment system with each bank’s assessment reflective of the risks it posed 

to its insurance fund. Five capital zones, ranging from well-capitalized to critically undercapitalized, were 

established along with increasingly harsh restrictions and mandatory prompt corrective action by 

regulators who now had authority to close a failing insured bank. 

In situations threatening systemic risk, that To Big To Fail Doctrine, FDICIA requires the FDIC Board, 

the Board of Governors of the Federal Reserve System, and the Secretary of the Treasury, in consultation 

with the President, to agree that the closure of the insured institution would have a serious effect on 

economic conditions or financial stability. To cover insurance losses, FDIC may borrow up to $30 billion 

from the Treasury, money to be repaid through deposit insurance assessments. 

The banking industry struggled through the 1990–91 recession with lingering losses on commercial real 

estate, loan demand down, and the Bank Insurance Fund insolvent by $7 billion. Thanks to legislative 

action and taxpayer bailout, it recovered, but only at enormous cost. 

Following the 1990–91 recession, the U.S. economy began a major expansion. Interest rates plummeted, 

the average yield on three-month Treasury bills fell and remained near 3% throughout 1993. The number 

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of unprofitable banks decreased from one out of 9 in 1991 to less than one in 20 by 1997. Southwest Bank 

of Jennings, Louisiana, failed on November 21, the only bank to fail that year. 

By developing new products and services (ATMs, derivatives, etc.) less affected by interest rate swings, 

commercial banks became less reliant on net interest income. Consolidation reduced their numbers by 

more than 3,000. Bank holding companies, responding to the Riegel-Neal Interstate Banking and 

Branching Efficiency Act of 1994, combined their bank subsidiaries. The Act also enabled interstate 

combinations between unaffiliated banks. Some of the nation’s largest banks merged. 

Record profits in the banking industry wetted appetites for financial deregulation and the elimination of 

what many perceived to be obsolete Depression-era laws. The 1933 Glass-Steagall Act (P.L. 48–162, 

Sections 20 and 32) prohibited banks and securities firms that dealt in ineligible securities from owning or 

controlling each other. Banks could not own securities firms or underwrite or sell most stocks and bonds. 

Insurance companies could not own banks or take deposits. Each type of institution had its own 

regulatory agency jealously guarding its authority. 

During the past 20 years, technological advances and innovative managers, using seemingly minor 

loopholes in the law and technological advances, bypassed long established divisions of authority. 

Commercial banks increased their securities activities up to the legal limits. Securities companies bought 

or established new companies, known as non-bank banks, offering credit cards and other banking 

products. As distinctions between their products blurred, Congress moved toward deregulation of 

financial services culminating in the Gramm-Leach-Bliley Act of November 1999. 

The G-L-B Act repealed the affiliation prohibitions of the Glass-Steagall Act, eliminating restrictions 

applicable to many banks, securities firms and insurance companies, and amended the Bank Holding 

Company Act of 1956 to permit cross-ownership and control among bank holding companies. 

Qualified Financial Holding Companies (FHCs) may now engage in a broad range of financial activities 

such as: dealing in securities; dealing in insurance in any state; lending, exchanging, transferring, 

investing for others or safeguarding money or securities; and acting as a financial or investment advisor. 

In addition FHCs may engage in related activities including making “merchant banking” investments. 

This allows an FHC to own a company engaged in activities not otherwise permissible for an FHC. 

If nothing else, the G-L-B Act is written in politically correct language with appropriate public 

safeguards. Its supporters claim that allowing one company to meet all of its customers’ financial needs 

will save $15 billion a year in fees due to greater competition and efficiency. That may be true, but it 

could just as easily be false. 

The effect of the G-L-B Act is to put a lot of eggs in a few very large baskets. It makes sweeping changes 

in magnitude but none of these changes are fundamental. They all follow established Congressional 

policies of improving banking regulations, earlier and better detection of problem banks and more 

efficient resolution of bank failures. Without a doubt, this is a safer system but humans remain in charge. 

Bank failures as the result of human error, even catastrophic failures, remain possible. 

NESARA takes a different approach, calling for fundamental changes in monetary and banking policy, 

changes that make bank failures virtually impossible. It reorganizes banks as public service utilities, as 

fiduciary institutions, giving them responsibility for handling other peoples’ money but never allowing 

them to put that money at risk. 

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Under NESARA, banks acquire a market segment, namely the making of secured loans by monetizing 

their clients’ debts, with such a tremendous competitive edge that no other type of financial institution 

could compete. As regulated public utilities, commercial banks earn a steady, though not exceptional, 

profit for their owners at almost no risk. Bank size becomes less important. Small, local banks can 

effectively serve their communities as well as the larger national banks. 

Recognizing commercial banks as public service utilities settles once and for all who actually owns the 

nation’s supply of currency and who receives the benefits of that ownership — We, the American people. 

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Please Support the NESARA Institute 

NESARA began as a one-man crusade; then there were two, and now three. Many people warned that we 

were wasting our time, that we could never win against the special interest groups. Yet, look at how far 

we have come with pure desire and modest resources! 

The newly created NESARA Institute, a non-profit educational organization, does not yet have an office, 

any staff, or even a telephone. This effort to heal America is truly a grass roots movement and before 

creating the Institute this effort was supported strictly through personal efforts. 

However, despite these growing pains, the NESARA Institute does have a goal and a straightforward plan 

for achieving that goal. 

With most of the work completed, national publicity is the primary task remaining. At this point we could 

definitely use your help in two areas. 

Spreading the word: 

Invest some of your time learning about NESARA and telling others of the immediate personal benefits. 

Financial Support: 

Provide a contribution to: 

Or visit the web site to transfer funds electronically. 

NESARA Institute 

7635 Jefferson Hwy. No. 354 

Baton Rouge, Louisiana 70809 

Although very expensive, national advertising is still the most cost effective and powerful way to quickly 

inform a lot of people about the benefits of NESARA. The amount of serious attention Congress provides 

to new proposals is directly proportional to demonstrations of public support. Like many things in life, the 

benefits we expect to receive are often related to our own initial efforts. A little support now provides 

huge rewards later. 

It’s your life and your country, and long past time for you to become directly involved in writing the laws 

that shape our destiny. If three people can get this far working by themselves, just think what a few more 

could do! 

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