Senate Finance Committee chairman Max Baucus, D-Mont., released a third set of proposals Thursday to overhaul America’s tax code, this one focusing on reforms to tax accounting and cost recovery rules.
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The package he released Thursday targets the rules for cost recovery and accounting that determine when a business can deduct the cost of investments and how they account for their income. However, Baucus contends the rules are outdated, overly complex and reward specific industries to the detriment of others. In addition, Congress keeps changing the rules, so it is often difficult for businesses to plan for the future as a result of temporary, and sometimes retroactive, provisions.
“America today is using a bloated tax code that was built for businesses close to 30 years ago,” Baucus said in a statement. “The code is completely outdated and acting as a brake on economic growth. More must be done to simplify tax rules, lessen the burden on small businesses and jumpstart job growth.”
To address these issues, the staff discussion draft proposes a modernized set of cost recovery and accounting rules that are simpler, fairer, and lessen tax burdens on small businesses. These reforms would also raise enough revenue from corporations in the long-term to finance a significant reduction in the corporate tax rate. Specifically, the discussion draft offers proposals to replace current rules with a system that better approximates economic depreciation based on estimates from the Congressional Budget Office.
They also propose to reduce the number of major depreciation rates from more than 40 to 5. Another proposal would eliminate the need for businesses to depreciate each of their assets separately. Yet another proposal would permanently increase Section 179 expensing to $1 million and expand the definition of qualifying expenses.
Senator Baucus has requested an analysis of the cost recovery and tax accounting rules staff discussion draft by the Congressional Budget Office.
Baucus has been working with his counterpart in the House, Ways and Means Committee chairman Dave Camp, R-Mich., on assembling a comprehensive tax reform package this year, with the two men convening a series of hearings in Congress in recent years, sometimes separately and sometimes jointly, on various aspects of tax reform. They have also been going outside the Beltway to travel around the country together meeting with individual taxpayers and businesses to solicit their tax reform ideas, as well as using social media to get ideas sent in via the Internet.
However, with the number of days on the legislative calendar dwindling, the prospects for enacting a tax reform package appear unlikely this year. Next year, as lawmakers gear up for the midterm elections, the likelihood of passing a comprehensive tax reform package is also in doubt, especially amid an atmosphere of partisan rancor and brinkmanship on Capitol Hill.
Baucus is looking for feedback from stakeholders and the American public on the discussion drafts as he continues his work to overhaul the tax code. Feedback on the cost recovery and tax accounting rules discussion draft is requested by Jan. 17, 2014 and comments can be sent to Tax_Reform@Finance.Senate.gov.
He is also looking for feedback on the other two discussion drafts. All three discussion drafts are based on bipartisan ideas and incorporate bills introduced by both Republicans and Democrats, his office noted. They are intended to spur a conversation about areas where Republicans and Democrats may be able to reach agreement on fixing the broken tax code.
One of the groups lobbying for deficit reduction praised the release of the various proposals in the discussion drafts. “The Campaign to Fix the Debt commends Senator Baucus for his continued commitment to comprehensive tax reform,” said Maya MacGuineas, head of the Campaign to Fix the Debt. “The release of these thoughtful discussion drafts is an important step forward in the tax reform process, and reflects the understanding that real reform will require making tough choices. The Campaign looks forward to working with Chairman Baucus, Chairman Camp, and other members of Congress in the coming weeks and months to develop a simpler and fairer tax code that broadens the base, lowers rates, promotes growth and competitiveness, and reduces the deficit.”
An overview of the cost recovery and accounting discussion draft can be
