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1 Michael Schuyler, Retroactive Taxation and the Baucus Proposal 1 (2013)

handle is hein.taxfoundation/taxfaaha0001 and id is 1 raw text is: TAX    _: 7 ~,
FOUNDATION
December 9, 2013
No. 405
Retroactive Taxation and the Baucus Proposal
By
Michael Schuyler
Introduction
Senator Max Baucus (D-MT), chairman of the Senate Finance Committee, has released a series of staff
discussion drafts that suggest numerous changes in international taxation, tax enforcement, and the tax
treatment of capital costs.! The centerpiece of the plan is a cut in the federal corporate income tax rate,
which is currently the highest among the world's developed economies.2 The draft does not specify the target
rate, because that will depend on revenue estimates and refinement of the plan, but Senator Baucus expects
it will be under 30 percent. To pay for the lower rate, the plan would expand the definition of taxable
income, an action known as base broadening.
Senator Baucus hopes the proposals will provide the basis for tax reform legislation. A press release issued by
the Senate Finance Committee stated that while this is not a final plan, the staff discussion drafts are
intended to spur a conversation about areas where Republicans and Democrats may be able to reach
agreement on how to fix the broken tax code.3
1 For a summary of the international tax proposals and links to more detailed information, see Senate Finance Committee, Baucus
Unveils Proposals for International Tax Reform, Nov. 19, 2013,
http://www.finance.senate.gov/newsroom/chairmanrelease/?id=f946a9f3-d296-42ad-bae4-bcf45 1b34b14.
For a summary of the enforcement proposals and links to more details, see Senate Finance Committee, Baucus Unveils Proposal to
Combat Tax Fraud, Make Filing Safer, Simpler andMore Efficient, Nov. 20, 2013,
htt-:/-,ww.finance.senate.ov/newsroomn/chairman/release/?id a4f8205c- d28--4a4 L-a6l1d-15d1 abd23d3.
For a summary of the capital cost recovery provisions and links to more details, see Senate Finance Committee, Baucus Works to
Overhaul Outdated Tax Code, Nov. 21, 2013, htt-J/www.financesenate.gvne,,Asroom/chairman/release/?id=536eefeb-2ae2
453f-af9b-946c305d5c93.
2 See William McBride, How Tax Reform Can Address America' Diminishing Investment and Economic Growth, TAX FOUNDATION
FISCAL FACT No. 395 (Sept. 23, 2013), httpJ/taxfoundationorL/article/how-tax-reform-can-address-america-s-diminishing
investment-and-economic-growth. For a discussion of effective corporate tax rates, which are also among the world's highest, see
Phillip Dittmer, U.S. Corporations Suffer High Effective Tax Rates by International Standards, TAX FOUNDATION SPECIAL REPORT
No. 195 (Sept. 13, 2011), http://ta.foundation~orL/artcle/us-corporations-suffer-high-effctive-tax-rates-international-standards.
See Baucus Unveils Proposals for International Tax Reform, supra note 1.

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