Baucus Works to Overhaul Outdated Tax Code

Press Release

Senate Finance Committee Chairman Max Baucus (D-Mont.) today unveiled the third package in a series of proposals to overhaul America's tax code. The latest staff discussion draft focuses on reforms to cost recovery and tax accounting rules.

"America today is using a bloated tax code that was built for businesses close to 30 years ago. The code is completely outdated and acting as a brake on economic growth.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," Senator Baucus said.

The rules for cost recovery and accounting determine when a business can deduct the cost of investments and how they account for their income. However, the rules are outdated, overly complex and reward specific industries to the detriment of others. In addition, Congress keeps changing the rules. It is often difficult for businesses to plan for the future as a result of temporary, and sometimes retroactive, provisions.

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.
*Reduce the number of major depreciation rates from more than 40 to 5.

*Eliminate the need for businesses to depreciate each of their assets separately.
P*ermanently increase Section 179 expensing to $1 million and expand the definition of qualifying expenses.

Senator Baucus requested that the Congressional Budget Office produce a letter detailing their analysis of economic depreciation rates of tangible assets.

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