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H.R. 3060 (pcs) To implement the Protocol on Environmental Protection to the Antarctic Treaty. [Placed on Calendar Senate] ...


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108th CONGRESS
  1st Session
                                H. R. 3060

To repeal the current Internal Revenue Code and replace it with a flat 
tax, thereby guaranteeing economic growth and greater fairness for all 
                               Americans.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           September 10, 2003

  Mr. Smith of Michigan (for himself, Mr. Hall, Mr. Hefley, and Mrs. 
   Myrick) introduced the following bill; which was referred to the 
Committee on Ways and Means, and in addition to the Committee on Rules, 
for a period to be subsequently determined by the Speaker, in each case 
for consideration of such provisions as fall within the jurisdiction of 
                        the committee concerned

_______________________________________________________________________

                                 A BILL


 
To repeal the current Internal Revenue Code and replace it with a flat 
tax, thereby guaranteeing economic growth and greater fairness for all 
                               Americans.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Tax Simplification 
Act of 2003''.
    (b) Table of Contents.--

Sec. 1. Short title; table of contents.
               TITLE I--TAX REDUCTION AND SIMPLIFICATION

Sec. 101. Individual income tax.
Sec. 102. Tax on business activities.
Sec. 103. Simplification of rules relating to qualified retirement 
                            plans.
Sec. 104. Repeal of alternative minimum tax.
Sec. 105. Repeal of credits.
Sec. 106. Repeal of estate and gift taxes and obsolete income tax 
                            provisions.
Sec. 107. Effective date.
            TITLE II--SUPERMAJORITY REQUIRED FOR TAX CHANGES

Sec. 201. Supermajority required.

               TITLE I--TAX REDUCTION AND SIMPLIFICATION

SEC. 101. INDIVIDUAL INCOME TAX.

    (a) In General.--Section 1 of the Internal Revenue Code of 1986 is 
amended to read as follows:

``SECTION 1. TAX IMPOSED.

    ``There is hereby imposed on the taxable income of every individual 
a tax equal to 19 percent (17 percent in the case of taxable years 
beginning after December 31, 2004) of the taxable income of such 
individual for such taxable year.''.
    (b) Taxable Income.--Section 63 of such Code is amended to read as 
follows:

``SEC. 63. TAXABLE INCOME.

    ``(a) In General.--For purposes of this subtitle, the term `taxable 
income' means the excess of--
            ``(1) the sum of--
                    ``(A) wages (as defined in section 3121(a) without 
                regard to paragraph (1) thereof) which are paid in cash 
                and which are received during the taxable year for 
                services performed in the United States,
                    ``(B) retirement distributions which are includible 
                in gross income for such taxable year, plus
                    ``(C) amounts received under any law of the United 
                States or of any State which is in the nature of 
                unemployment compensation, over
            ``(2) the standard deduction.
    ``(b) Standard Deduction.--
            ``(1) In general.--For purposes of this subtitle, the term 
        `standard deduction' means the sum of--
                    ``(A) the basic standard deduction, plus
                    ``(B) the additional standard deduction.
            ``(2) Basic standard deduction.--For purposes of paragraph 
        (1), the basic standard deduction is--
                    ``(A) $25,580 in the case of--
                            ``(i) a joint return, or
                            ``(ii) a surviving spouse (as defined in 
                        section 2(a)),
                    ``(B) $16,330 in the case of a head of household 
                (as defined in section 2(b)), and
                    ``(C) $12,790 in the case of an individual--
                            ``(i) who is not married and who is not a 
                        surviving spouse or head of household, or
                            ``(ii) who is a married individual filing a 
                        separate return.
            ``(3) Additional standard deduction.--For purposes of 
        paragraph (1), the additional standard deduction is $5,510 for 
        each dependent (as defined in section 152) who is described in 
        section 151(c)(1) for the taxable year and who is not required 
        to file a return for such taxable year.
    ``(c) Retirement Distributions.--For purposes of subsection (a), 
the term `retirement distribution' means any distribution from--
            ``(1) a plan described in section 401(a) which includes a 
        trust exempt from tax under section 501(a),
            ``(2) an annuity plan described in section 403(a),
            ``(3) an annuity contract described in section 403(b),
            ``(4) an individual retirement account described in section 
        408(a),
            ``(5) an individual retirement annuity described in section 
        408(b),
            ``(6) an eligible deferred compensation plan (as defined in 
        section 457),
            ``(7) a governmental plan (as defined in section 414(d)), 
        or
            ``(8) a trust described in section 501(c)(18).
Such term includes any plan, contract, account, annuity, or trust 
which, at any time, has been determined by the Secretary to be such a 
plan, contract, account, annuity, or trust.
    ``(d) Income of Certain Children.--For purposes of this subtitle--
            ``(1) an individual's taxable income shall include the 
        taxable income of each dependent child of such individual who 
        has not attained age 14 as of the close of such taxable year, 
        and
            ``(2) such dependent child shall have no liability for tax 
        imposed by section 1 with respect to such income and shall not 
        be required to file a return for such taxable year.
    ``(e) Inflation Adjustment.--
            ``(1) In general.--In the case of any taxable year 
        beginning in a calendar year after 2003, each dollar amount 
        contained in subsection (b) shall be increased by an amount 
determined by the Secretary to be equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment for such 
                calendar year.
            ``(2) Cost-of-living adjustment.--For purposes of paragraph 
        (1), the cost-of-living adjustment for any calendar year is the 
        percentage (if any) by which--
                    ``(A) the CPI for the preceding calendar year, 
                exceeds
                    ``(B) the CPI for the calendar year 2002.
            ``(3) CPI for any calendar year.--For purposes of paragraph 
        (2), the CPI for any calendar year is the average of the 
        Consumer Price Index as of the close of the 12-month period 
        ending on August 31 of such calendar year.
            ``(4) Consumer price index.--For purposes of paragraph (3), 
        the term `Consumer Price Index' means the last Consumer Price 
        Index for all-urban consumers published by the Department of 
        Labor. For purposes of the preceding sentence, the revision of 
        the Consumer Price Index which is most consistent with the 
        Consumer Price Index for calendar year 1986 shall be used.
            ``(5) Rounding.--If any increase determined under paragraph 
        (1) is not a multiple of $10, such increase shall be rounded to 
        the next highest multiple of $10.
    ``(f) Marital Status.--For purposes of this section, marital status 
shall be determined under section 7703.''.

SEC. 102. TAX ON BUSINESS ACTIVITIES.

    (a) In General.--Section 11 of the Internal Revenue Code of 1986 
(relating to tax imposed on corporations) is amended to read as 
follows:

``SEC. 11. TAX IMPOSED ON BUSINESS ACTIVITIES.

    ``(a) Tax Imposed.--There is hereby imposed on every person engaged 
in a business activity a tax equal to 19 percent (17 percent in the 
case of taxable years beginning after December 31, 2004) of the 
business taxable income of such person.
    ``(b) Liability for Tax.--The tax imposed by this section shall be 
paid by the person engaged in the business activity, whether such 
person is an individual, partnership, corporation, or otherwise.
    ``(c) Business Taxable Income.--For purposes of this section--
            ``(1) In general.--The term `business taxable income' means 
        gross active income reduced by the deductions specified in 
        subsection (d).
            ``(2) Gross active income.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the term `gross active income' means gross receipts 
                from--
                            ``(i) the sale or exchange of property or 
                        services in the United States by any person in 
                        connection with a business activity, and
                            ``(ii) the export of property or services 
                        from the United States in connection with a 
                        business activity.
                    ``(B) Exchanges.--For purposes of this section, the 
                amount treated as gross receipts from the exchange of 
                property or services is the fair market value of the 
                property or services received, plus any money received.
                    ``(C) Coordination with special rules for financial 
                services, etc.--Except as provided in subsection (e)--
                            ``(i) the term `property' does not include 
                        money or any financial instrument, and
                            ``(ii) the term `services' does not include 
                        financial services.
            ``(3) Exemption from tax for activities of governmental 
        entities and tax-exempt organizations.--For purposes of this 
        section, the term `business activity' does not include any 
        activity of a governmental entity or of any other organization 
        which is exempt from tax under this chapter.
    ``(d) Deductions.--
            ``(1) In general.--The deductions specified in this 
        subsection are--
                    ``(A) the cost of business inputs for the business 
                activity,
                    ``(B) wages (as defined in section 3121(a) without 
                regard to paragraph (1) thereof) which are paid in cash 
                for services performed in the United States as an 
                employee, and
                    ``(C) retirement contributions to or under any plan 
                or arrangement which makes retirement distributions (as 
                defined in section 63(c)) for the benefit of such 
                employees to the extent such contributions are allowed 
                as a deduction under section 404.
            ``(2) Business inputs.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the term `cost of business inputs' means--
                            ``(i) the amount paid for property sold or 
                        used in connection with a business activity,
                            ``(ii) the amount paid for services (other 
                        than for the services of employees, including 
                        fringe benefits paid by reason of such 
                        services) in connection with a business 
                        activity, and
                            ``(iii) any excise tax, sales tax, customs 
                        duty, or other separately stated levy imposed 
                        by a Federal, State, or local government on the 
                        purchase of property or services which are for 
                        use in connection with a business activity.
                Such term shall not include any tax imposed by chapter 
                2 or 21.
                    ``(B) Exceptions.--Such term shall not include--
                            ``(i) items described in subparagraphs (B) 
                        and (C) of paragraph (1), and
                            ``(ii) items for personal use not in 
                        connection with any business activity.
                    ``(C) Exchanges.--For purposes of this section, the 
                amount treated as paid in connection with the exchange 
                of property or services is the fair market value of the 
property or services exchanged, plus any money paid.
    ``(e) Special Rules for Financial Inter-
mediation Service Activities.--In the case of the business activity of 
providing financial intermediation services, the taxable income from 
such activity shall be equal to the value of the intermediation 
services provided in such activity.
    ``(f) Exception for Services Performed as Employee.--For purposes 
of this section, the term `business activity' does not include the 
performance of services by an employee for the employee's employer.
    ``(g) Carryover of Credit-Equivalent of Excess Deductions.--
            ``(1) In general.--If the aggregate deductions for any 
        taxable year exceed the gross active income for such taxable 
        year, the credit-equivalent of such excess shall be allowed as 
        a credit against the tax imposed by this section for the 
        following taxable year.
            ``(2) Credit-equivalent of excess deductions.--For purposes 
        of paragraph (1), the credit-equivalent of the excess described 
        in paragraph (1) for any taxable year is an amount equal to--
                    ``(A) the sum of--
                            ``(i) such excess, plus
                            ``(ii) the product of such excess and the 
                        3-month Treasury rate for the last month of 
                        such taxable year, multiplied by
                    ``(B) the rate of the tax imposed by subsection (a) 
                for such taxable year.
            ``(3) Carryover of unused credit.--If the credit allowable 
        for any taxable year by reason of this subsection exceeds the 
        tax imposed by this section for such year, then (in lieu of 
        treating such excess as an overpayment) the sum of--
                    ``(A) such excess, plus
                    ``(B) the product of such excess and the 3-month 
                Treasury rate for the last month of such taxable year,
        shall be allowed as a credit against the tax imposed by this 
        section for the following taxable year.
            ``(4) 3-month treasury rate.--For purposes of this 
        subsection, the 3-month Treasury rate is the rate determined by 
        the Secretary based on the average market yield (during any 1-
        month period selected by the Secretary and ending in the 
        calendar month in which the determination is made) on 
        outstanding marketable obligations of the United States with 
        remaining periods to maturity of 3 months or less.''.
    (b) Tax on Tax-Exempt Entities Providing Noncash Compensation to 

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