II 116TH CONGRESS 2D SESSION S. 5031 To amend the Internal Revenue Code of 1986 to provide for a progressive consumption tax and to reform the income tax, and for other purposes. IN THE SENATE OF THE UNITED STATES DECEMBER 16, 2020 Mr. CARDIN introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend the Internal Revenue Code of 1986 to provide for a progressive consumption tax and to reform the income tax, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE, ETC. 3 (a) IN GENERAL.—This Act may be cited as the 4 ‘‘Progressive Consumption Tax Act of 2020’’. 5 (b) REFERENCE.—Except as otherwise expressly pro- 6 vided, whenever in this Act an amendment or repeal is 7 expressed in terms of an amendment to, or repeal of, a 8 section or other provision, the reference shall be consid- 9 VerDate Sep 11 2014 00:05 Jan 07, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S5031.IS S5031 kjohnson on DSK79L0C42PROD with BILLS 2 •S 5031 IS ered to be made to a section or other provision of the In- 1 ternal Revenue Code of 1986. 2 (c) TABLE OF CONTENTS.—The table of contents of 3 this Act is as follows: 4 Sec. 1. Short title, etc. TITLE I—PROGRESSIVE CONSUMPTION TAX Sec. 101. Imposition of progressive consumption tax. TITLE II—INDIVIDUAL AND CORPORATE TAX REFORM Subtitle A—Individual Income Tax Reforms Sec. 201. Individual income tax rate reductions and inflation adjustments. Sec. 202. Family allowance amounts; repeal of personal exemption deduction. Sec. 203. Repeal of limitations relating to itemized deductions. Sec. 204. Restoration of certain deductions. Sec. 205. Termination of separate treatment of capital gains. Sec. 206. Repeals. Sec. 207. Establishment of progressive tax rebate. Sec. 208. Technical and conforming amendments. Subtitle B—Corporate Tax Reforms Sec. 211. Corporate income tax rate reduction. TITLE III—REFUND OF EXCESS CONSUMPTION TAX REVENUE Sec. 301. Refunds of excess consumption tax revenue. TITLE I—PROGRESSIVE 5 CONSUMPTION TAX 6 SEC. 101. IMPOSITION OF PROGRESSIVE CONSUMPTION 7 TAX. 8 (a) IN GENERAL.—Subtitle D is amended by insert- 9 ing before chapter 31 the following new chapter: 10 ‘‘CHAPTER 30—PROGRESSIVE 11 CONSUMPTION TAX 12 ‘‘SUBCHAPTER A. IMPOSITION OF TAX ‘‘SUBCHAPTER B. TAXABLE SUPPLY VerDate Sep 11 2014 00:05 Jan 07, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6211 E:\BILLS\S5031.IS S5031 kjohnson on DSK79L0C42PROD with BILLS 3 •S 5031 IS ‘‘SUBCHAPTER C. CREDIT AGAINST TAX ‘‘SUBCHAPTER D. ADMINISTRATION ‘‘SUBCHAPTER E. DEFINITIONS AND SPECIAL RULES ‘‘Subchapter A—Imposition of Tax 1 ‘‘Sec. 3901. Imposition of tax. ‘‘Sec. 3902. Taxable amount. ‘‘SEC. 3901. IMPOSITION OF TAX. 2 ‘‘(a) GENERAL RULE.—A tax is hereby imposed on 3 every taxable supply. 4 ‘‘(b) AMOUNT OF TAX.— 5 ‘‘(1) IN GENERAL.—Except as provided in para- 6 graph (2), the amount of the tax shall be 10 percent 7 of the taxable amount. 8 ‘‘(2) SPECIAL RATE FOR EXPORTS.—The 9 amount of the tax shall be zero with respect to the 10 provision of any supply which is— 11 ‘‘(A) a supply of tangible personal property 12 that is exported from the United States within 13 90 days after the provider gives an invoice for 14 the supply, or 15 ‘‘(B) a supply, other than a supply of tan- 16 gible personal property— 17 ‘‘(i) which is provided to a recipient 18 that is not in the United States when the 19 supply is performed or otherwise done, and 20 VerDate Sep 11 2014 00:05 Jan 07, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S5031.IS S5031 kjohnson on DSK79L0C42PROD with BILLS 4 •S 5031 IS ‘‘(ii) the use of which takes place out- 1 side of the United States. 2 ‘‘SEC. 3902. TAXABLE AMOUNT. 3 ‘‘(a) AMOUNT CHARGED CUSTOMER.—For purposes 4 of this chapter, the taxable amount for any taxable supply 5 for which money is the only consideration shall be the 6 price charged by the provider— 7 ‘‘(1) including all invoiced charges for transpor- 8 tation, and other items payable to the provider with 9 respect to the supply, but 10 ‘‘(2) excluding the tax imposed by section 3901 11 with respect to the supply and excluding any State 12 and local sales and use taxes with respect to the 13 supply. 14 ‘‘(b) BARTER TRANSACTIONS.—For purposes of this 15 chapter, the taxable amount for any taxable supply which 16 includes consideration other than money shall be the fair 17 market value of the consideration (including all invoiced 18 charges for transportation and other items payable to the 19 provider) plus the amount of any money paid in consider- 20 ation. 21 ‘‘(c) IMPORTS.—For purposes of this chapter, the 22 taxable amount in the case of any import shall be— 23 ‘‘(1) the customs value plus customs duties and 24 any other duties which may be imposed, or 25 VerDate Sep 11 2014 00:05 Jan 07, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S5031.IS S5031 kjohnson on DSK79L0C42PROD with BILLS 5 •S 5031 IS ‘‘(2) if there is no such customs value, the fair 1 market value (determined as if the importer had sold 2 the supply). 3 For purposes of this subsection, the customs value of any 4 import shall include all invoiced charges for transportation 5 and other items payable to the importer with respect to 6 the supply. 7 ‘‘(d) SPECIAL RULE IN THE CASE OF SALES OF CER- 8 TAIN USED CONSUMER GOODS.—For purposes of this 9 chapter, if— 10 ‘‘(1) a person acquires any tangible personal 11 property in a transaction which was not taxable 12 under this chapter, and 13 ‘‘(2) such property had been used by an ulti- 14 mate consumer before such acquisition, 15 the taxable amount in the case of any sale of such property 16 by such person (determined without regard to this sub- 17 section) shall be reduced by the amount paid for such 18 property by such person. 19 ‘‘Subchapter B—Taxable Supply 20 ‘‘Sec. 3911. Taxable supply. ‘‘Sec. 3912. Supplies made in connection with the United States. ‘‘Sec. 3913. Exempt supply. ‘‘SEC. 3911. TAXABLE SUPPLY. 21 ‘‘(a) IN GENERAL.—For purposes of this chapter, the 22 term ‘taxable supply’ means— 23 VerDate Sep 11 2014 00:05 Jan 07, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S5031.IS S5031 kjohnson on DSK79L0C42PROD with BILLS 6 •S 5031 IS ‘‘(1) the importation of property into the 1 United States, and 2 ‘‘(2) any supply (other than an exempt sup- 3 ply)— 4 ‘‘(A) which is provided— 5 ‘‘(i) in the course of carrying on a 6 trade or business, 7 ‘‘(ii) in the case of an organization ex- 8 empt from tax under section 501(a), in 9 furtherance of the activities related to the 10 purpose or function constituting the basis 11 of its exemption under section 501, or 12 ‘‘(iii) in the case of a State, an Indian 13 tribal government, a possession of the 14 United States, or any political subdivision 15 of any of the foregoing, or the United 16 States or the District of Columbia, in car- 17 rying out any activity that is not an essen- 18 tial governmental function, 19 ‘‘(B) for which consideration is provided in 20 return, and 21 ‘‘(C) which is made in connection with the 22 United States. 23 ‘‘(b) SUPPLY.—For purposes of this chapter— 24 VerDate Sep 11 2014 00:05 Jan 07, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S5031.IS S5031 kjohnson on DSK79L0C42PROD with BILLS 7 •S 5031 IS ‘‘(1) IN GENERAL.—The term ‘supply’ means 1 any supply whatsoever, including— 2 ‘‘(A) the sale or provision (including 3 through renting, leasing, or licensing) of prop- 4 erty, 5 ‘‘(B) the performance of services, 6 ‘‘(C) the grant, assignment, or surrender 7 of real property, 8 ‘‘(D) the creation, grant, transfer, assign- 9 ment, or surrender of any right, 10 ‘‘(E) financial supplies, and 11 ‘‘(F) an entry into, or release from, an ob- 12 ligation or agreement to perform or refrain 13 from performing an act. 14 ‘‘(2) SPECIAL RULE FOR SERVICES FOR EM- 15 PLOYER.—An employee’s services for the employee’s 16 employer shall not be treated as a supply. 17 ‘‘SEC. 3912. SUPPLIES MADE IN CONNECTION WITH THE 18 UNITED STATES. 19 ‘‘(a) TANGIBLE PROPERTY.—For purposes of this 20 chapter— 21 ‘‘(1) IN GENERAL.—The supply of tangible 22 property is made in connection with the United 23 States if— 24 VerDate Sep 11 2014 00:05 Jan 07, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S5031.IS S5031 kjohnson on DSK79L0C42PROD with BILLS 8 •S 5031 IS ‘‘(A) the property is delivered or made 1 available to the recipient in the United States, 2 or 3 ‘‘(B) the property is assembled in or re- 4 moved from any location in the United States. 5 ‘‘(2) REAL PROPERTY.—The supply of real 6 property is made in connection with the United 7 States if the real property is located in the United 8 States. 9 ‘‘(b) SERVICES, INTANGIBLE PROPERTY, AND OTHER 10 SUPPLIES.—For purposes of this chapter, the supply of 11 anything other than tangible property or real property is 12 made in connection with the United States if— 13 ‘‘(1) the supply is used, performed, or otherwise 14 done in the United States, or 15 ‘‘(2) the supply is provided through a trade or 16 business in the United States. 17 ‘‘SEC. 3913. EXEMPT SUPPLY. 18 ‘‘(a) IN GENERAL.—An exempt supply shall not be 19 subject to tax under this chapter. 20 ‘‘(b) EXEMPT SUPPLY.—For purposes of this chap- 21 ter— 22 ‘‘(1) IN GENERAL.—The term ‘exempt supply’ 23 means— 24 VerDate Sep 11 2014 00:05 Jan 07, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S5031.IS S5031 kjohnson on DSK79L0C42PROD with BILLS 9 •S 5031 IS ‘‘(A) the rental or leasing of residential 1 real property, 2 ‘‘(B) any sale of qualified residential real 3 property, 4 ‘‘(C) any financial supply, 5 ‘‘(D) any nonparticipating small supplier 6 supply, and 7 ‘‘(E) any taxable supply (or category of 8 such supplies) treated as an exempt supply 9 under section 3932(b). 10 ‘‘(2) QUALIFIED RESIDENTIAL REAL PROP- 11 ERTY.—For purposes of paragraph (1), the term 12 ‘qualified residential real property’ means residential 13 real property— 14 ‘‘(A) which— 15 ‘‘(i) has previously been sold as resi- 16 dential real property, or 17 ‘‘(ii) has been continuously rented for 18 5 years or more, and 19 ‘‘(B) to which substantial renovations have 20 not been made after the date of the enactment 21 of this chapter. 22 ‘‘(3) NONPARTICIPATING SMALL SUPPLIER SUP- 23 PLY.— 24 VerDate Sep 11 2014 00:05 Jan 07, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S5031.IS S5031 kjohnson on DSK79L0C42PROD with BILLS 10 •S 5031 IS ‘‘(A) IN GENERAL.—For purposes of para- 1 graph (1), the term ‘nonparticipating small sup- 2 plier supply’ means any supply provided by a 3 supplier during— 4 ‘‘(i) any taxable period during which 5 such supplier was a nonparticipating small 6 supplier, or 7 ‘‘(ii) the four-week period beginning 8 on the first day after the close of the last 9 calendar quarter in which such supplier 10 was a nonparticipating small supplier. 11 ‘‘(B) NONPARTICIPATING SMALL SUP- 12 PLIER.— 13 ‘‘(i) IN GENERAL.—For purposes of 14 subparagraph (A), the term ‘nonpartici- 15 pating small supplier’ means any person 16 for any taxable period if— 17 ‘‘(I) such person has aggregate 18 taxable revenues of not more than 19 $100,000 for the four-calendar quar- 20 ter period ending immediately before 21 the taxable period, and 22 ‘‘(II) has not made an election 23 under clause (iii) for such taxable pe- 24 riod. 25 VerDate Sep 11 2014 00:05 Jan 07, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S5031.IS S5031 kjohnson on DSK79L0C42PROD with BILLS 11 •S 5031 IS ‘‘(ii) TAXABLE REVENUE.—For pur- 1 poses of this paragraph, the term ‘taxable 2 revenue’ means revenue from supplies 3 which are taxable supplies, determined 4 without regard to paragraph (1)(D). 5 ‘‘(iii) ELECTION.—Under regulations 6 prescribed by the Secretary, any person 7 who meets the requirements of clause (i)(I) 8 may make an election not to be treated as 9 a nonparticipating small supplier for any 10 taxable period. 11 ‘‘(C) AGGREGATION RULES.—For purposes 12 of determining aggregate taxable revenues 13 under subparagraph (B)(i)(I), all members of 14 the same controlled group of corporations (with- 15 in the meaning of section 267(f)) and all per- 16 sons under common control (within the mean- 17 ing of section 52(b) but determined by treating 18 an interest of more than 50 percent as a con- 19 trolling interest) shall be treated as 1 person. 20 ‘‘Subchapter C—Credit Against Tax 21 ‘‘Sec. 3916. Credit against tax. ‘‘SEC. 3916. CREDIT AGAINST TAX. 22 ‘‘(a) GENERAL RULE.—There shall be allowed as a 23 credit against the aggregate amount of tax imposed by 24 VerDate Sep 11 2014 00:05 Jan 07, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S5031.IS S5031 kjohnson on DSK79L0C42PROD with BILLS 12 •S 5031 IS section 3901 with respect to all taxable supplies made by 1 the taxpayer during the taxable period an amount equal 2 to the aggregate amount of tax imposed by section 3901 3 on creditable acquisitions of the taxpayer during such tax- 4 able period. 5 ‘‘(b) CREDITABLE ACQUISITIONS.—For purposes of 6 this chapter, the term ‘creditable acquisition’ means the 7 acquisition or receipt of any supply which— 8 ‘‘(1) was subject to tax under section 3901 at 9 the time it was provided to the taxpayer, 10 ‘‘(2) was used by the taxpayer— 11 ‘‘(A) in the course of carrying on a trade 12 or business, 13 ‘‘(B) in the case of a taxpayer exempt 14 from tax under section 501(a), in furtherance 15 of the activities related to the purpose or func- 16 tion constituting the basis of the exemption 17 under section 501, or 18 ‘‘(C) in the case of a State, an Indian trib- 19 al government, a possession of the United 20 States, or any political subdivision of any of the 21 foregoing, or the United States or the District 22 of Columbia, in carrying out any activity that 23 is not an essential governmental function, and 24 VerDate Sep 11 2014 00:05 Jan 07, 2021 Jkt 019200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S5031.IS S5031 kjohnson on DSK79L0C42PROD with BILLS 13 •S 5031 IS ‘‘(3) except as provided in subsection (c), was 1 not used by the taxpayer to make an exempt supply. 2 ‘‘(c) CERTAIN ACQUISITIONS RELATED TO FINAN- 3 CIAL SUPPLIES.— 4 ‘‘(1) ACQUISITIONS BY QUALIFIED SMALL FI- 5 NANCIAL SUPPLIERS.— 6 ‘‘(A) IN GENERAL.—Solely for purposes of 7 subsections (b)(3) and (d)(1), a financial supply 8 which is provided by a qualified small financial 9 supplier shall not be treated as an exempt sup- 10 ply. 11 ‘‘(B) QUALIFIED SMALL FINANCIAL SUP- 12 PLIER.— 13 ‘‘(i) IN GENERAL.—For purposes of 14 [Text truncated for display. 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