‘‘(B) the cost-of-living adjustment for such 
calendar year. 
‘‘(2) COST-OF-LIVING ADJUSTMENT.—For pur-
poses 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 2003. 
‘‘(3) CPI FOR ANY CALENDAR YEAR.—For pur-
poses 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 Au-
gust 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 con-
sistent 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 mul-
tiple of $10. 
‘‘(g) MARITAL STATUS.—For purposes of this sec-
tion, marital status shall be determined under section 
7703. 
‘‘SEC. 60B. TAX IMPOSED ON BUSINESS ACTIVITIES. 
‘‘(a) TAX IMPOSED.—There is hereby imposed on 
every person engaged in a business activity who makes an 
election to be taxed under this part a tax equal to—
‘‘(1) 19 percent of the business taxable income 
of such person for such taxable year in the case of 
the first 2 taxable years of the individual beginning 
with the taxable year for which the election is made, 
and 
‘‘(2) 17 percent of the business taxable income 
of such person for such taxable year in the case of 
all taxable years subsequent to the taxable years de-
scribed in paragraph (1). 
‘‘(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 para-
graph (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 activ-
ity, 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 re-
ceived, 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 in-
clude money or any financial instrument, 
and
‘‘(ii) the term ‘services’ does not in-
clude financial services. 
‘‘(3) EXEMPTION FROM TAX FOR ACTIVITIES OF 
GOVERNMENTAL ENTITIES AND TAX-EXEMPT ORGA-
NIZATIONS.—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 retire-
ment 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.—