To amend the Internal Revenue Code of 1986 to provide a refund of individual taxes in 2001 and to establish a 10 percent rate bracket beginning in 2001, and for other purposes.

March 27, 2001

Mr. DASCHLE (for himself, Mr. CONRAD, Mr. LIEBERMAN, Mr. DORGAN, Mr. DURBIN, Mr. ROCKEFELLER, Mr. REID, and Mr. JOHNSON) introduced the following bill; which was read twice and referred to the Committee on Finance

To amend the Internal Revenue Code of 1986 to provide a refund of individual taxes in 2001 and to establish a 10 percent rate bracket beginning in 2001, and for other purposes.

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

SECTION 1. SHORT TITLE.

This Act may be cited as the `Economic Stimulus Tax Cut Act of 2001'.

SEC. 2. REFUND OF INDIVIDUAL INCOME AND EMPLOYMENT TAXES.

(a) IN GENERAL- Subchapter B of chapter 65 of the Internal Revenue Code of 1986 (relating to rules of special application in the case of abatements, credits, and refunds) is amended by adding at the end the following new section:

`SEC. 6428. REFUND OF INDIVIDUAL INCOME AND EMPLOYMENT TAXES.

`(a) GENERAL RULE- Except as otherwise provided in this section, each individual shall be treated as having made a payment against the tax imposed by chapter 1 for any taxable year beginning in 2001, in an amount equal to the lesser of--

`(1) the amount of the taxpayer's liability for tax for the taxpayer's last taxable year beginning in calendar year 2000, or

`(2) the taxpayer's applicable amount.

`(b) LIABILITY FOR TAX- For purposes of this section, the liability for tax for the taxable year shall be the sum of--

`(1) the excess (if any) of--

`(A) the sum of--

`(i) the taxpayer's regular tax liability (within the meaning of section 26(b)) for the taxable year, and

`(ii) the tax imposed by section 55(a) with respect to such taxpayer for the taxable year, over

`(B) the sum of the credits allowable under part IV of subchapter A of chapter 1 (other than sections 31, 33, and 34) for the taxable year, and

`(2) the taxes imposed by sections 1401, 3101, 3111, 3201(a), 3211(a)(1), and 3221(a) on amounts received by the taxpayer for the taxable year.

`(c) APPLICABLE AMOUNT- For purposes of this section--

`(1) IN GENERAL- The applicable amount for any taxpayer shall be determined under the following table:

$600

$450

$300

$300

$300.

`(2) TAXPAYERS WITH ONLY PAYROLL TAX LIABILITY- A taxpayer is described in this paragraph if such taxpayer's liability for tax for the taxable year does not include any liability described in subsection (b)(1).

`(d) DATE PAYMENT DEEMED MADE-

`(1) IN GENERAL- The payment provided by this section shall be deemed made on the date of the enactment of this section.

`(2) REMITTANCE OF PAYMENT- The Secretary shall remit to each taxpayer the payment described in paragraph (1) within 90 days after such date of enactment.

`(3) CLAIM FOR NONPAYMENT- Any taxpayer who erroneously does not receive a payment described in paragraph (1) may make claim for such payment in a manner and at such time as the Secretary prescribes.

`(e) CERTAIN PERSONS NOT ELIGIBLE- This section shall not apply to--

`(1) any individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which such individual's taxable year begins,

`(2) any estate or trust, or

`(3) any nonresident alien individual.'.

(b) CONFORMING AMENDMENT- Section 1324(b)(2) of title 31, United States Code, is amended by inserting before the period `, or enacted by the Economic Stimulus Tax Cut Act of 2001'.

(c) CLERICAL AMENDMENT- The table of sections for subchapter B of chapter 65 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item:

`Sec. 6428. Refund of individual income and employment taxes.'.

(d) EFFECTIVE DATE- The amendments made by this section shall take effect on the date of the enactment of this Act.

SEC. 3. REDUCTION IN INCOME TAX RATES FOR INDIVIDUALS.

(a) IN GENERAL- Section 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:

`(i) RATE REDUCTIONS AFTER 2000-

`(1) NEW LOWEST RATE BRACKET-

`(A) IN GENERAL- In the case of taxable years beginning after December 31, 2000--

`(i) the rate of tax under subsections (a), (b), (c), and (d) on taxable income not over the initial bracket amount shall be 10 percent (12.5 percent in taxable years beginning in 2001), and

`(ii) the 15 percent rate of tax shall apply only to taxable income over the initial bracket amount.

`(B) INITIAL BRACKET AMOUNT- For purposes of this subsection, the initial bracket amount is--

`(i) $12,000 in the case of subsection (a),

`(ii) $10,000 in the case of subsection (b), and

`(iii) 1/2 the amount applicable under clause (i) in the case of subsections (c) and (d).

`(C) INFLATION ADJUSTMENT- In prescribing the tables under subsection (f) which apply with respect to taxable years beginning in calendar years after 2001--

`(i) the Secretary shall make no adjustment to the initial bracket amount for any taxable year beginning before January 1, 2003,

`(ii) the cost-of-living adjustment used in making adjustments to the initial bracket amount for any taxable year beginning after December 31, 2002, shall be determined under subsection (f)(3) by substituting `2001' for `1992' in subparagraph (B) thereof, and

`(iii) such adjustment shall not apply to the amount referred to in subparagraph (B)(iii).

If any amount after adjustment under the preceding sentence is not a multiple of $50, such amount shall be rounded to the next lowest multiple of $50.

`(2) ADJUSTMENT OF TABLES- The Secretary shall adjust the tables prescribed under subsection (f) to carry out this subsection.'.

(b) DETERMINATION OF WITHHOLDING TABLES- Section 3402(a) of the Internal Revenue Code of 1986 (relating to requirement of withholding) is amended by adding at the following new paragraph:

`(3) CHANGES MADE BY SECTION 3 OF THE ECONOMIC STIMULUS TAX CUT ACT OF 2001- Notwithstanding the provisions of this subsection, the Secretary shall modify the tables and procedures under paragraph (1) to reflect the amendments made by section 3 of the Economic Stimulus Tax Cut Act of 2001, and such modification shall take effect on July 1, 2001, as if the lowest rate of tax under section 1 (as amended by such section 3) was a 10-percent rate effective on such date.'.

(c) CONFORMING AMENDMENTS-

(1) Subparagraph (B) of section 1(g)(7) of the Internal Revenue Code of 1986 is amended--

(A) by striking `15 percent' in clause (ii)(II) and inserting `the first bracket percentage', and

(B) by adding at the end the following flush sentence:

`For purposes of clause (ii), the first bracket percentage is the percentage applicable to the lowest income bracket in the table under subsection (c).'.

(2) Section 1(h) of such Code is amended by striking paragraph (13).

(3) Section 15 of such Code is amended by adding at the end the following new subsection:

`(f) RATE REDUCTIONS ENACTED BY ECONOMIC STIMULUS TAX CUT ACT OF 2001- This section shall not apply to any change in rates under subsection (i) of section 1 (relating to rate reductions in 2001).'.

(4) Section 3402(p)(2) of such Code is amended by striking `equal to 15 percent of such payment' and inserting `equal to the product of the lowest rate of tax under section 1(c) and such payment'.

(d) EFFECTIVE DATES-

(1) IN GENERAL- Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years beginning after December 31, 2000.

(2) AMENDMENTS TO WITHHOLDING PROVISION- The amendments made by subsection (b) and subsection (c)(4) shall apply to amounts paid after June 30, 2001.

END