To amend the Internal Revenue Code of 1986 to phase out the taxation of social security benefits.

May 8, 2003

Mr. SHELBY introduced the following bill; which was read twice and referred to the Committee on Finance

To amend the Internal Revenue Code of 1986 to phase out the taxation of social security benefits.

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 `Older Americans Tax Fairness Act'.

SEC. 2. PHASEOUT OF TAXATION OF SOCIAL SECURITY BENEFITS.

(a) REPEAL OF INCREASE IN TAX ON SOCIAL SECURITY BENEFITS-

(1) IN GENERAL- Paragraph (2) of section 86(a) of the Internal Revenue Code of 1986 (relating to social security and tier 1 railroad retirement benefits) is amended by adding at the end the following new flush sentence:

`This paragraph shall not apply to any taxable year beginning after December 31, 2002.'

(2) EFFECTIVE DATE- The amendment made by this subsection shall apply to taxable years beginning after December 31, 2002.

(b) PHASEOUT OF BASE TAX-

(1) IN GENERAL- Subsection (a) of section 86 of the Internal Revenue Code of 1986 (relating to social security and tier 1 railroad retirement benefits) is amended by adding at the end the following new paragraph:

`(3) PHASEOUT OF BASE TAX- In the case of any taxable year beginning in a calendar year after 2003 and before 2008, paragraph (1) shall be applied by substituting the percentage determined under the following table for `one-half' each place it appears:

`In the case of a taxable

--

year beginning in cal-

--

endar year:

--The percentage is:

2004

--40 percent

2005

--30 percent

2006

--20 percent

2007

--10 percent.'.

(2) TERMINATION OF BASE TAX- Paragraph (1) of section 86(a) of such Code is amended by adding at the end the following new flush sentence:

`This paragraph shall not apply to any taxable year beginning after December 31, 2007.'

(3) EFFECTIVE DATE- The amendments made by this subsection shall apply to taxable years beginning after December 31, 2003.

END