A bill 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.

Summary: Economic Stimulus Tax Cut Act of 2001 - Amends the Internal Revenue Code to treat an eligible taxpayer as having made a payment of the lesser of the prior year's tax liability or a specified applicable amount against individual and employment taxes.Reduces specified individual tax rates.

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:

                                                         The applicable
``In the case of a taxpayer                                  amount is:
        described in:
    Section 1(a)..................................                $600 
    Section 1(b)..................................                $450 
    Section 1(c)..................................                $300 
    Section 1(d)..................................                $300 
    Paragraph (2).................................                $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.