Taxpayer Debt Buy-Down Act

Summary: Taxpayer Debt Buy-Down Act - Amends the Internal Revenue Code to allow individuals with adjusted income tax liability to designate on their tax returns that a portion of such liability (not to exceed ten percent) be used to reduce the public debt. 
Establishes a Public Debt Reduction Trust Fund for the deposit of designated amounts.  Makes amounts in such Trust Fund available only to pay at maturity, or to redeem or buy before maturity, any obligation of the Federal Government included in the public debt (other than an obligation of the Federal Old-Age and Survivors Insurance Trust Fund, the Civil Service Retirement and Disability Fund, or the Department of Defense Military Retirement Fund). Prohibits the reissuance of any obligation which is paid, redeemed, or bought with amounts from the Trust Fund. 
Amends the Balanced Budget and Emergency Deficit Control Act of 1985 (Gramm-Rudman-Hollings Act) to provide for the sequestration of amounts designated to the Trust Fund. Specifies accounts exempt from such sequestration.  Includes aggregated amounts designated to the Trust Fund and amounts sequestered to reduce the public debt in sequestration preview and final reports.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Taxpayer Debt Buy-Down Act''.

SEC. 2. DESIGNATION OF AMOUNTS FOR REDUCTION OF PUBLIC DEBT.

    (a) In General.--Subchapter A of chapter 61 of the Internal Revenue 
Code of 1986 (relating to returns and records) is amended by adding at 
the end the following new part:

          ``PART IX--DESIGNATION FOR REDUCTION OF PUBLIC DEBT
                              ``Sec. 6097. Designation.
``SEC. 6097. DESIGNATION.

    ``(a) In General.--Every individual with adjusted income tax 
liability for any taxable year may designate that a portion of such 
liability (not to exceed 10 percent thereof) shall be used to reduce 
the public debt.
    ``(b) Manner and Time of Designation.--A designation under 
subsection (a) may be made with respect to any taxable year only at the 
time of filing the return of tax imposed by chapter 1 for the taxable 
year. The designation shall be made on the first page of the return or 
on the page bearing the taxpayer's signature.
    ``(c) Adjusted Income Tax Liability.--For purposes of this section, 
the term `adjusted income tax liability' means income tax liability (as 
defined in section 6096(b)) reduced by any amount designated under 
section 6096 (relating to designation of income tax payments to 
Presidential Election Campaign Fund).''
    (b) Clerical Amendment.--The table of parts for such subchapter A 
is amended by adding at the end the following new item:

                              ``Part IX. Designation for reduction of 
                                        public debt.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after the date of the enactment of this 
Act.

SEC. 3. PUBLIC DEBT REDUCTION TRUST FUND.

    (a) In General.--Subchapter A of chapter 98 of the Internal Revenue 
Code of 1986 (relating to trust fund code) is amended by adding at the 
end the following new section:

``SEC. 9512. PUBLIC DEBT REDUCTION TRUST FUND.

    ``(a) Creation of Trust Fund.--There is established in the Treasury 
of the United States a trust fund to be known as the `Public Debt 
Reduction Trust Fund', consisting of any amount appropriated or 
credited to the Trust Fund as provided in this section or section 
9602(b).
    ``(b) Transfers to Trust Fund.--There are hereby appropriated to 
the Public Debt Reduction Trust Fund amounts equivalent to the amounts 
designated under section 6097 (relating to designation for public debt 
reduction).
    ``(c) Expenditures.--Amounts in the Public Debt Reduction Trust 
Fund shall be used by the Secretary of the Treasury for purposes of 
paying at maturity, or to redeem or buy before maturity, any obligation 
of the Federal Government included in the public debt (other than an 
obligation held by the Federal Old-Age and Survivors Insurance Trust 
Fund, the Civil Service Retirement and Disability Fund, or the 
Department of Defense Military Retirement Fund). Any obligation which 
is paid, redeemed, or bought with amounts from the Public Debt 
Reduction Trust Fund shall be canceled and retired and may not be 
reissued.''
    (b) Clerical Amendment.--The table of sections for such subchapter 
is amended by adding at the end the following new item:

                              ``Sec. 9512. Public Debt Reduction Trust 
                                        Fund.''
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts received after the date of the enactment of this Act.
SEC. 4. TAXPAYER-GENERATED SEQUESTRATION OF FEDERAL SPENDING TO REDUCE 
              THE PUBLIC DEBT.

    (a) Sequestration To Reduce the Public Debt.--Part C of the 
Balanced Budget and Emergency Deficit Control Act of 1985 is amended by 
adding after section 253 the following new section:
``SEC. 253A. SEQUESTRATION TO REDUCE THE PUBLIC DEBT.

    ``(a) Sequestration.--Notwithstanding sections 255 and 256, within 
15 days after Congress adjourns to end a session, and on the same day 
as a sequestration (if any) under sections 251, 252, and 253, but after 
any sequestration of budget-year budgetary resources required by those 
sections, there shall be a sequestration equivalent to the estimated 
aggregate amount designated under section 6097 of the Internal Revenue 
Code of 1986 for the calendar year two years before the year in which 
that session of Congress started, as estimated by the Department of the 
Treasury on October 1 in the year after the applicable tax year and as 
modified by the total of (1) any amounts by which net discretionary 
spending is reduced by legislation below the discretionary spending 
limits enacted after the enactment of this section related to the 
fiscal year subject to the sequestration or, in the absence of such 
limits, any net reduction below discretionary outlays for fiscal year 
1995 and (2) the net deficit change that has resulted from all direct 
spending legislation enacted after the enactment of this section 
related to the fiscal year subject to the sequestration, as estimated 
by OMB. Within 5 days after the enactment of any such direct spending 
legislation, OMB shall estimate the change in spending resulting from 
that legislation for the 5-fiscal-year period beginning with the first 
fiscal year for which that legislation becomes effective and transmit a 
report to the House of Representatives and the Senate containing that 
estimate. Only the estimated deficit reduction included in the 5-year 
estimate made at the time the legislation is enacted shall be used for 
purposes of determining whether there shall be a sequestration under 
this subsection. Notwithstanding the preceding two sentences, any 
estimates of direct spending made by OMB under this subsection for any 
legislation that first takes effect in fiscal year 1995, 1996, or 1997 
shall include estimates of the direct spending effects through fiscal 
year 2002 and those estimates shall be used for purposes of determining 
whether there shall be a sequestration under this subsection. If the 
reduction in spending under paragraphs (1) and (2) for a fiscal year is 
greater than the estimated aggregate amount designated under section 
6097 of the Internal Revenue Code of 1986 respecting that fiscal year, 
then there shall be no sequestration under this section.
    ``(b) Applicability.--
            ``(1) In general.--Except as provided by paragraph (2), 
        each account of the United States shall be reduced by a dollar 
        amount calculated by multiplying the level of budgetary 
        resources in that account at that time by the uniform 
        percentage necessary to carry out subsection (a). All 
        obligational authority reduced under this section shall be done 
        in a manner that makes such reductions permanent.
            ``(2) Exempt accounts.--(A) No order issued under this part 
        may--
                    ``(i) reduce benefits payable to the old-age and 
                survivors insurance program established under title II 
                of the Social Security Act;
                    ``(ii) reduce payments for net interest (all of 
                major functional category 900); or
                    ``(iii) make any reduction in the following 
                accounts:
                            ``Federal Deposit Insurance Corporation, 
                        Bank Insurance Fund;
                            ``Federal Deposit Insurance Corporation, 
                        FSLIC Resolution Fund;
                            ``Federal Deposit Insurance Corporation, 
                        Savings Association Insurance Fund;
                            ``National Credit Union Administration, 
                        credit union share insurance fund; or
                            ``Resolution Trust Corporation.
            ``(B) The following budget accounts, activities within 
        accounts, or income shall be exempt from sequestration--
                    ``(i) all payments to trust funds from excise taxes 
                or other receipts or collections properly creditable to 
                those trust funds;
                    ``(ii) offsetting receipts and collections;
                    ``(iii) all payments from one Federal direct 
                spending budget account to another Federal budget 
                account; all intragovernmental funds including those 
                from which funding is derived primarily from other 
                Government accounts, except to the extent that such 
                funds are augmented by direct appropriations for the 
                fiscal year for which the order is in effect; and those 
                obligations of discretionary accounts or activities 
                that are financed by intragovernmental payments from 
                another discretionary account or activity;
                    ``(iv) expenses to the extent they result from 
                private donations, bequests, or voluntary contributions 
                to the Government;
                    ``(v) nonbudgetary activities, including but not 
                limited to--
                            ``(I) credit liquidating and financing 
                        accounts;
                            ``(II) the Pension Benefit Guarantee 
                        Corporation Trust Funds;
                            ``(III) the Thrift Savings Fund;
                            ``(IV) the Federal Reserve System; and
                            ``(V) appropriations for the District of 
                        Columbia to the extent they are appropriations 
                        of locally raised funds;
                    ``(vi) payments resulting from Government 
                insurance, Government guarantees, or any other form of 
                contingent liability, to the extent those payments 
                result from contractual or other legally binding 
                commitments of the Government at the time of any 
                sequestration;
                    ``(vii) the following accounts, which largely 
                fulfill requirements of the Constitution or otherwise 
                make payments to which the Government is committed--
                            ``Administration of Territories, Northern 
                        Mariana Islands Covenant grants (14-0412-0-1-
                        806);
                            ``Bureau of Indian Affairs, miscellaneous 
                        payments to Indians (14-2303-0-1-452);
                            ``Bureau of Indian Affairs, miscellaneous 
                        trust funds, tribal trust funds (14-9973-0-7-
                        999);
                            ``Claims, defense;
                            ``Claims, judgments, and relief act (20-
                        1895-0-1-806);
                            ``Compact of Free Association, economic 
                        assistance pursuant to Public Law 99-658 (14-
                        0415-0-1-806);
                            ``Compensation of the President (11-0001-0-
                        1-802);
                            ``Customs Service, miscellaneous permanent 
                        appropriations (20-9992-0-2-852);
                            ``Eastern Indian land claims settlement 
                        fund (14-2202-0-1-806);
                            ``Farm Credit System Financial Assistance 
                        Corporation, interest payments (20-1850-0-1-
                        351);
                            ``Internal Revenue collections of Puerto 
                        Rico (20-5737-0-2-852);
                            ``Panama Canal Commission, operating 
                        expenses and capital outlay (95-5190-0-2-403);
                            ``Payments of Vietnam and USS Pueblo 
                        prisoner-of-war claims (15-0104-0-1-153);
                            ``Payments to copyright owners (03-5175-0-
                        2-376);
                            ``Payments to the United States 
                        territories, fiscal assistance (14-0418-0-1-
                        801);
                            ``Salaries of Article III judges;
                            ``Soldier's and Airmen's Home, payment of 
                        claims (84-8930-0-7-705);
                            ``Washington Metropolitan Area Transit 
                        Authority, interest payments (46-0300-0-1-401).
                    ``(viii) the following noncredit special, 
                revolving, or trust-revolving funds--
                            ``Coinage profit fund (20-5811-0-2-803);
                            ``Exchange Stabilization Fund (20-4444-0-3-
                        155);
                            ``Foreign Military Sales trust fund (11-
                        82232-0-7-155); and
                    ``(ix)(I) any amount paid as regular unemployment 
                compensation by a State from its account in the 
                Unemployment Trust Fund (established by section 904(a) 
                of the Social Security Act);
                    ``(II) any advance made to a State from the Federal 
                unemployment account (established by section 904(g) of 
                such Act) under title XII of such Act and any advance 
                appropriated to the Federal unemployment account 
                pursuant to section 1203 of such Act; and
                    ``(III) any payment made from the Federal Employees 
                Compensation Account (as established under section 909 
                of such Act) for the purpose of carrying out chapter 85 
                of title 5, United States Code, and funds appropriated 
                or transferred to or otherwise deposited in such 
                Account.
            ``(3) Federal administrative expenses.--
                    ``(A) Administrative expenses incurred by the 
                departments and agencies, including independent 
                agencies, of the Federal Government in connection with 
                any program, project, activity, or account shall be 
                subject to reduction pursuant to any sequestration 
                order, without regard to the exemptions under paragraph 
                (2) and regardless of whether the program, project, 
                activity, or account is self-supporting and does not 
                receive appropriations.
                    ``(B) Payments made by the Federal Government to 
                reimburse or match administrative costs incurred by a 
                State or political subdivision under or in connection 
                with any program, project, activity, or account shall 
                not be considered administrative expenses of the 
                Federal Government for purposes of this section, and 
                shall be subject to sequestration to the extent (and 
                only to the extent) that other payments made by the 
                Federal Government under or in connection with that 
                program, project, activity, or account are subject to 
                that reduction or sequestration; except that Federal 
                payments made to a State as reimbursement of 
                administrative costs incurred by that State under or in 
                connection with the unemployment compensation programs 
                specified in paragraph (2)(ix) shall be subject to 
                reduction or sequestration under this part 
                notwithstanding the exemption otherwise granted to such 
                programs under that paragraph.''.
    (b) Reports.--Section 254 of the Balanced Budget and Emergency 
Deficit Control Act of 1985 is amended--
            (1) in subsection (a), by inserting after the item relating 
        to the GAO compliance report the following:
    ``October 1 . . . Department of Treasury report to Congress 
estimating amount of income tax designated pursuant to section 6097 of 
the Internal Revenue Code of 1986.'';
            (2) in subsection (d)(1), by inserting ``, and 
        sequestration to reduce the public debt,'';
            (3) in subsection (d), by redesignating paragraph (5) as 
        paragraph (6) and by inserting after paragraph (4) the 
        following new paragraph:
            ``(5) Sequestration to reduce the public debt reports.--The 
        preview reports shall set forth for the budget year estimates 
        for each of the following:
                    ``(A) The aggregate amount designated under section 
                6097 of the Internal Revenue Code of 1986 for the 
                calendar year two years before the year in which the 
                budget year begins.
                    ``(B) The amount of reductions required under 
                section 253A and the deficit remaining after those 
                reductions have been made.
                    ``(C) The sequestration percentage necessary to 
                achieve the required reduction in accounts under 
                section 253A(b).''; and
            (4) in subsection (g), by redesignating paragraphs (4) and 
        (5) as paragraphs (5) and (6), respectively, and by inserting 
        after paragraph (3) the following new paragraph:
            ``(4) Sequestration to reduce the public debt reports.--The 
        final reports shall contain all of the information contained in 
        the public debt taxation designation report required on October 
        1.''
    (c) Effective Date.--Notwithstanding section 275(b) of the Balanced 
Budget and Emergency Deficit Control Act of 1985, the expiration date 
set forth in that section shall not apply to the amendments made by 
this section. The amendments made by this section shall cease to have 
any effect after the first fiscal year during which there is no public 
debt.