Middle Class Tax Relief Act of 1998

Summary: Middle Class Tax Relief Act of 1998 - Amends the Internal Revenue Code to revise tax rates for:  (1) married individuals filing joint returns and surviving spouses (eliminates the marriage penalty); (2) heads of households; (3) other individuals; and (4) estates and trusts.

SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

    (a) Short Title.--This Act may be cited as the ``Middle Class Tax 
Relief Act of 1998''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.
    (c) Section 15 Not To Apply.--No amendment made by section 3 shall 
be treated as a change in a rate of tax for purposes of section 15 of 
the Internal Revenue Code of 1986.

SEC. 2. FINDINGS.

    The Congress hereby finds that--
            (1) the Congressional Budget Office has projected a Federal 
        budget surplus at the end of fiscal year 1998, the first 
        surplus in almost 30 years;
            (2) if there is such a surplus, a systematic plan should be 
        put in place to retire our $5,500,000,000,000 debt while 
        restoring the social security and other trust funds; and
            (3) once such a plan has been adopted in the context of a 
        balanced Federal budget and as an alternative to new Government 
        spending, Congress should provide broad-based tax relief that 
        will allow hard-working Americans to keep more of what they 
        earn and the freedom to provide for their own needs.

SEC. 3. REDUCTION OF INCOME TAX RATES; ELIMINATION OF MARRIAGE PENALTY.

    (a) General Rule.--Section 1 (relating to tax imposed) is amended 
by striking subsections (a) through (e) and inserting the following:
    ``(a) Married Individuals Filing Joint Returns and Surviving 
Spouses.--There is hereby imposed on the taxable income of--
            ``(1) every married individual (as defined in section 7703) 
        who makes a single return jointly with his spouse under section 
        6013, and
            ``(2) every surviving spouse (as defined in section 2(a)),
a tax determined in accordance with the following table:

``If taxable income is:             The tax is:
    Not over $70,000...............
                                        15% of taxable income.
    Over $70,000 but not over 
        $102,300.
                                        $10,500, plus 28% of the excess 
                                                over $70,000.
    Over $102,300 but not over 
        $155,950.
                                        $19,544, plus 31% of the excess 
                                                over $102,300.
    Over $155,950 but not over 
        $278,450.
                                        $36,175.50, plus 36% of the 
                                                excess over $155,950.
    Over $278,450..................
                                        $80,275.50, plus 39.6% of the 
                                                excess over $278,450.
    ``(b) Heads of Households.--There is hereby imposed on the taxable 
income of every head of a household (as defined in section 2(b)) a tax 
determined in accordance with the following table:

``If taxable income is:             The tax is:
    Not over $52,600...............
                                        15% of taxable income.
    Over $52,600 but not over 
        $87,700.
                                        $7,890, plus 28% of the excess 
                                                over $52,600.
    Over $87,700 but not over 
        $142,000.
                                        $17,718, plus 31% of the excess 
                                                over $87,700.
    Over $142,000 but not over 
        $278,450.
                                        $34,551, plus 36% of the excess 
                                                over $142,000.
    Over $278,450..................
                                        $83,673 plus 39.6% of the 
                                                excess over $278,450.
    ``(c) Other Individuals.--There is hereby imposed on the taxable 
income of every individual (other than an individual to whom subsection 
(a) or (b) applies) a tax determined in accordance with the following 
table:

``If taxable income is:             The tax is:
    Not over $35,000...............
                                        15% of taxable income.
    Over $35,000 but not over 
        $61,400.
                                        $5,250, plus 28% of the excess 
                                                over $35,000.
    Over $61,400 but not over 
        $128,100.
                                        $12,642, plus 31% of the excess 
                                                over $61,400.
    Over $128,100 but not over 
        $278,450.
                                        $33,319, plus 36% of the excess 
                                                over $128,100.
    Over $278,450..................
                                        $87,445, plus 39.6% of the 
                                                excess over $278,450.
    ``(d) Estates and Trusts.--There is hereby imposed on the taxable 
income of--
            ``(1) every estate, and
            ``(2) every trust,
taxable under this subsection a tax determined in accordance with the 
following table:

``If taxable income is:             The tax is:
    Not over $1,700................
                                        15% of taxable income.
    Over $1,700 but not over $4,000
                                        $255, plus 28% of the excess 
                                                over $1,700.
    Over $4,000 but not over $6,100
                                        $899, plus 31% of the excess 
                                                over $4,000.
    Over $6,100 but not over $8,350
                                        $1,550, plus 36% of the excess 
                                                over $6,100.
    Over $8,350....................
                                        $2,360, plus 39.6% of the 
                                                excess over $8,350.''.
    (b) Inflation Adjustment To Apply in Determining Rates for 1999.--
Subsection (f) of section 1 is amended--
            (1) by striking ``1993'' in paragraph (1) and inserting 
        ``1998'',
            (2) by striking ``1992'' in paragraph (3)(B) and inserting 
        ``1997'', and
            (3) by striking paragraph (7).
    (c) Conforming Amendments.--
            (1) The following provisions are each amended by striking 
        ``1992'' and inserting ``1997'' each place it appears:
                    (A) Section 25A(h).
                    (B) Section 32(j)(1)(B).
                    (C) Section 41(e)(5)(C).
                    (D) Section 68(b)(2)(B).
                    (E) Section 135(b)(2)(B)(ii).
                    (F) Section 151(d)(4).
                    (G) Section 221(g)(1)(B).
                    (H) Section 512(d)(2)(B).
                    (I) Section 513(h)(2)(C)(ii).
                    (J) Section 877(a)(2).
                    (K) Section 911(b)(2)(D)(ii)(II).
                    (L) Section 4001(e)(1)(B).
                    (M) Section 4261(e)(4)(A)(ii).
                    (N) Section 6039F(d).
                    (O) Section 6334(g)(1)(B).
                    (P) Section 7430(c)(1).
            (2) Subparagraph (B) of section 1(f)(6) is amended to read 
        as follows:
                    ``(B) Married individuals filing separately.--In 
                the case of a married individual filing a separate 
                return, subparagraph (A) shall be applied by 
                substituting `$25' for `$50' each place it appears for 
                purposes of determining any increase in the dollar 
                amount under section 63(c)(2)(D), the $50,000 amount in 
                section 68(b)(1), and the dollar amount in section 
                151(d)(3)(C)(iv).''
            (3) Subclause (II) of section 42(h)(6)(G)(i) is amended by 
        striking ``1987'' and inserting ``1997''.
            (4) Subparagraph (B) of section 59(j)(2) is amended by 
        striking ``, determined by substituting `1997' for `1992' in 
        subparagraph (B) thereof''.
            (5) Subparagraph (B) of section 63(c)(4) is amended by 
        striking ``by substituting for'' and all that follows and 
        inserting ``by substituting for `calendar year 1997' in 
        subparagraph (B) thereof `calendar year 1987' in the case of 
        the dollar amounts contained in paragraph (2) or (5)(A) or 
        subsection (f).''
            (6) Subparagraph (B) of section 132(f)(6) is amended by 
        inserting before the period ``, determined by substituting 
        `calendar year 1992' for `calendar year 1997' in subparagraph 
        (B) thereof''.
            (7) Paragraph (2) of section 220(g) of such Code is amended 
        by striking ``by substituting `calendar year 1997' for 
        `calendar year 1992' in subparagraph (B) thereof''.
            (8) Subparagraph (B) of section 685(c)(3) is amended by 
        striking ``, by substituting `calendar year 1997' for `calendar 
        year 1992' in subparagraph (B) thereof''.
            (9) Subparagraph (B) of section 2032A(a)(3) is amended by 
        striking ``by substituting `calendar year 1997' for `calendar 
        year 1992' in subparagraph (B) thereof''.
            (10) Subparagraph (B) of section 2503(b)(2) is amended by 
        striking ``by substituting `calendar year 1997' for `calendar 
        year 1992' in subparagraph (B) thereof''.
            (11) Paragraph (2) of section 2631(c) is amended by 
        striking ``by substituting `calendar year 1997' for `calendar 
        year 1992' in subparagraph (B) thereof''.
            (12) Subparagraph (B) of section 6601(j)(3) is amended by 
        striking ``by substituting `calendar year 1997' for `calendar 
        year 1992' in subparagraph (B) thereof''.
            (13) Sections 468B(b)(1), 511(b)(1), 641(a), 641(d)(2)(A), 
        and 685(d) are each amended by striking ``section 1(e)'' each 
        place it appears and inserting ``section 1(d)''.
            (14) Sections 1(f)(2) and 904(b)(3)(E)(ii) are each amended 
        by striking ``(d), or (e)'' and inserting ``or (d)''.
            (15) Paragraph (1) of section 1(f) is amended by striking 
        ``(d), and (e)'' and inserting ``and (d)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1998.