To amend the Internal Revenue Code of 1986 to make permanent the deduction of State and local general sales taxes, and for other purposes.

Summary: Middle Class Tax Fairness Act of 2012 - Amends the Internal Revenue Code to make permanent the taxpayer election to deduct state and local general sales taxes in lieu of state and local income taxes.

Requires an individual taxpayer whose adjusted gross income exceeds $1 million to pay a minimum tax rate of 30% of the excess of the taxpayer's adjusted gross income over the taxpayer's modified charitable contribution deduction for the taxable year (tentative fair share tax). Establishes the amount of such tax as the excess (if any) of the tentative fair share tax over the excess of: (1) the sum of the taxpayer's regular tax liability, the alternative minimum tax (AMT) amount, and the payroll tax for the taxable year; over (2) certain tax credits. Provides for a phase-in of such tax. Requires an inflation adjustment to the $1 million income threshold for taxable years beginning after 2013.

Requires any savings resulting from the enactment of this Act to be used for federal budget deficit reduction or reduction of the federal debt.

SECTION 1. SHORT TITLE, ETC.

    (a) Short Title.--This Act may be cited as the ``Middle Class Tax 
Fairness Act of 2012''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title, etc.
 TITLE I--PERMANENT EXTENSION OF DEDUCTION OF STATE AND LOCAL GENERAL 
                              SALES TAXES

Sec. 101. Permanent extension of deduction of State and local general 
                            sales taxes.
                       TITLE II--REVENUE OFFSETS

          Subtitle A--Fair Share Tax on High-Income Taxpayers

Sec. 201. Fair share tax on high-income taxpayers.
                       Subtitle B--Miscellaneous

Sec. 211. Deficit reduction.
Sec. 212. Budgetary effects.

 TITLE I--PERMANENT EXTENSION OF DEDUCTION OF STATE AND LOCAL GENERAL 
                              SALES TAXES

SEC. 101. PERMANENT EXTENSION OF DEDUCTION OF STATE AND LOCAL GENERAL 
              SALES TAXES.

    (a) In General.--Subparagraph (I) of section 164(b)(5) of the 
Internal Revenue Code of 1986 is amended by striking ``, and before 
January 1, 2012''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 2011.

                       TITLE II--REVENUE OFFSETS

          Subtitle A--Fair Share Tax on High-Income Taxpayers

SEC. 201. FAIR SHARE TAX ON HIGH-INCOME TAXPAYERS.

    (a) In General.--Subchapter A of chapter 1 of the Internal Revenue 
Code of 1986 is amended by adding at the end the following new part:

          ``PART VII--FAIR SHARE TAX ON HIGH-INCOME TAXPAYERS

``Sec. 59B. Fair share tax.

``SEC. 59B. FAIR SHARE TAX.

    ``(a) General Rule.--
            ``(1) Phase-in of tax.--In the case of any high-income 
        taxpayer, there is hereby imposed for a taxable year (in 
        addition to any other tax imposed by this subtitle) a tax equal 
        to the product of--
                    ``(A) the amount determined under paragraph (2), 
                and
                    ``(B) a fraction (not to exceed 1)--
                            ``(i) the numerator of which is the excess 
                        of--
                                    ``(I) the taxpayer's adjusted gross 
                                income, over
                                    ``(II) the dollar amount in effect 
                                under subsection (c)(1), and
                            ``(ii) the denominator of which is the 
                        dollar amount in effect under subsection 
                        (c)(1).
            ``(2) Amount of tax.--The amount of tax determined under 
        this paragraph is an amount equal to the excess (if any) of--
                    ``(A) the tentative fair share tax for the taxable 
                year, over
                    ``(B) the excess of--
                            ``(i) the sum of--
                                    ``(I) the regular tax liability (as 
                                defined in section 26(b)) for the 
                                taxable year,
                                    ``(II) the tax imposed by section 
                                55 for the taxable year, plus
                                    ``(III) the payroll tax for the 
                                taxable year, over
                            ``(ii) the credits allowable under part IV 
                        of subchapter A (other than sections 27(a), 31, 
                        and 34).
    ``(b) Tentative Fair Share Tax.--For purposes of this section--
            ``(1) In general.--The tentative fair share tax for the 
        taxable year is 30 percent of the excess of--
                    ``(A) the adjusted gross income of the taxpayer, 
                over
                    ``(B) the modified charitable contribution 
                deduction for the taxable year.
            ``(2) Modified charitable contribution deduction.--For 
        purposes of paragraph (1)--
                    ``(A) In general.--The modified charitable 
                contribution deduction for any taxable year is an 
                amount equal to the amount which bears the same ratio 
                to the deduction allowable under section 170 (section 
                642(c) in the case of a trust or estate) for such 
                taxable year as--
                            ``(i) the amount of itemized deductions 
                        allowable under the regular tax (as defined in 
                        section 55) for such taxable year, determined 
                        after the application of section 68, bears to
                            ``(ii) such amount, determined before the 
                        application of section 68.
                    ``(B) Taxpayer must itemize.--In the case of any 
                individual who does not elect to itemize deductions for 
                the taxable year, the modified charitable contribution 
                deduction shall be zero.
    ``(c) High-Income Taxpayer.--For purposes of this section--
            ``(1) In general.--The term `high-income taxpayer' means, 
        with respect to any taxable year, any taxpayer (other than a 
        corporation) with an adjusted gross income for such taxable 
        year in excess of $1,000,000 (50 percent of such amount in the 
        case of a married individual who files a separate return).
            ``(2) Inflation adjustment.--
                    ``(A) In general.--In the case of a taxable year 
                beginning after 2013, the $1,000,000 amount under 
                paragraph (1) shall be increased by an amount equal 
                to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for the 
                        calendar year in which the taxable year begins, 
                        determined by substituting `calendar year 2012' 
                        for `calendar year 1992' in subparagraph (B) 
                        thereof.
                    ``(B) Rounding.--If any amount as adjusted under 
                subparagraph (A) is not a multiple of $10,000, such 
                amount shall be rounded to the next lowest multiple of 
                $10,000.
    ``(d) Payroll Tax.--For purposes of this section, the payroll tax 
for any taxable year is an amount equal to the excess of--
            ``(1) the taxes imposed on the taxpayer under sections 
        1401, 1411, 3101, 3201, and 3211(a) (to the extent such taxes 
        are attributable to the rate of tax in effect under section 
        3101) with respect to such taxable year or wages or 
        compensation received during the taxable year, over
            ``(2) the deduction allowable under section 164(f) for such 
        taxable year.
    ``(e) Special Rule for Estates and Trusts.--For purposes of this 
section, in the case of an estate or trust, adjusted gross income shall 
be computed in the manner described in section 67(e).
    ``(f) Not Treated as Tax Imposed by This Chapter for Certain 
Purposes.--The tax imposed under this section shall not be treated as 
tax imposed by this chapter for purposes of determining the amount of 
any credit under this chapter (other than the credit allowed under 
section 27(a)) or for purposes of section 55.''.
    (b) Conforming Amendment.--Section 26(b)(2) of the Internal Revenue 
Code of 1986 is amended by redesignating subparagraphs (C) through (X) 
as subparagraphs (D) through (Y), respectively, and by inserting after 
subparagraph (B) the following new subparagraph:
                    ``(C) section 59B (relating to fair share tax),''.
    (c) Clerical Amendment.--The table of parts for subchapter A of 
chapter 1 of the Internal Revenue Code of 1986 is amended by adding at 
the end the following new item:

         ``Part VII. Fair Share Tax on High-Income Taxpayers''.

    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2012.

                       Subtitle B--Miscellaneous

SEC. 211. DEFICIT REDUCTION.

    The net amount of any savings realized as a result of the enactment 
of this Act and the amendments made by this Act (after any expenditures 
authorized by this Act and the amendments made by this Act) shall be 
deposited in the Treasury and used for Federal budget deficit reduction 
or, if there is no Federal budget deficit, for reducing the Federal 
debt in such manner as the Secretary of the Treasury considers 
appropriate.

SEC. 212. BUDGETARY EFFECTS.

    The budgetary effects of this Act, for the purpose of complying 
with the Statutory Pay-As-You-Go Act of 2010, shall be determined by 
reference to the latest statement titled ``Budgetary Effects of PAYGO 
Legislation'' for this Act, submitted for printing in the Congressional 
Record by the Chairman of the House Budget Committee, provided that 
such statement has been submitted prior to the vote on passage.