To amend the Internal Revenue Code of 1986 to allow the taxable income of each spouse of a married couple to be taxed using either the rates applicable to single filers or the rates applicable to joint returns.

Summary: Amends the Internal Revenue Code to permit a husband and wife to file a combined income tax return on which each spouse is taxed separately at the unmarried return rate.

SECTION 1. PURPOSE.

    This Act eliminates the marriage penalty.

SEC. 2. COMBINED RETURN TO WHICH UNMARRIED RATES APPLY.

    (a) In General.--Subpart B of part II of subchapter A of chapter 61 
of the Internal Revenue Code of 1986 (relating to income tax returns) 
is amended by inserting after section 6013 the following new section:

``SEC. 6013A. COMBINED RETURN WITH SEPARATE RATES.

    ``(a) General Rule.--A husband and wife may make a combined return 
of income taxes under subtitle A under which--
            ``(1) a separate taxable income is determined for each 
        spouse by applying the rules provided in this section, and
            ``(2) the tax imposed by section 1 is the aggregate amount 
        resulting from applying the separate rates set forth in section 
        1(c) to each such taxable income.
    ``(b) Treatment of Income.--For purposes of this section--
            ``(1) earned income (within the meaning of section 911(d)), 
        and any income received as a pension or annuity which arises 
        from an employer-employee relationship, shall be treated as the 
        income of the spouse who rendered the services, and
            ``(2) income from property shall be divided between the 
        spouses in accordance with their respective ownership rights in 
        such property.
    ``(c) Treatment of Deductions.--For purposes of this section--
            ``(1) except as otherwise provided in this subsection, the 
        deductions allowed by section 62(a) shall be allowed to the 
        spouse treated as having the income to which such deductions 
        relate,
            ``(2) the deduction for retirement savings described in 
        paragraph (7) of section 62(a) shall be allowed to the spouse 
        for whose benefit the savings are maintained,
            ``(3) the deduction for alimony described in paragraph (10) 
        of section 62(a) shall be allowed to the spouse who has the 
        liability to pay the alimony,
            ``(4) the deduction referred to in paragraph (16) of 
        section 62(a) (relating to contributions to medical savings 
        accounts) shall be allowed to the spouse with respect to whose 
        employment or self-employment such account relates,
            ``(5) the deductions allowable by section 151 (relating to 
        personal exemptions) shall be determined by requiring each 
        spouse to claim 1 personal exemption and by allocating the 
        personal exemptions under section 151(c) (relating to 
        dependents) as provided in paragraph (7) or in such other 
        manner as the spouses agree,
            ``(6) section 63 shall be applied as if such spouses were 
        not married, and
            ``(7) each spouse's share of all other deductions shall be 
        determined by multiplying the aggregate amount thereof by the 
        fraction--
                    ``(A) the numerator of which is such spouse's 
                adjusted gross income, and
                    ``(B) the denominator of which is the combined 
                adjusted gross incomes of the 2 spouses.
Any fraction determined under paragraph (7) shall be rounded to the 
nearest percentage point.
    ``(d) Treatment of Credits.--Credits shall be determined (and 
applied against the joint liability of the couple for tax) as if the 
spouses had filed a joint return.
    ``(e) Treatment as Joint Return.--Except as otherwise provided in 
this section or in the regulations prescribed hereunder, for purposes 
of this title (other than sections 1 and 63(c)) a combined return under 
this section shall be treated as a joint return.
    ``(f) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out this section.''.
    (b) Unmarried Rate Made Applicable.--So much of subsection (c) of 
section 1 of such Code as precedes the table is amended to read as 
follows:
    ``(c) Separate or Unmarried Return Rate.--There is hereby imposed 
on the taxable income of every individual (other than a married 
individual (as defined in section 7703) filing a joint return or a 
separate return, a surviving spouse as defined in section 2(a), or a 
head of household as defined in section 2(b)) a tax determined in 
accordance with the following table:''.
    (c) Basic Standard Deduction for Unmarried Individuals Made 
Applicable.--Subparagraph (C) of section 63(c)(2) of such Code is 
amended by striking all that follows the dollar amount and inserting 
``in the case of an individual who is not--
                            ``(i) a married individual filing a joint 
                        return or a separate return,
                            ``(ii) a surviving spouse, or
                            ``(iii) a head of household, or''.
    (d) Clerical Amendment.--The table of sections for subpart B of 
part II of subchapter A of chapter 61 of such Code is amended by 
inserting after the item relating to section 6013 the following:

                              ``Sec. 6013A. Combined return with 
                                        separate rates.''
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.