Debt Buy-Down Act

Summary: Debt Buy-Down Act  This bill amends the Internal Revenue Code to allow individual taxpayers to designate up to 10% of their adjusted income tax liability for the reduction of the public debt.  The bill also establishes in the Treasury a Public Debt Reduction Trust Fund to hold tax revenues generated by this bill for the reduction of the public debt. The bill amends the Balanced Budget and Emergency Deficit Control Act of 1985 to: (1) require spending to be reduced annually by an amount equivalent to the revenue generated by this bill, and (2) enforce the requirement for spending reductions using a sequestration, with exemptions for Social Security retirement benefits, veterans benefits, and net interest payments on the debt.  (Sequestration is a process of automatic, usually across-the-board spending reductions under which budgetary resources are permanently cancelled to enforce specific budget policy goals.) 

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``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 adjusted income tax liability of an individual for any taxable year 
is the income tax liability of the individual for the taxable year 
determined under section 6096(b), reduced by any amount designated 
under section 6096(a).''.
    (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 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 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, 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 
inserting after section 253 the following new section:

``SEC. 253A. SEQUESTRATION TO REDUCE THE PUBLIC DEBT.

    ``(a) Sequestration.--Within 15 days after Congress adjourns to end 
a session, and on the same day as sequestration (if any) under sections 
251, 252, and 253, and under section 5(b) of the Statutory Pay-As-You-
Go Act of 2010, but after any sequestration 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 last taxable year ending 1 year before the beginning of 
that session of Congress, as estimated by the Department of the 
Treasury on October 1 and as modified by the total of--
            ``(1) any amounts by which net discretionary spending is 
        reduced by an Act of Congress to be below the discretionary 
        spending limits that is enacted after the date of enactment of 
        this section and relate to the fiscal year subject to the 
        sequestration (or, in the absence of such limits, any net 
        deficit change from the baseline amount calculated under 
        section 257); and
            ``(2) the net deficit change that has resulted from all 
        direct spending legislation enacted after the date of enactment 
        of this section that relate to the fiscal year subject to the 
        sequestration, as estimated by the Office of Management and 
        Budget.
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 for that fiscal year, 
then there shall be no sequestration under this section.
    ``(b) Applicability.--
            ``(1) In general.--Notwithstanding sections 255 and 256, 
        and 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.--No order issued under this section 
        may--
                    ``(A) reduce benefits payable to the old-age and 
                survivors insurance program established under title II 
                of the Social Security Act;
                    ``(B) reduce retired or retainer pay payable to a 
                member or former member of the uniformed services; or
                    ``(C) reduce payments for net interest (all of 
                major functional category 900).''.
    (b) Reports.--Section 254 of the Balanced Budget and Emergency 
Deficit Control Act of 1985 is amended--
            (1) in subsection (a), by adding at the end of the table 
        the following new item:

    ``October 1....................
                                        Department of the Treasury 
                                                report to Congress 
                                                estimating amount of 
                                                income tax designated 
                                                pursuant to section 
                                                6097 of the Internal 
                                                Revenue Code of 
                                                1986.'';
            (2) in subsection (c)--
                    (A) in paragraph (1), by inserting ``, and 
                sequestration to reduce the public debt,'' after 
                ``sequestration'';
                    (B) by redesignating paragraph (5) as paragraph 
                (6); and
                    (C) by inserting after paragraph (4) the following:
            ``(5) Reports on sequestration to reduce the public debt.--
        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 last 
                taxable year ending before the budget year.
                    ``(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
            (3) in subsection (f)--
                    (A) by redesignating paragraphs (4) and (5) as 
                paragraphs (5) and (6), respectively; and
                    (B) by inserting after paragraph (3) the following:
            ``(4) Reports on sequestration to reduce the public debt.--
        The final reports shall contain all of the information 
        contained in the public debt taxation designation report 
        required on October 1.''.
    (c) Conforming Amendment.--The table of contents in section 250(a) 
of the Balanced Budget and Emergency Deficit Control Act of 1985 is 
amended by inserting after the item relating to section 253 the 
following:

``Sec. 253A. Sequestration to reduce the public debt.''.
    (d) Sunset.--The amendments made by this section shall cease to 
have force or effect after the first fiscal year during which there is 
no public debt.