A bill to amend the Internal Revenue Code of 1986 to provide a 10 percent individual income tax rate for taxable years beginning in 2001 and a payroll tax credit for those taxpayers who have no income tax liability in 2001.

Summary: Economic Stimulus Act of 2001 - Amends the Internal Revenue Code, as of tax year 2001, to reduce the 15 percent tax rate to ten percent for: (1) joint filers with taxable income below $20,000; (2) heads of household with taxable income below $16,000; and (3) single or married persons filing separately with taxable income below $10,000.Provides a payroll tax credit ($500 maximum) for qualifying taxpayers with no tax liability as of tax year 2001.

SECTION 1. SHORT TITLE; ETC.

    (a) Short Title.--This Act may be cited as the ``Economic Stimulus 
Act of 2001''.
    (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.

SEC. 2. REDUCTION IN INCOME TAX RATES FOR INDIVIDUALS.

    (a) In General.--Section 1 is amended by adding at the end the 
following new subsection:
    ``(i) Rate Reductions in 2001.--
            ``(1) New lowest rate bracket.--
                    ``(A) In general.--In the case of taxable years 
                beginning in 2001--
                            ``(i) the rate of tax under subsections 
                        (a), (b), (c), and (d) on taxable income not 
                        over the initial bracket amount shall be 10 
                        percent, and
                            ``(ii) the 15 percent rate of tax shall 
                        apply only to taxable income over the initial 
                        bracket amount.
                    ``(B) Initial bracket amount.--For purposes of this 
                subsection, the initial bracket amount is--
                            ``(i) $20,000 in the case of subsection 
                        (a),
                            ``(ii) $16,000 in the case of subsection 
                        (b), and
                            ``(iii) \1/2\ the amount applicable under 
                        clause (i) in the case of subsections (c) and 
                        (d).
            ``(2) Adjustment of tables.--The Secretary shall adjust the 
        tables prescribed under subsection (f) to carry out this 
        subsection.''.
    (b) Conforming Amendments.--
            (1) Subparagraph (B) of section 1(g)(7) is amended--
                    (A) by striking ``15 percent'' in clause (ii)(II) 
                and inserting ``the first bracket percentage'', and
                    (B) by adding at the end the following flush 
                sentence:
                ``For purposes of clause (ii), the first bracket 
                percentage is the percentage applicable to the lowest 
                income bracket in the table under subsection (c).''.
            (2) Section 1(h) is amended by striking paragraph (13).
            (3) Section 15 is amended by adding at the end the 
        following new subsection:
    ``(f) Rate Reductions Enacted by Economic Stimulus Act of 2001.--
This section shall not apply to any change in rates under subsection 
(i) of section 1 (relating to rate reductions in 2001).''.
            (4) Section 3402(p)(2) is amended by striking ``equal to 15 
        percent of such payment'' and inserting ``equal to the product 
        of the lowest rate of tax under section 1(c) and such 
        payment''.
    (c) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        beginning after December 31, 2000.
            (2) Amendment to withholding provision.--The amendment made 
        by subsection (b)(4) shall apply to amounts paid after the 60th 
        day after the date of the enactment of this Act.

SEC. 3. CREDIT AGAINST INDIVIDUAL EMPLOYMENT TAXES.

    (a) In General.--Subchapter B of chapter 65 (relating to rules of 
special application in the case of abatements, credits, and refunds) is 
amended by adding at the end the following new section:

``SEC. 6428. CREDIT AGAINST INDIVIDUAL EMPLOYMENT TAXES.

    ``(a) General Rule.--Except as otherwise provided in this section, 
each individual shall be treated as having made a payment against the 
tax imposed by chapter 1 for any taxable year beginning in 2001, in an 
amount equal to the lesser of--
            ``(1) the amount of the taxpayer's liability for tax for 
        the taxpayer's last taxable year beginning in calendar year 
        2000, or
            ``(2) $500.
    ``(b) Liability for Tax.--For purposes of this section, the 
liability for tax for the taxable year shall be the taxpayer's social 
security taxes (within the meaning of section 24(d)(3)) for the taxable 
year.
    ``(c) Date Payment Deemed Made.--
            ``(1) In general.--The payment provided by this section 
        shall be deemed made on July 1, 2001.
            ``(2) Remittance of payment.--The Secretary shall remit to 
        each taxpayer the payment described in paragraph (1) on July 1, 
        2001.
    ``(d) Certain Persons Not Eligible.--This section shall not apply 
to--
            ``(1) any individual with taxable income (as defined in 
        section 63) for the taxable year beginning in 2001,
            ``(2) any estate or trust, nor
            ``(3) any nonresident alien individual.''.
    (b) Conforming Amendment.--Section 1324(b)(2) of title 31, United 
States Code, is amended by inserting before the period ``, or enacted 
by the Economic Stimulus Act of 2001''.
    (c) Clerical Amendment.--The table of sections for subchapter B of 
chapter 65 is amended by adding at the end the following new item:

                              ``Sec. 6428. Credit against individual 
                                        employment taxes.''.
    (d) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.