Budget Surplus Dividend Act of 1998

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Budget Surplus Dividend Act of 
1998''.

SEC. 2. 33\1/3\ PERCENT OF FEDERAL BUDGET SURPLUS TO REIMBURSE 
              EMPLOYERS AND EMPLOYEES FOR A PORTION OF THEIR SOCIAL 
              SECURITY TAXES.

    (a) In General.--Subpart C of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to refundable credits) 
is amended by redesignating section 35 as section 36 and by inserting 
after section 34 the following new section:

``SEC. 35. CREDIT FOR PORTION OF SOCIAL SECURITY TAXES.

    ``(a) Allowance of Credit.--In the case of a taxable year to which 
this section applies, there shall be allowed as a credit against the 
tax imposed by this subtitle for the taxable year an amount equal to 
the applicable percentage of the taxpayer's social security taxes for 
the taxable year.
    ``(b) Taxable Years to Which Section Applies.--
            ``(1) In general.--Except as provided by paragraph (2), 
        this section shall apply to any taxable year beginning in the 
        first calendar year beginning after a fiscal year if there is a 
        Federal budget surplus for such fiscal year of more than 
        $1,000,000,000.
            ``(2) Social security trust funds required to be solvent 
        before credit allowed.--This section shall not apply to any 
        taxable year beginning before the date on which the Board of 
        Trustees of the Federal Old Age and Survivors Insurance Trust 
        Fund and the Federal Disability Insurance Trust Fund makes the 
        solvency determination described in section 5 of the Budget 
        Surplus Dividend Act of 1998.
    ``(c) Applicable Percentage.--For purposes of this section--
            ``(1) In general.--The term `applicable percentage' means--
                    ``(A) the base percentage with respect to so much 
                of the taxpayer's social security taxes as does not 
                exceed $3,000, and
                    ``(B) the phasedown percentage with respect to so 
                much of the taxpayer's social security taxes as exceeds 
                $3,000.
            ``(2) Base percentage.--The term `base percentage' means, 
        for taxable years beginning in a calendar year, the percentage 
        which the Secretary estimates will result in a reduction of 
        revenues to the Treasury by reason of this section for such 
        taxable year equal to 33\1/3\ percent of the Federal 
budget surplus for the most recent fiscal year ending before such 
calendar year. Proper adjustments shall be made in the percentage 
determined under the preceding sentence with respect to any subsequent 
fiscal year to the extent that prior estimates were in excess of or 
less than the proper percentage.
            ``(3) Phasedown percentage.--The term `phasedown 
        percentage' means the base percentage reduced (but not below 
        zero) by the number of percentage points which bears the same 
        ratio to the base percentage as--
                    ``(A) the excess of the taxpayer's social security 
                taxes over $3,000 bears to
                    ``(B) the excess of the maximum social security 
                taxes over $3,000.
            ``(4) Maximum social security taxes.--The term `maximum 
        social security taxes' means the amount which would be the 
        social security taxes of the taxpayer if the amount on which 
        such taxes are determined were equal to the maximum amount of 
        remuneration which may be taken into account under section 
        3101(a).
            ``(5) Special rules.--
                    ``(A) Dollar limitations on per employee basis.--
                The dollar limitations in paragraphs (1) and (3) shall 
                be applied on a per employee basis.
                    ``(B) Self-employed individuals.--Paragraphs (1) 
                and (3) shall be applied by substituting `$6,000' for 
                `$3,000' each place it appears in the case of the taxes 
                referred to in subparagraph (C) or (D) of subsection 
                (d)(1).
    ``(d) Social Security Taxes.--For purposes of this section--
            ``(1) In general.--The term `social security taxes' means, 
        with respect to any taxpayer for any taxable year--
                    ``(A) the taxes imposed by sections 3101 and 
                3201(a) (relating to taxes on employees) on amounts 
                received by the taxpayer during the calendar year in 
                which the taxable year begins,
                    ``(B) the taxes imposed by sections 3111 and 
                3221(a) (relating to taxes on employers) on amounts 
                paid by the taxpayer during the calendar year in which 
                the taxable year begins,
                    ``(C) the taxes imposed by section 1401 on the 
                self-employment income of the taxpayer for the taxable 
                year, and
                    ``(D) the taxes imposed by section 3211(a)(1) on 
                amounts received by the taxpayer during the calendar 
                year in which the taxable year begins.
            ``(2) Coordination with special refund of social security 
        taxes.--The term `social security taxes' shall not include any 
        taxes to the extent the taxpayer is entitled to a special 
        refund of such taxes under section 6413(c).
            ``(3) Special rule.--Any amounts paid pursuant to an 
        agreement under section 3121(l) (relating to agreements entered 
        into by American employers with respect to foreign affiliates) 
        which are equivalent to the taxes referred to in paragraph 
        (1)(A) shall be treated as taxes referred to in such 
        paragraph.''
    (b) Clerical Amendment.--The table of sections for subpart C of 
part IV of subchapter A of chapter 1 of such Code is amended by 
striking the item relating to section 35 and inserting the following:

                              ``Sec. 35. Credit for portion of social 
                                        security taxes.
                              ``Sec. 36. Overpayments of tax.''

SEC. 3. APPROPRIATION TO USE 33\1/3\ PERCENT OF FEDERAL BUDGET SURPLUS 
              TO REDUCE OUTSTANDING PUBLIC DEBT.

    There is hereby appropriated for the first fiscal year following 
each fiscal year (beginning after this Act takes effect) for which 
there is a Federal budget surplus an amount equal to 33\1/3\ percent of 
such surplus for purpose of paying at maturity, or to redeem or buy 
before maturity, obligations of the Government included in the public 
debt. An obligation of the Government that is paid, redeemed, or bought 
with funds appropriated by the preceding sentence shall be canceled and 
retired and may not be reissued.

SEC. 4. USE 33\1/3\ PERCENT OF FEDERAL BUDGET SURPLUS TO INCREASE 
              NONDEFENSE DISCRETIONARY SPENDING LIMITS.

    For the first fiscal year following each fiscal year (beginning 
after this Act takes effect) for which there is a Federal budget 
surplus, the Director of the Office of Management and Budget shall 
increase (on a pro rata basis between the applicable nondefense 
categories for that fiscal year) the discretionary spending limit for 
new budget authority under section 251(c) of the Balanced Budget and 
Emergency Deficit Control Act of 1985 by an amount equal to 33\1/3\ 
percent of such surplus and shall adjust the outlays flowing from that 
budget authority accordingly.

SEC. 5. EFFECTIVE DATE BASED ON SOLVENCY OF SOCIAL SECURITY TRUST 
              FUNDS.

    This Act and the amendments made by this Act shall take effect on 
the date on which the Board of Trustees of the Federal Old Age and 
Survivors Insurance Trust Fund and the Federal Disability Insurance 
Trust Fund determines (using intermediate assumptions) that both the 
Federal Old Age and Survivors Insurance Trust Fund and the Federal 
Disability Insurance Trust Fund are in close actuarial balance through 
the year 2070. Such determination shall be included in the first annual 
report of such Board made after such determination is made.

Summary: Budget Surplus Dividend Act of 1998 - Amends the Internal Revenue Code to allow, upon a specified determination of budgetary surplus, a credit equal to a certain percentage of a taxpayer's annual social security taxes. Provides for the use of budgetary surplus to reduce public debt and increase nondefense discretionary spending.