Tax Rate Reduction Act of 1994

SECTION 1. SHORT TITLE; ETC.

    (a) Short Title.--This Act may be cited as the ``Tax Rate Reduction 
Act of 1994''.
    (b) Section 15 Not To Apply.--No amendment made by this Act, and no 
change in a rate pursuant to section 1(f)(8) of the Internal Revenue 
Code of 1986 (as amended by this Act), shall be treated as a change in 
a rate of tax for purposes of section 15 of such Code.

SEC. 2. REDUCTION IN INDIVIDUAL INCOME TAX RATES.

    (a) Repeal of 39.6% Rate.--
            (1) Each of the tables contained in subsections (a), (b), 
        (c), (d), and (e) of section 1 of the Internal Revenue Code of 
        1986 is amended by striking the last item in each column 
        (relating to 39.6 percent rate bracket).
            (2) Each of the tables contained in subsections (a), (b), 
        and (c) of section 1 of such Code is amended by striking ``but 
        not over $250,000''.
            (3) The table contained in subsection (d) of section 1 of 
        such Code is amended by striking ``but not over $125,000''.
            (4) The table contained in subsection (e) of section 1 of 
        such Code is amended by striking ``but not over $7,500''.
    (b) Additional Rate Reductions.--
            (1) In general.--Subsection (f) of section 1 of such Code 
        is amended by adding at the end the following new paragraph:
            ``(8) Rate reductions.--In prescribing the tables under 
        paragraph (1) which apply with respect to taxable years 
        beginning in a calendar year after 1994, the corresponding 
        percentages specified for such calendar year in the following 
        table shall be substituted for 15%, 28%, 31%, and 36%, 
        respectively, in subsections (a), (b), (c), (d), and (e).

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                                 The corresponding percentage shall be  
In the case of taxable years  substituted for the following percentages:
  beginning during calendar  -------------------------------------------
            year:                15%        28%        31%        36%   
------------------------------------------------------------------------
1995........................     14%        28%        31%       34%  
1996........................     13%        26%        29%       33%  
1997........................     12%        24%        27%       33%  
1998 or thereafter..........     12%        22%        25%       33%.'' 
------------------------------------------------------------------------

            (2) Technical amendments.--
                    (A) Subparagraph (B) of section 1(f)(2) of such 
                Code is amended by inserting ``except as provided in 
                paragraph (8),'' before ``by not changing''.
                    (B) Subparagraph (C) of section 1(f)(2) of such 
                Code is amended by inserting ``and the reductions under 
                paragraph (8) in the rates of tax'' before the period.
                    (C) The heading for subsection (f) of section 1 of 
                such Code is amended by inserting ``Rate Reductions;'' 
                before ``Adjustments''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1994.

SEC. 3. REPEAL OF OVERALL LIMITATION ON ITEMIZED DEDUCTIONS.

    (a) In General.--Section 68 of the Internal Revenue Code of 1986 is 
hereby repealed.
    (b) Technical Amendments.--
            (1) Subparagraph (A) of section 1(f)(6) of such Code is 
        amended by striking ``section 68(b)(2)''.
            (2) Paragraph (1) of section 56(b) of such Code is amended 
        by striking subparagraph (F).
            (3) The table of sections for part I of subchapter B of 
        chapter 1 of such Code is amended by striking the item relating 
        to section 68.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1994.

SEC. 4. REPEAL OF PHASEOUT OF PERSONAL EXEMPTIONS.

    (a) In General.--Subsection (d) of section 151 of the Internal 
Revenue Code of 1986 (relating to exemption amount) is amended by 
striking paragraphs (3) and (4) and inserting the following new 
paragraph:
            ``(3) Inflation adjustment.--In the case of any taxable 
        year beginning in a calendar year after 1989, the dollar amount 
        contained in paragraph (1) shall be increased by an amount 
        equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, by substituting `calendar year 
                1988' for `calendar year 1992' in subparagraph (B) 
                thereof.''
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1994.

Summary: Tax Rate Reduction Act of 1994 - Amends the Internal Revenue Code to repeal the highest income tax rate for individuals, lower the highest taxable income threshold, and reduce individual income tax rates from 1995 until 1998. Repeals the overall limitation on itemized deductions and the phaseout of personal exemptions.