To amend the Internal Revenue Code of 1986 to reduce estate and gift tax rates to 30 percent, to increase the exclusion equivalent of the unified credit to $10,000,000, and to increase the annual gift tax exclusion to $50,000.

SECTION 1. ESTATE AND GIFT TAX RATES REDUCED TO 30 PERCENT.

    (a) Estate Tax.--
            (1) In general.--Section 2001 of the Internal Revenue Code 
        of 1986 (relating to estate tax) is amended by striking 
        subsections (b) and (c) and by inserting after subsection (a) 
        the following new subsection:
    ``(b) Computation of Tax.--The tax imposed by this section shall be 
the amount equal to the excess (if any) of--
            ``(1) 30 percent of the sum of--
                    ``(A) the amount of the taxable estate, and
                    ``(B) the amount of the adjusted taxable gifts, 
                over
            ``(2) the aggregate amount of tax paid under chapter 12 
        with respect to gifts made by the decedent after December 31, 
        1976.
For purposes of paragraph (1)(B), the term `adjusted taxable gifts' 
means the total amount of the taxable gifts (within the meaning of 
section 2503) made by the decedent after December 31, 1976, other than 
gifts which are includible in the gross estate of the decedent.''
            (2) Conforming amendments.--
                    (A) Subsection (b) of section 2101 of such Code is 
                amended to read as follows:
    ``(b) Computation of Tax.--The tax imposed by this section shall be 
the amount equal to the excess (if any) of--
            ``(1) 30 percent of the sum of--
                    ``(A) the amount of the taxable estate, and
                    ``(B) the amount of the adjusted taxable gifts, 
                over
            ``(2) the aggregate amount of tax paid under chapter 12 
        with respect to gifts made by the decedent after December 31, 
        1976.''
                    (B) Subsection (c) of section 2102 of such Code is 
                amended--
                            (i) by striking ``$13,000'' each place it 
                        appears and inserting ``$20,000'', and
                            ``(ii) by striking ``$46,800'' and 
                        inserting ``$52,500''.
    (b) Gift Tax.--
            (1) In general.--Section 2502 of such Code is amended to 
        read as follows:

``SEC. 2502. RATE OF TAX.

    ``(a) General Rule.--The tax imposed by section 2501 for each 
calendar year shall be an amount equal to 30 percent of the sum of the 
taxable gifts for such calendar year.
    ``(b) Tax To Be Paid by Donor.--The tax imposed by section 2501 
shall be paid by the donor.''
            (2) Conforming amendments.--
                    (A) Subchapter A of chapter 12 of such Code is 
                amended by striking section 2504.
                    (B) The table of sections for such subchapter is 
                amended by striking the item relating to section 2504.
    (c) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying, and gifts made, after the date of 
the enactment of this Act.

SEC. 2. UNIFIED CREDIT INCREASED TO EQUIVALENT OF $10,000,000 
              EXCLUSION; INFLATION ADJUSTMENT OF UNIFIED CREDIT.

    (a) In General.--Subsection (c) of section 2010 of the Internal 
Revenue Code of 1986 (relating to applicable credit amount) is amended 
by striking all that follows ``were the applicable exclusion amount'' 
and inserting ``. For purposes of the preceding sentence, the 
applicable exclusion amount is $10,000,000.''
    (b) Inflation Adjustment.--Section 2010 of such Code is amended by 
redesignating subsection (d) as subsection (e) and by inserting after 
subsection (c) the following new subsection:
    ``(d) Cost-of-Living Adjustment.--In the case of any decedent 
dying, and gift made, in a calendar year after 2003, the $10,000,000 
amount set forth in subsection (c) shall be increased by an amount 
equal to--
            ``(1) $10,000,000, multiplied by
            ``(2) the cost-of-living adjustment determined under 
        section 1(f)(3) for such calendar year by substituting 
        `calendar year 2002' for `calendar year 1992' in subparagraph 
        (B) thereof.
If any amount as adjusted under the preceding sentence is not a 
multiple of $10,000, such amount shall be rounded to the nearest 
multiple of $10,000.''
    (c) Conforming Amendment.--Subparagraph (A) of section 2057(a)(3) 
of such Code is amended by striking ``$625,000'' and inserting ``the 
excess of the applicable exclusion amount (determined without regard to 
this paragraph) over $675,000''.
    (d) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying, and gifts made, after the date of 
the enactment of this Act.

SEC. 3. ANNUAL GIFT TAX EXCLUSION INCREASED TO $50,000.

    (a) In General.--Subsection (b) of section 2503 of the Internal 
Revenue Code of 1986 (relating to exclusion from gifts) is amended by 
striking ``$10,000'' each place it appears and inserting ``$50,000''.
    (b) Conforming Amendment.--Paragraph (2) of section 2503(b) of such 
Code is amended--
            (1) by striking ``1998'' and inserting ``2003'', and
            (2) by striking ``1997'' and inserting ``2002''.
    (c) Effective Date.--The amendments made by this section shall 
apply to gifts made after December 31, 2002.

Summary: Amends the Internal Revenue Code to: (1) reduce estate and gift tax rates to 30 percent. (2) increase the exclusion equivalent of the unified credit to $10 million, and (3) increase the annual gift tax exclusion to $50,000.