I

107TH CONGRESS

1ST SESSION H. R. 874

To amend the Internal Revenue Code of 1986 to provide individual income

tax rate reductions and to repeal the phaseouts of the deduction for

personal exemptions and of itemized deductions.

IN THE HOUSE OF REPRESENTATIVES

MARCH 6, 2001

Mr. CRANE introduced the following bill; which was referred to the Committee

on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to provide

individual income tax rate reductions and to repeal the

phaseouts of the deduction for personal exemptions and

of itemized deductions.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; ETC.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Hidden Rate Elimination Act of 2001’’.

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this Act an amend8 ment or repeal is expressed in terms of an amendment
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1 to, or repeal of, a section or other provision, the reference

2 shall be considered to be made to a section or other provi3 sion of the Internal Revenue Code of 1986.

4 (c) SECTION 15 NOT TO APPLY.—No amendment

5 made by this Act shall be treated as a change in a rate

6 of tax for purposes of section 15 of the Internal Revenue

7 Code of 1986.

8 SEC. 2. REDUCTION IN MARGINAL INCOME TAX RATES FOR

9 INDIVIDUALS.

10 (a) RATES FOR 2002.—Section 1 (relating to tax im11 posed) is amended by striking subsections (a) through (d)

12 and inserting the following:

13 ‘‘(a) MARRIED INDIVIDUALS FILING JOINT RETURNS

14 AND SURVIVING SPOUSES.—There is hereby imposed on

15 the taxable income of—

16 ‘‘(1) every married individual (as defined in sec17 tion 7703) who makes a single return jointly with

18 his spouse under section 6013, and

19 ‘‘(2) every surviving spouse (as defined in sec20 tion 2(a)),

21 a tax determined in accordance with the following table:

‘‘If taxable income is: The tax is:

Not over $12,000 .......................... 14% of taxable income.

Over $12,000 but not over

$45,200.

$1,680, plus 15% of the excess over

$12,000.

Over $45,200 but not over

$109,250.

$6,660, plus 27% of the excess over

$45,200.

Over $109,250 but not over

$166,450.

$23,953.50, plus 30% of the excess

over $109,250.
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‘‘If taxable income is: The tax is:

Over $166,450 but not over

$297,300.

$41,113.50, plus 35% of the excess

over $166,450.

Over $297,300 ............................... $86,911, plus 38% of the excess over

$297,300.

1 ‘‘(b) HEADS OF HOUSEHOLDS.—There is hereby im2 posed on the taxable income of every head of a household

3 (as defined in section 2(b)) a tax determined in accordance

4 with the following table:

‘‘If taxable income is: The tax is:

Not over $10,000 .......................... 14% of taxable income.

Over $10,000 but not over

$36,250.

$1,400, plus 15% of the excess over

$10,000.

Over $36,250 but not over

$93,600.

$5,337.50, plus 27% of the excess

over $36,250.

Over $93,600 but not over

$151,600.

$20,822, plus 30% of the excess over

$93,600.

Over $151,600 but not over

$297,300.

$38,222, plus 35% of the excess over

$151,600.

Over $297,300 ............................... $89,217, plus 38% of the excess over

$297,300.

5 ‘‘(c) UNMARRIED INDIVIDUALS (OTHER THAN SUR6 VIVING SPOUSES AND HEADS OF HOUSEHOLDS).—There

7 is hereby imposed on the taxable income of every indi8 vidual (other than a surviving spouse as defined in section

9 2(a) or the head of a household as defined in section 2(b))

10 who is not a married individual (as defined in section

11 7703) a tax determined in accordance with the following

12 table:

‘‘If taxable income is: The tax is:

Not over $6,000 ............................ 14% of taxable income.

Over $6,000 but not over $27,050 $840, plus 15% of the excess over

$6,000.

Over $27,050 but not over

$65,550.

$3,997.50, plus 27% of the excess

over $27,050.

Over $65,550 but not over

$136,750.

$14,362.50, plus 30% of the excess

over $65,550.

Over $136,750 but not over

$297,300.

$35,752.50, plus 35% of the excess

over $136,750.
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‘‘If taxable income is: The tax is:

Over $297,300 ............................... $91,945, plus 38% of the excess over

$297,300.

1 ‘‘(d) MARRIED INDIVIDUALS FILING SEPARATE RE2 TURNS.—There is hereby imposed on the taxable income

3 of every married individual (as defined in section 7703)

4 who does not make a single return jointly with his spouse

5 under section 6013, a tax determined in accordance with

6 the following table:

‘‘If taxable income is: The tax is:

Not over $6,000 ............................ 14% of taxable income.

Over $6,000 but not over $22,600 $840, plus 15% of the excess over

$6,000.

Over $22,600 but not over

$54,625.

$3,330, plus 27% of the excess over

$22,600.

Over $54,625 but not over

$83,225.

$11,976.75, plus 30% of the excess

over $54,625.

Over $83,225 but not over

$148,650.

$20,556.75, plus 35% of the excess

over $83,225.

Over $148,650 ............................... $43,455.50, plus 38% of the excess

over $148,650.’’.

7 (b) PHASEIN OF RATE REDUCTIONS.—Section 1 is

8 amended by adding at the end the following new sub9 section:

10 ‘‘(i) PHASEIN OF 2006 RATES OF 10, 15, 25, AND

11 33 PERCENT.—

12 ‘‘(1) IN GENERAL.—In the case of taxable years

13 beginning in a calendar year after 2002, the tax

14 rates determined under subsection (a), (b), (c), or

15 (d) shall be the tax rates imposed by such subsection

16 in taxable years beginning in calendar year 2002, re17 duced—
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1 ‘‘(A) in the case of the 14 percent rate, by

2 1 percentage point in each taxable year begin3 ning in a calendar year after 2002 and before

4 2007,

5 ‘‘(B) in the case of the 27 and 35 percent

6 rates, by 1 percentage point in taxable years be7 ginning in calendar year 2004, and by an addi8 tional 1 percentage point in taxable years begin9 ning in calendar year 2006, and

10 ‘‘(C) in the case of the 30 and 38 percent

11 rate, by 1 percentage point in each taxable year

12 beginning in a calendar year after 2002 and be13 fore 2006, and by an additional 2 percentage

14 points in taxable years beginning in calendar

15 year 2006.

16 ‘‘(2) ADJUSTMENT OF TABLES.—The Secretary

17 shall adjust the tables prescribed under subsection

18 (f) to carry out the reductions under this sub19 section.’’.

20 (c) INFLATION ADJUSTMENT TO APPLY IN DETER21 MINING RATES FOR 2002.—Subsection (f) of section 1 is

22 amended—

23 (1) by striking ‘‘1993’’ in paragraph (1) and in24 serting ‘‘2001’’,
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1 (2) by striking ‘‘1992’’ in paragraph (3)(B) and

2 inserting ‘‘2000’’, and

3 (3) by striking paragraph (7) and inserting the

4 following new paragraph:

5 ‘‘(7) SPECIAL RULE FOR CERTAIN BRACKETS.—

6 ‘‘(A) CALENDAR YEARS 2002 THROUGH

7 2006.—In prescribing the tables under para8 graph (1) which apply with respect to taxable

9 years beginning in calendar years after 2001

10 and before 2007, the Secretary shall make no

11 adjustment to the dollar amounts at which the

12 first rate bracket begins or at which the second

13 rate bracket begins under any table contained

14 in subsection (a), (b), (c), or (d).

15 ‘‘(B) LATER CALENDAR YEARS.—In pre16 scribing the tables under paragraph (1) which

17 apply with respect to taxable years beginning in

18 a calendar year after 2006, the cost-of-living

19 adjustment used in making adjustments to the

20 dollar amounts referred to in subparagraph (A)

21 shall be determined under paragraph (3) by

22 substituting ‘2005’ for ‘2000’.’’.

23 (d) CONFORMING AMENDMENTS.—
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1 (1) The following provisions are each amended

2 by striking ‘‘1992’’ and inserting ‘‘2000’’ each place

3 it appears:

4 (A) Section 32(j)(1)(B).

5 (B) Section 41(e)(5)(C).

6 (C) Section 42(h)(3)(H)(i)(II).

7 (D) Section 59(j)(2)(B).

8 (E) Section 63(c)(4)(B).

9 (F) Section 68(b)(2)(B).

10 (G) Section 132(f)(6)(A)(ii).

11 (H) Section 135(b)(2)(B)(ii).

12 (I) Section 146(d)(2)(B).

13 (J) Section 151(d)(4).

14 (K) Section 220(g)(2).

15 (L) Section 221(g)(1)(B).

16 (M) Section 512(d)(2)(B).

17 (N) Section 513(h)(2)(C)(ii).

18 (O) Section 685(c)(3)(B).

19 (P) Section 877(a)(2).

20 (Q) Section 911(b)(2)(D)(ii)(II).

21 (R) Section 2032A(a)(3)(B).

22 (S) Section 2503(b)(2)(B).

23 (T) Section 2631(c)(2).

24 (U) Section 4001(e)(1)(B).

25 (V) Section 4261(e)(4)(A)(ii).
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1 (W) Section 6039F(d).

2 (X) Section 6323(i)(4)(B).

3 (Y) Section 6334(g)(1)(B).

4 (Z) Section 6601(j)(3)(B).

5 (AA) Section 7430(c)(1).

6 (2) Sections 25A(h)(1)(A)(ii) and

7 25A(h)(2)(A)(ii) are each amended by striking ‘‘be8 gins,’’ and all that follows through ‘‘thereof’’.

9 (3) Subclause (II) of section 42(h)(6)(G)(i) is

10 amended by striking ‘‘1987’’ and inserting ‘‘2000’’.

11 (e) ADDITIONAL CONFORMING AMENDMENTS.—

12 (1) Section 1(g)(7)(B)(ii)(II) is amended by

13 striking ‘‘15 percent’’ and inserting ‘‘10 percent’’.

14 (2) Section 1(h) is amended—

15 (A) by striking ‘‘28 percent’’ both places it

16 appears in paragraphs (1)(A)(ii)(I) and

17 (1)(B)(i) and inserting ‘‘15 percent’’, and

18 (B) by striking paragraph (13).

19 (3) Section 531 is amended by striking ‘‘39.6

20 percent’’ and inserting ‘‘33 percent’’.

21 (4) Section 541 of such Code is amended by

22 striking ‘‘39.6 percent’’ and inserting ‘‘33 percent’’.

23 (5) Section 3402(p)(1)(B) is amended by strik24 ing ‘‘7, 15, 28, or 31 percent’’ and inserting ‘‘5, 10,

25 15, or 25 percent’’.
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1 (6) Section 3402(p)(2) is amended by striking

2 ‘‘15 percent’’ and inserting ‘‘10 percent’’.

3 (7) Section 3402(q)(1) is amended by striking

4 ‘‘28 percent’’ and inserting ‘‘15 percent’’.

5 (8) Section 3402(r)(3) is amended by striking

6 ‘‘31 percent’’ and inserting ‘‘25 percent’’.

7 (9) Section 3406(a)(1) is amended by striking

8 ‘‘31 percent’’ and inserting ‘‘25 percent’’.

9 (10) The Secretary of the Treasury may pre10 scribe percentages which shall apply in lieu of the

11 percentages specified in the amendments made by

12 this subsection in order to coordinate those percent13 ages with the percentages specified in the tables pre14 scribed under the last sentence of section 1(i)(1) of

15 the Internal Revenue Code of 1986, as added by this

16 section.

17 (f) EFFECTIVE DATES.—

18 (1) IN GENERAL.—Except as provided in para19 graph (2), the amendments made by this section

20 shall apply to taxable years beginning after Decem21 ber 31, 2001.

22 (2) AMENDMENTS TO WITHHOLDING PROVI23 SIONS.—The amendments made by paragraphs (5),

24 (6), (7), (8), and (9) of subsection (e) shall apply to

25 amounts paid after December 31, 2001.
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1 SEC. 3. REPEAL OF PHASEOUTS OF DEDUCTION FOR PER2 SONAL EXEMPTIONS AND OF ITEMIZED DE3 DUCTIONS.

4 (a) REPEAL OF PHASEOUT OF PERSONAL EXEMP5 TIONS.—

6 (1) IN GENERAL.—Subsection (d) of section

7 151 (relating to exemption amount) is amended by

8 striking paragraph (3).

9 (2) TECHNICAL AMENDMENTS.—

10 (A) Paragraph (6) of section 1(f) is

11 amended—

12 (i) by striking ‘‘section 151(d)(4)’’ in

13 subparagraph (A) and inserting ‘‘section

14 151(d)(3)’’, and

15 (ii) by striking ‘‘section 151(d)(4)(A)’’

16 in subparagraph (B) and inserting ‘‘section

17 151(d)(3)’’.

18 (B) Paragraph (4) of section 151(d) is

19 amended to read as follows:

20 ‘‘(3) INFLATION ADJUSTMENT.—In the case of

21 any taxable year beginning in a calendar year after

22 1989, the dollar amount contained in paragraph (1)

23 shall be increased by an amount equal to—

24 ‘‘(A) such dollar amount, multiplied by

25 ‘‘(B) the cost-of-living adjustment deter26 mined under section 1(f)(3) for the calendar
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1 year in which the taxable year begins, by sub2 stituting ‘calendar year 1988’ for ‘calendar year

3 2000’ in subparagraph (B) thereof.’’

4 (b) REPEAL OF OVERALL LIMITATION ON ITEMIZED

5 DEDUCTIONS.—

6 (1) IN GENERAL.—Section 68 is hereby re7 pealed.

8 (2) TECHNICAL AMENDMENTS.—

9 (A) Subparagraph (A) of section 1(f)(6) is

10 amended by striking ‘‘section 68(b)(2)’’.

11 (B) Paragraph (1) of section 56(b) is

12 amended by striking subparagraph (F).

13 (C) Subparagraph (B) of section 773(a)(3)

14 is amended by striking clause (i) and by redes15 ignating clauses (ii), (iii), and (iv) as clauses

16 (i), (ii), and (iii), respectively.

17 (D) The table of sections for part I of sub18 chapter B of chapter 1 is amended by striking

19 the item relating to section 68.

20 (c) EFFECTIVE DATE.—The amendments made by

21 this section shall apply to taxable years beginning after

22 December 31, 2001.

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