I

106TH CONGRESS

1ST SESSION H. R. 1099

To amend the Internal Revenue Code of 1986 to provide more revenue

for the Social Security system by imposing a tax on certain unearned

income and to provide tax relief for more than 80,000,000 individuals

and families who pay more in Social Security taxes than income taxes

by reducing the rate of the old age, survivors, and disability insurance

Social Security payroll tax.

IN THE HOUSE OF REPRESENTATIVES

MARCH 11, 1999

Mr. OWENS (for himself, Mr. HILLIARD, Ms. MCKINNEY, and Mr. SANDERS)

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

more revenue for the Social Security system by imposing

a tax on certain unearned income and to provide tax

relief for more than 80,000,000 individuals and families

who pay more in Social Security taxes than income taxes

by reducing the rate of the old age, survivors, and disability insurance Social Security payroll tax.

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

2 This Act may be cited as the ‘‘Social Security Protec3 tion and Tax Relief Act of 1999’’.

4 SEC. 2. FINDINGS.

5 Congress finds the following:

6 (1) Working people are subject to social secu7 rity taxes as well as income taxes, and for over 90

8 percent of the population the combined tax on

9 earned income is higher than the income tax rates

10 of 15 percent and 28 percent that apply to unearned

11 income.

12 (2) There is no logical reason why social secu13 rity taxes should be imposed only on earnings and

14 not on unearned income (such as dividends, interest,

15 rent income, and capital gains).

16 SEC. 3. SOCIAL SECURITY TAX ON CERTAIN UNEARNED IN17 COME.

18 (a) IN GENERAL.—Subchapter A of chapter 1 of the

19 Internal Revenue Code of 1986 (relating to determination

20 of tax liability) is amended by adding at the end the fol21 lowing new part:

22 ‘‘PART VIII—SOCIAL SECURITY TAX ON CERTAIN

23 UNEARNED INCOME

‘‘Sec. 59B. Social security tax on certain unearned income.
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1 ‘‘SEC. 59B. SOCIAL SECURITY TAX ON CERTAIN UNEARNED

2 INCOME.

3 ‘‘(a) IMPOSITION OF TAX.—In the case of an indi4 vidual, there is hereby imposed (in addition to any other

5 tax imposed by this subtitle) for each taxable year a tax

6 equal to 12 percent of such individual’s social security tax7 able income for such taxable year.

8 ‘‘(b) DEFINITIONS.—For purposes of this section—

9 ‘‘(1) SOCIAL SECURITY TAXABLE INCOME.—The

10 term ‘social security taxable income’ means adjusted

11 gross income reduced by the greater of—

12 ‘‘(A) the sum of—

13 ‘‘(i) the standard deduction applicable

14 to the taxpayer (or which would be applica15 ble if the taxpayer did not elect to itemize

16 deductions for the taxable year), and

17 ‘‘(ii) the deduction for personal ex18 emptions under section 151 (determined

19 without regard to subsection (d)(3) there20 of), or

21 ‘‘(B) the aggregate exempt income of the

22 taxpayer for the taxable year.

23 ‘‘(2) EXEMPT INCOME.—The term ‘exempt in24 come’ means the following amounts to the extent in25 cluded in gross income:
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1 ‘‘(A) Amounts received as a pension or an2 nuity from a qualified plan (as defined in sec3 tion 4980(c)(1)).

4 ‘‘(B) Amounts received as a social security

5 benefit (as defined in section 86(d)).

6 ‘‘(C) Amounts received as earned income

7 (within the meaning of section 911(d)).

8 ‘‘(c) CREDITS NOT ALLOWED, ETC.—The tax im9 posed by this section shall not be treated as a tax imposed

10 by this chapter for purposes of determining—

11 ‘‘(1) the amount of any credit allowable under

12 this chapter, or

13 ‘‘(2) the amount of the minimum tax imposed

14 by section 55.’’.

15 (b) CLERICAL AMENDMENT.—The table of parts for

16 subchapter A of chapter 1 of such Code is amended by

17 adding at the end the following new item:

‘‘Part VIII. Social security tax on certain unearned income.’’.

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

19 this section shall apply to taxable years beginning after

20 December 31, 1999.

21 (d) TRANSFERS TO TRUST FUNDS.—

22 (1) IN GENERAL.—There are hereby appro23 priated to the payor funds amounts equivalent to the

24 tax imposed by section 59B of such Code (as added

25 by this section). The Secretary of the Treasury shall
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1 make appropriate allocations of revenue received in

2 the general fund of the Treasury to each payor fund.

3 (2) TRANSFERS.—The amounts appropriated

4 by paragraph (1) to any payor fund shall be trans5 ferred from time to time (but not less frequently

6 than quarterly) from the general fund of the Treas7 ury on the basis of estimates made by the Secretary

8 of the Treasury of the amounts referred to in such

9 paragraph. Any such quarterly payment shall be

10 made on the first day of such quarter and shall take

11 into account revenue estimated to be received during

12 such quarter. Proper adjustments shall be made in

13 amounts subsequently transferred to the extent prior

14 estimates were in excess of or less than the amounts

15 required to be transferred.

16 (3) DEFINITIONS.—For purposes of this

17 subsection—

18 (A) PAYOR FUND.—The term ‘‘payor

19 fund’’ means any trust fund or account from

20 which payments of social security benefits are

21 made.

22 (B) SOCIAL SECURITY BENEFITS.—The

23 term ‘‘social security benefits’’ has the meaning

24 given such term by section 86(d) of the Internal

25 Revenue Code of 1986.
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1 SEC. 4. CHANGE IN RATES OF SOCIAL SECURITY TAXES.

2 (a) DECREASE IN RATE OF OASDI TAX ON EMPLOY3 EES.—The table in section 3101(a) of the Internal Rev4 enue Code of 1986 is amended by striking the last item

5 and inserting the following:

‘‘1990 or any year before 2000 ............................................... 6.2 percent

‘‘2000 or thereafter ..................................................................4.95 percent.’’

6 (b) DECREASE IN RATE OF OASDI TAX ON EMPLOY7 ERS.—The table in section 3111(a) of such Code is

8 amended by striking the last item and inserting the fol9 lowing:

‘‘1990 or any year before 1999 ............................................... 6.2 percent

‘‘1999 or thereafter ..................................................................4.95 percent.’’

10 (c) DECREASE IN RATE OF OASDI TAX ON SELF11 EMPLOYMENT INCOME.—The table in section 1401(a) of

12 such Code is amended by striking the last item and insert13 ing the following:

‘‘December 31, 1989 .................. January 1, 2000 ........................ 12.4

‘‘December 31, 1999 .................. .................................................... 9.9.’’

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