II

103D CONGRESS

1ST SESSION S. 188

To amend the Internal Revenue Code of 1986 to repeal the income taxation

of corporations, to impose a 10 percent tax on the earned income (and

only the earned income) of individuals, to repeal the estate and gift

taxes, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JANUARY 26 (legislative day, JANUARY 5), 1993

Mr. HELMS introduced the following bill; which was read the first time

A BILL

To amend the Internal Revenue Code of 1986 to repeal

the income taxation of corporations, to impose a 10

percent tax on the earned income (and only the earned

income) of individuals, to repeal the estate and gift taxes,

and for other purposes.

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.

4 This Act may be cited as the ‘‘Flat Tax Act of 1993’’.

5 SEC. 2. REPEAL OF TAXATION OF CORPORATIONS.

6 The following provisions of the Internal Revenue

7 Code of 1986 are hereby repealed:
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1 (1) section 11 (relating to corporate income

2 tax),

3 (2) section 55 (relating to alternative minimum

4 tax) to the extent it applies to corporations,

5 (3) section 511 (relating to unrelated business

6 income tax),

7 (4) section 531 (relating to accumulated earn8 ings tax),

9 (5) section 541 (relating to personal holding

10 company tax),

11 (6) section 594 (relating to alternative tax for

12 certain mutual savings banks),

13 (7) section 801 (relating to tax imposed on life

14 insurance companies),

15 (8) section 831 (relating to tax on certain other

16 insurance companies),

17 (9) section 852 (relating to tax on regulated in18 vestment companies),

19 (10) section 857 (relating to tax on real estate

20 investment trusts), and

21 (11) section 882 (relating to tax on income of

22 foreign corporations connected with United States

23 business).
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•S 188 IS

1 SEC. 3. 10 PERCENT INCOME TAX RATE FOR INDIVIDUALS.

2 Section 1 of the Internal Revenue Code of 1986 (re3 lating to tax imposed on individuals) is amended to read

4 as follows:

5 ‘‘SECTION 1. TAX IMPOSED.

6 ‘‘(a) IN GENERAL.—There is hereby imposed on the

7 income of every individual a tax equal to 10 percent of

8 the excess of the earned income of such individual for the

9 taxable year over the exemption amount for such year.

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

11 ‘‘(1) EXEMPTION AMOUNT.—

12 ‘‘(A) IN GENERAL.—The term ‘exemption

13 amount’ means, for any taxable year, $10,000

14 increased (for taxable years beginning after De15 cember 31, 1993) by an amount equal to

16 $10,000 multiplied by the cost-of-living adjust17 ment for the calendar year in which the taxable

18 year begins.

19 ‘‘(B) COST-OF-LIVING ADJUSTMENT.—For

20 purposes of this paragraph—

21 ‘‘(i) IN GENERAL.—The cost-of-living

22 adjustment for any calendar year is the

23 percentage (if any) by which—

24 ‘‘(I) the CPI for October of the

25 preceding calendar year, exceeds
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1 ‘‘(II) the CPI for October of

2 1992.

3 ‘‘(ii) CPI.—The term ‘CPI’ means the

4 last Consumer Price Index for all-urban

5 consumers published by the Department of

6 Labor.

7 ‘‘(C) ROUNDING.—If the increase deter8 mined under this paragraph is not a multiple of

9 $10, such increase shall be rounded to the near10 est multiple of $10 (or if such increase is a

11 multiple of $5, such increase shall be increased

12 to the next highest multiple of $10).

13 ‘‘(2) EARNED INCOME.—

14 ‘‘(A) IN GENERAL.—Except as provided in

15 subparagraph (B), the term ‘earned income’

16 means—

17 ‘‘(i) wages, salaries, and other em18 ployee compensation,

19 ‘‘(ii) the amount of the taxpayer’s net

20 earnings from self-employment for the tax21 able year, and

22 ‘‘(iii) the amount of dividends which

23 are from a personal service corporation or

24 which are otherwise directly or indirectly

25 compensation for services.
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1 ‘‘(B) EXCEPTIONS.—The term ‘earned in2 come’ does not include—

3 ‘‘(i) any amount received as a pension

4 or annuity, or

5 ‘‘(ii) any tip unless the amount of the

6 tip is not within the discretion of the serv7 ice-recipient.

8 ‘‘(C) FRINGE BENEFITS VALUED AT EM9 PLOYER COST.—The amount of any fringe ben10 efit which is included as earned income shall be

11 the cost to the employer of such benefit.’’.

12 SEC. 4. REPEAL OF SPECIAL DEDUCTIONS, CREDITS, AND

13 EXCLUSIONS FROM INCOME FOR INDIVID14 UALS.

15 Chapter 1 of the Internal Revenue Code of 1986 is

16 amended by striking out all specific exclusions from gross

17 income, all deductions, and all credits against income tax

18 to the extent related to the computation of individual in19 come tax liability.

20 SEC. 5. REPEAL OF ESTATE AND GIFT TAXES.

21 Subtitle B of the Internal Revenue Code of 1986 (re22 lating to estate, gift, and generation-skipping taxes) is

23 hereby repealed.
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1 SEC. 6. EFFECTIVE DATES.

2 (a) IN GENERAL.—Except as provided in subsection

3 (b), the amendments made by this Act shall apply to tax4 able years beginning after the date of the enactment of

5 this Act.

6 (b) REPEAL OF ESTATE AND GIFT TAXES.—The re7 peal made by section 5 shall apply to estates of decedents

8 dying, and transfers made, after the date of the enactment

9 of this Act.

10 (c) TECHNICAL AND CONFORMING CHANGES.—The

11 Secretary of the Treasury or his delegate shall, as soon

12 as practicable but in any event not later than 90 days

13 after the date of the enactment of this Act, submit to the

14 Committee on Ways and Means of the House of Rep15 resentatives a draft of any technical and conforming

16 changes in the Internal Revenue Code of 1986 which are

17 necessary to reflect throughout such Code the changes in

18 the substantive provisions of law made by this Act.

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