II

105TH CONGRESS

2D SESSION S. 2147

To amend the Internal Revenue Code of 1986 to provide a deduction for

two-earner married couples, to allow self-employed individuals a 100-

percent deduction for health insurance costs, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JUNE 11, 1998

Mr. DASCHLE (for himself and Mr. JOHNSON) introduced the following bill;

which was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to provide

a deduction for two-earner married couples, to allow selfemployed individuals a 100-percent deduction for health

insurance costs, 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. DEDUCTION FOR TWO-EARNER MARRIED COU4 PLES.

5 (a) IN GENERAL.—Part VII of subchapter B of chap6 ter 1 of the Internal Revenue Code of 1986 (relating to

7 additional itemized deductions for individuals) is amended
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1 by redesignating section 222 as section 223 and by insert2 ing after section 221 the following new section:

3 ‘‘SEC. 222. DEDUCTION FOR MARRIED COUPLES TO ELIMI4 NATE THE MARRIAGE PENALTY.

5 ‘‘(a) IN GENERAL.—In the case of a joint return

6 under section 6013 for the taxable year, there shall be al7 lowed as a deduction an amount equal to the applicable

8 percentage of the qualified earned income of the spouse

9 with the lower qualified earned income for the taxable

10 year.

11 ‘‘(b) APPLICABLE PERCENTAGE.—For purposes of

12 this section

13 ‘‘(1) IN GENERAL.—The term ‘applicable per14 centage’ means 20 percent, reduced by 2 percentage

15 points for each $1,000 (or fraction thereof) by which

16 the taxpayer’s modified adjusted gross income for

17 the taxable year exceeds $50,000.

18 ‘‘(2) TRANSITION RULE FOR 1999 AND 2000.—In

19 the case of taxable years beginning in 1999 and

20 2000, paragraph (1) shall be applied by substituting

21 ‘10 percent’ for ‘20 percent’ and ‘1 percentage

22 point’ for ‘2 percentage points’.

23 ‘‘(3) MODIFIED ADJUSTED GROSS INCOME.—

24 For purposes of this subsection, the term ‘modified
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1 adjusted gross income’ means adjusted gross income

2 determined—

3 ‘‘(A) after application of sections 86, 219,

4 and 469, and

5 ‘‘(B) without regard to sections 135, 137,

6 and 911 or the deduction allowable under this

7 section.

8 ‘‘(4) COST-OF-LIVING ADJUSTMENT.—In the

9 case of any taxable year beginning in a calendar

10 year after 2002, the $50,000 amount under para11 graph (1) shall be increased by an amount equal to

12 such dollar amount multiplied by the cost-of-living

13 adjustment determined under section 1(f)(3) for the

14 calendar year in which the taxable year begins, ex15 cept that subparagraph (B) thereof shall be applied

16 by substituting ‘calendar year 2002’ for ‘calendar

17 year 1992’. If any amount as adjusted under this

18 paragraph is not a multiple of $2,000, such amount

19 shall be rounded to the next lowest multiple of

20 $2,000.

21 ‘‘(c) QUALIFIED EARNED INCOME DEFINED.—

22 ‘‘(1) IN GENERAL.—For purposes of this sec23 tion, the term ‘qualified earned income’ means an

24 amount equal to the excess of—
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1 ‘‘(A) the earned income of the spouse for

2 the taxable year, over

3 ‘‘(B) an amount equal to the sum of the

4 deductions described in paragraphs (1), (2),

5 (7), and (15) of section 62 to the extent such

6 deductions are properly allocable to or charge7 able against earned income described in sub8 paragraph (A).

9 The amount of qualified earned income shall be de10 termined without regard to any community property

11 laws.’’

12 ‘‘(2) EARNED INCOME.—For purposes of para13 graph (1), the term ‘earned income’ means income

14 which is earned income within the meaning of sec15 tion 911(d)(2) or 401(c)(2)(C), except that—

16 ‘‘(A) such term shall not include any

17 amount—

18 ‘‘(i) not includible in gross income,

19 ‘‘(ii) received as a pension or annuity,

20 ‘‘(iii) paid or distributed out of an in21 dividual retirement plan (within the mean22 ing of section 7701(a)(37)),

23 ‘‘(iv) received as deferred compensa24 tion, or
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1 ‘‘(v) received for services performed

2 by an individual in the employ of his

3 spouse (within the meaning of section

4 3121(b)(3)(A)), and

5 ‘‘(B) section 911(d)(2)(B) shall be applied

6 without regard to the phrase ‘not in excess of

7 30 percent of his share of net profits of such

8 trade or business’.’’

9 (b) DEDUCTION TO BE ABOVE-THE-LINE.—Section

10 62(a) of the Internal Revenue Code of 1986 (defining ad11 justed gross income) is amended by adding after para12 graph (17) the following new paragraph:

13 ‘‘(18) DEDUCTION FOR TWO-EARNER MARRIED

14 COUPLES.—The deduction allowed by section 222.’’

15 (c) EARNED INCOME CREDIT PHASEOUT TO RE16 FLECT DEDUCTION.—Section 32(c)(2) of the Internal

17 Revenue Code of 1986 (defining earned income) is amend18 ed by adding at the end the following new subparagraph:

19 ‘‘(C) MARRIAGE PENALTY REDUCTION.—

20 Solely for purposes of applying subsection

21 (a)(2)(B), earned income for any taxable year

22 shall be reduced by an amount equal to the

23 amount of the deduction allowed to the tax24 payer for such taxable year under section 222.’’
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1 (d) CLERICAL AMENDMENT.—The table of sections

2 for part VII of subchapter B of chapter 1 of such Code

3 is amended by striking the item relating to section 222

4 and inserting the following new items:

‘‘Sec. 222. Deduction for married couples to eliminate the marriage penalty.

‘‘Sec. 223. Cross reference.’’

5 (e) EFFECTIVE DATE.—The amendments made by

6 this section shall apply to taxable years beginning after

7 December 31, 1998.

8 SEC. 2. DEDUCTION FOR HEALTH INSURANCE COSTS FOR

9 SELF-EMPLOYED INDIVIDUALS.

10 (a) IN GENERAL.—Paragraph (1) of section 162(l)

11 of the Internal Revenue Code of 1986 is amended to read

12 as follows:

13 ‘‘(1) ALLOWANCE OF DEDUCTION.—In the case

14 of an individual who is an employee within the

15 meaning of section 401(c)(1), there shall be allowed

16 as a deduction under this section an amount equal

17 to 100 percent (75 percent in the case of taxable

18 years beginning in 1999 and 2000) of the amount

19 paid during the taxable year for insurance which

20 constitutes medical care for the taxpayer, his spouse,

21 and dependents.’’
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1 (b) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 1998.

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