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Subtitle B—Taxes Based on Income
and Wages
SEC. 811. PAYROLL TAX ON EMPLOYERS.
(a) IN GENERAL.—Section 3111 (relating to tax on
employers) is amended by redesignating subsection (c) as
subsection (d) and by inserting after subsection (b) the
following new subsection:
‘‘(c) HEALTH CARE.—
‘‘(1) IN GENERAL.—In addition to other taxes,
there is hereby imposed on every employer an excise
tax, with respect to having individuals in his employ,
equal to the applicable percentage of the wages (as
defined in section 3121(a)) paid by him with respect
to employment (as defined in section 3121(b)).
‘‘(2) APPLICABLE PERCENTAGE.—For purposes
of paragraph (1), the term ‘applicable percentage’
means—
‘‘(A) 4 percent in the case of a small em-
ployer, and
‘‘(B) 8.4 percent in the case of any other
employer.
‘‘(3) SMALL EMPLOYER.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (2), the term ‘small employer’ means any
employer if—
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‘‘(i) the average number of full-time
employees (or the equivalent) of such em-
ployer during the preceding calendar year
is less than 75, and
‘‘(ii) the average annual wages (as de-
fined in section 3121(a)) paid by such em-
ployer to such employees during such year
is less than $24,000.
‘‘(B) CONTROLLED GROUPS.—All persons
treated as a single employer under subsection
(a) or (b) of section 52 or subsection (m) or (o)
of section 414 shall be treated as 1 employer
for purposes of subparagraph (A).’’
(b) SELF-EMPLOYMENT INCOME.—Section 1401 (re-
lating to rate of tax on self-employment income) is amend-
ed by redesignating subsection (c) as subsection (d) and
by inserting after subsection (b) the following new sub-
section:
‘‘(c) HEALTH CARE.—
‘‘(1) IN GENERAL.—In addition to other taxes,
there shall be imposed for each taxable year, on the
self-employment income of every individual, a tax
equal to the applicable percentage (as defined in sec-
tion 3111(c)) of the amount of the self-employment
income for such taxable year.
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‘‘(2) SPECIAL RULE FOR DETERMINING APPLI-
CABLE PERCENTAGE.—In determining the applicable
percentage for purposes of paragraph (1), section
3111(c) shall be applied by treating such individual
as an employee receiving wages equal to such indi-
vidual’s self-employment income for the taxable
year.’’
(c) COMPARABLE
TAXES
FOR
RAILROAD
SERV-
ICES.—
(1) TAX
ON
EMPLOYERS.—Section 3221 is
amended by redesignating subsections (c), (d), and
(e) as subsections (d), (e), and (f), respectively, and
by inserting after subsection (b) the following new
subsection:
‘‘(c) HEALTH CARE.—In addition to other taxes,
there is hereby imposed on every employer an excise tax,
with respect to having individuals in his employ, equal to
the applicable percentage (as defined in section 3111(c))
of the compensation paid by such employer for services
rendered to such employer.’’
(2) TAX ON EMPLOYEE REPRESENTATIVES.—
Subsection (a) of section 3211 (relating to tax on
employee representatives) is amended by redesignat-
ing paragraph (3) as paragraph (4) and by inserting
after paragraph (2) the following new paragraph:
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‘‘(3) HEALTH CARE.—
‘‘(A) IN GENERAL.—In addition to other
taxes, there is hereby imposed on the income of
each employee representative a tax equal to the
applicable percentage of the compensation re-
ceived during the calendar year by such em-
ployee representative for services rendered by
such employee representative.
‘‘(B) SPECIAL
RULE
FOR
DETERMINING
APPLICABLE PERCENTAGE.—In determining the
applicable percentage for purposes of subpara-
graph (A), section 3111(c) shall be applied by
treated such individual as an employee receiving
wages equal to such individual’s compensation
for the taxable year.’’
(3) NO APPLICABLE BASE.—Subparagraph (A)
of section 3231(e)(2) is amended by adding at the
end thereof the following new clause:
‘‘(iv) HEALTH CARE TAXES.—Clause
(i) shall not apply to the taxes imposed by
sections 3221(c) and 3211(a)(3).’’
(4) TECHNICAL AMENDMENTS.—
(A) Paragraph (4) of section 3211, as re-
designated by paragraph (2), is amended by
160
striking ‘‘and (2)’’ and inserting ‘‘, (2), and
(3)’’.
(B) Subsection (f) of section 3221, as re-
designated by paragraph (1), is amended by
striking ‘‘and (b)’’ and inserting ‘‘, (b), and
(c)’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to remuneration paid after Decem-
ber 31, 1996.
SEC. 812. HEALTH CARE INCOME TAX.
(a) GENERAL RULE.—Subchapter A of chapter 1 (re-
lating to determination of tax liability) is amended by add-
ing at the end thereof the following new part:
‘‘PART VIII—HEALTH CARE INCOME TAX ON
INDIVIDUALS
‘‘Sec. 59B. Health care income tax.
‘‘SEC. 59B. HEALTH CARE INCOME TAX.
‘‘(a) IMPOSITION OF TAX.—In the case of an individ-
ual, there is hereby imposed a tax (in addition to any other
tax imposed by this subtitle) equal to 2.1 percent of the
taxable income of the taxpayer for the taxable year.
‘‘(b) NO CREDITS AGAINST TAX; NO EFFECT ON
MINIMUM TAX.—The tax imposed by this section shall not
be treated as a tax imposed by this chapter for purposes
of determining—
161
‘‘(1) the amount of any credit allowable under
this chapter, or
‘‘(2) the amount of the minimum tax imposed
by section 55.
‘‘(c) SPECIAL RULES.—
‘‘(1) TAX TO BE WITHHELD, ETC.—For pur-
poses of this title, the tax imposed by this section
shall be treated as imposed by section 1.
‘‘(2) REIMBURSEMENT OF TAX BY EMPLOYER
NOT INCLUDIBLE IN GROSS INCOME.—The gross in-
come of an employee shall not include any payment
by his employer to reimburse the employee for the
tax paid by the employee under this section.
‘‘(3) OTHER
RULES.—The rules of section
59A(d) shall apply to the tax imposed by this sec-
tion.’’
(b) CLERICAL AMENDMENT.—The table of parts for
subchapter A of chapter 1 is amended by adding at the
end the following new item:
‘‘Part VIII. Health care income tax on individuals.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1996.
162
Subtitle C—Increase in Excise
Taxes on Tobacco Products
SEC. 821. INCREASE IN EXCISE TAXES ON TOBACCO PROD-
UCTS.
(a) CIGARETTES.—Subsection (b) of section 5701 is
amended—
(1) by striking ‘‘$12 per thousand ($10 per
thousand on cigarettes removed during 1991 or
1992)’’ in paragraph (1) and inserting ‘‘$100 per
thousand’’, and
(2) by striking ‘‘$25.20 per thousand ($21 per
thousand on cigarettes removed during 1991 or
1992)’’ in paragraph (2) and inserting ‘‘$210 per
thousand’’.
(b) CIGARS.—Subsection (a) of section 5701 is
amended—
(1) by striking ‘‘$1.125 cents per thousand
(93.75 cents per thousand on cigars removed during
1991 or 1992)’’ in paragraph (1) and inserting
‘‘$9.38 per thousand’’, and
(2) by striking ‘‘equal to’’ and all that follows
in paragraph (2) and inserting ‘‘equal to 106.25 per-
cent of the price for which sold but not more than
$250 per thousand.’’
163
(c) CIGARETTE PAPERS.—Subsection (c) of section
5701 is amended by striking ‘‘0.75 cent (0.625 cent on
cigarette papers removed during 1991 or 1992)’’ and in-
serting ‘‘6.25 cents’’.
(d) CIGARETTE TUBES.—Subsection (d) of section
5701 is amended by striking ‘‘1.5 cents (1.25 cents on
cigarette tubes removed during 1991 or 1992)’’ and in-
serting ‘‘12.5 cents’’.
(e) SMOKELESS TOBACCO.—Subsection (e) of section
5701 is amended—
(1) by striking ‘‘36 cents (30 cents on snuff re-
moved during 1991 or 1992)’’ in paragraph (1) and
inserting ‘‘$3.00’’, and
(2) by striking ‘‘12 cents (10 cents on chewing
tobacco removed during 1991 or 1992)’’ in para-
graph (2) and inserting ‘‘$1.00’’.
(f) PIPE TOBACCO.—Subsection (f) of section 5701
is amended by striking ‘‘67.5 cents (56.25 cents on pipe
tobacco removed during 1991 or 1992)’’ and inserting
‘‘$5.63’’.
(g) EFFECTIVE DATE.—The amendments made by
this section shall apply to articles removed (as defined in
section 5702(k) of the Internal Revenue Code of 1986)
after December 31, 1996.
(h) FLOOR STOCKS TAXES.—
164
(1) IMPOSITION OF TAX.—On tobacco products
and cigarette papers and tubes manufactured in or
imported into the United States which are removed
before January 1, 1997, and held on such date for
sale by any person, there is hereby imposed a tax in
an amount equal to the excess of—
(A) the tax which would be imposed under
section 5701 of the Internal Revenue Code of
1986 on the article if the article had been re-
moved on such date, over
(B) the prior tax (if any) imposed under
section 5701 or 7652 of such Code on such ar-
ticle.
(2) AUTHORITY TO EXEMPT CIGARETTES HELD
IN VENDING MACHINES.—To the extent provided in
regulations prescribed by the Secretary, no tax shall
be imposed by paragraph (1) on cigarettes held for
retail sale on January 1, 1997, by any person in any
vending machine. If the Secretary provides such a
benefit with respect to any person, the Secretary
may reduce the $500 amount in paragraph (3) with
respect to such person.
(3) CREDIT AGAINST TAX.—Each person shall
be allowed as a credit against the taxes imposed by
paragraph (1) an amount equal to $500. Such credit
165
shall not exceed the amount of taxes imposed by
paragraph (1) for which such person is liable.
(4) LIABILITY FOR TAX AND METHOD OF PAY-
MENT.—
(A) LIABILITY FOR TAX.—A person hold-
ing any article on January 1, 1997, to which
any tax imposed by paragraph (1) applies shall
be liable for such tax.
(B) METHOD OF PAYMENT.—The tax im-
posed by paragraph (1) shall be paid in such
manner as the Secretary shall prescribe by reg-
ulations.
(C) TIME
FOR
PAYMENT.—The tax im-
posed by paragraph (1) shall be paid on or be-
fore July 31, 1997.
(5) ARTICLES
IN
FOREIGN
TRADE
ZONES.—
Notwithstanding the Act of June 18, 1934 (48 Stat.
998, 19 U.S.C. 81a) and any other provision of law,
any article which is located in a foreign trade zone
on January 1, 1997, shall be subject to the tax im-
posed by paragraph (1) if—
(A) internal revenue taxes have been deter-
mined, or customs duties liquidated, with re-
spect to such article before such date pursuant
166
to a request made under the 1st proviso of sec-
tion 3(a) of such Act, or
(B) such article is held on such date under
the supervision of a customs officer pursuant to
the 2d proviso of such section 3(a).
(6) DEFINITIONS.—For purposes of this sub-
section—
(A) IN GENERAL.—Terms used in this sub-
section which are also used in section 5702 of
the Internal Revenue Code of 1986 shall have
the respective meanings such terms have in
such section.
(B) SECRETARY.—The term ‘‘Secretary’’
means the Secretary of the Treasury or his del-
egate.
(7) CONTROLLED
GROUPS.—Rules similar to
the rules of section 5061(e)(3) of such Code shall
apply for purposes of this subsection.
(8) OTHER LAWS APPLICABLE.—All provisions
of law, including penalties, applicable with respect to
the taxes imposed by section 5701 of such Code
shall, insofar as applicable and not inconsistent with
the provisions of this subsection, apply to the floor
stocks taxes imposed by paragraph (1), to the same
extent as if such taxes were imposed by such section
167
5701. The Secretary may treat any person who bore
the ultimate burden of the tax imposed by para-
graph (1) as the person to whom a credit or refund
under such provisions may be allowed or made.
Subtitle D—Increase in Taxes on
Firearms and Ammunition
SEC. 831. INCREASE IN TAXES ON FIREARMS AND AMMUNI-
TION.
(a) PISTOLS AND REVOLVERS.—The text of section
4181 (relating to imposition of tax on firearms) is amend-
ed to read as follows:
‘‘There is hereby imposed upon the sale by the manu-
facturer, producer, or importer of any pistol, revolver, fire-
arm, shell, or cartridge a tax equal to 50 percent of the
price for which so sold.’’
(b) ADDITIONAL TAXES NOT ADDED TO WILDLIFE
FUND.—Section 3(a) of the Act of September 2, 1937 (16
U.S.C. 669b(a)), commonly referred to as the ‘‘Pittman-
Robertson Wildlife Restoration Act’’, is amended by add-
ing at the end the following new sentence: ‘‘There shall
not be covered into the fund the portion of the tax imposed
by such section 4181 that is attributable to any increase
in amounts received in the Treasury under such section
by reason of the amendment made by section 831 of the
168
American Health Security Act, as estimated by the Sec-
retary.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on January 1, 1997.
(d) FLOOR STOCKS TAX.—
(1) IMPOSITION OF TAX.—In the case of any
taxable article on which tax was imposed under sec-
tion 4181 of the Internal Revenue Code of 1986 be-
fore January 1, 1997, and which is held by a dealer
on such date, there is hereby imposed a floor stocks
tax equal to the excess of—
(A) the tax which would be imposed by
such section if such article had been sold by the
manufacturer, producer, or importer on such
date, over
(B) the tax imposed by such section on
such article.
(2) LIABILITY FOR TAX AND METHOD OF PAY-
MENT.—
(A) LIABILITY FOR TAX.—The dealer hold-
ing the taxable article on January 1, 1997, to
which the tax imposed by paragraph (1) applies
shall be liable for such tax.
(B) METHOD OF PAYMENT.—The tax im-
posed by paragraph (1) shall be paid in such
169
manner as the Secretary of the Treasury or his
delegate shall prescribe.
(C) TIME
FOR
PAYMENT.—The tax im-
posed by paragraph (1) shall be paid on or be-
fore July 31, 1997.
(3) DEFINITIONS.—For purposes of this sub-
section—
(A) TAXABLE
ARTICLE.—The term ‘tax-
able article’ means any article subject to tax
under section 4181 of such Code, other than an
article exempt from such tax under section
4182 of such Code.
(B) HELD BY A DEALER.—The term ‘held
by a dealer’ has the meaning given such term
by section 6412 of such Code.
(4) ARTICLES
IN
FOREIGN
TRADE
ZONES.—
Notwithstanding the Act of June 18, 1934 (48 Stat.
998, 19 U.S.C. 81a) and any other provision of law,
any article which is located in a foreign trade zone
on January 1, 1997, shall be subject to the tax im-
posed by paragraph (1) if—
(A) internal revenue taxes have been deter-
mined, or customs duties liquidated, with re-
spect to such article before such date pursuant
170
to a request made under the 1st proviso of sec-
tion 3(a) of such Act, or
(B) such article is held on such date under
the supervision of a customs officer pursuant to
the 2d proviso of such section 3(a).
(5) OTHER LAWS APPLICABLE.—All provisions
of law, including penalties, applicable with respect to
the taxes imposed by section 4181 of such Code
shall, insofar as applicable and not inconsistent with
the provisions of this subsection, apply with respect
to the floor stock taxes imposed by paragraph (1) to
the same extent as if such taxes were imposed by
such section 4181.
TITLE IX—CONFORMING AMEND-
MENTS TO THE EMPLOYEE
RETIREMENT INCOME SECU-
RITY ACT OF 1974
SEC. 901. ERISA INAPPLICABLE TO HEALTH COVERAGE AR-
RANGEMENTS UNDER STATE HEALTH SECU-
RITY PROGRAMS.
Section 4 of the Employee Retirement Income Secu-
rity Act of 1974 (29 U.S.C. 1003) is amended—
(1) in subsection (a), by striking ‘‘subsection
(b)’’ and inserting ‘‘subsections (b) and (c)’’; and
171
(2) by adding at the end the following new sub-
section:
‘‘(c) The provisions of this title shall not apply to any
arrangement forming a part of a State health security pro-
gram established pursuant to section 101(b) of the Amer-
ican Health Security Act of 1994.’’.
SEC. 902. EXEMPTION OF STATE HEALTH SECURITY PRO-
GRAMS FROM ERISA PREEMPTION.
Section 514(b) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1144(b)) is amended by
adding at the end the following new paragraph:
‘‘(9) Subsection (a) of this section shall not apply to
State health security programs established pursuant to
section 101(b) of the American Health Security Act of
1994.’’.
SEC. 903. PROHIBITION OF EMPLOYEE BENEFITS DUPLICA-
TIVE OF BENEFITS UNDER STATE HEALTH
SECURITY PROGRAMS.
Part 5 of subtitle B of title I of the Employee Retire-
ment Income Security Act of 1974 is amended by adding
at the end the following new section:
‘‘PROHIBITION OF EMPLOYEE BENEFITS DUPLICATIVE OF
STATE HEALTH SECURITY PROGRAM BENEFITS
‘‘SEC. 516. No employee benefit plan may provide
benefits which duplicate payment for any items or services
for which payment may be made under a State health se-
172
curity program established pursuant to section 101(b) of
the American Health Security Act of 1994.’’.
SEC. 903. REPEAL OF CONTINUATION COVERAGE REQUIRE-
MENTS UNDER ERISA AND CERTAIN OTHER
REQUIREMENTS 
RELATING 
TO 
GROUP
HEALTH PLANS.
(a) IN GENERAL.—Part 6 of subtitle B of title I of
the Employee Retirement Income Security Act of 1974
(29 U.S.C. 1161 et seq.) is repealed.
(b) CONFORMING AMENDMENTS.—
(1) Section 502(a)(7) of such Act (29 U.S.C.
1132(a)(7)) is amended—
(A) by striking paragraph (7); and
(B) by redesignating paragraph (8) as
paragraph (7).
(2) Section 502(c)(1) of such Act (29 U.S.C.
1132(c)(1)) is amended by striking ‘‘paragraph (1)
or (4) of section 606 or’’.
(3) Section 4301(c)(4) of the Omnibus Budget
Reconciliation Act of 1993 (Public Law 103–66; 107
Stat. 377) and the amendments made thereby are
repealed.
(4) The table of contents in section 1 of the
Employee Retirement Income Security Act of 1974
173
is amended by striking the items relating to part 6
of subtitle B of title I of such Act.
SEC. 904. EFFECTIVE DATE OF TITLE.
The amendments made by this title shall take effect
January 1, 1996.
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