‘‘(3) 15 percent of the adjusted net capital gain 
(or, if less, modified taxable income) in excess of the 
amount on which tax is determined under paragraph 
(2). 
Terms used in this paragraph which are also used in sec-
tion 1(h) shall have the respective meanings given such 
terms by section 1(h) but computed with the adjustments 
under this section. 
‘‘(d) ALTERNATIVE TAXABLE INCOME.—For pur-
poses of this section— 
‘‘(1) IN GENERAL.—The term ‘alternative tax-
able income’ means— 
‘‘(A) gross income, minus 
‘‘(B) the sum of— 
‘‘(i) the personal exemption, 
‘‘(ii) the dependent allowance, plus 
‘‘(iii) the alternative standard deduc-
tion. 
‘‘(2) PERSONAL EXEMPTION.—The personal ex-
emption is— 
‘‘(A) 200 percent of the dollar amount in 
effect under subparagraph (B) in the case of— 
‘‘(i) a joint return, or 
‘‘(ii) a surviving spouse (as defined in 
section 2(a)), and 
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‘‘(B) $3,500 in the case of an individual— 
‘‘(i) who is not married and is not a 
surviving spouse, or 
‘‘(ii) who is a married individual filing 
a separate return. 
‘‘(3) DEPENDENT
ALLOWANCE.—The depend-
ent allowance is $3,500 for each dependent (as de-
fined in section 152). 
‘‘(4) ALTERNATIVE
STANDARD
DEDUCTION.— 
The alternative standard deduction means— 
‘‘(A) $25,000 in the case of— 
‘‘(i) a joint return, or 
‘‘(ii) a surviving spouse (as defined in 
section 2(a)), and 
‘‘(B) $12,500 in the case of an indi-
vidual— 
‘‘(i) who is not married and is not a 
surviving spouse, or 
‘‘(ii) who is a married individual filing 
a separate return. 
‘‘(e) INFLATION ADJUSTMENTS.— 
‘‘(1) IN GENERAL.—In the case of any taxable 
year beginning in a calendar year after 2009, each 
of the dollar amounts for the rate brackets in sub-
section (b) and each of the dollar amounts in sub-
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section (d)(2)(B), (d)(3), and (d)(4) shall be in-
creased by an amount equal to— 
‘‘(A) such dollar amount, multiplied by 
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for the calendar 
year in which the taxable year begins, by sub-
stituting ‘calendar year 2008’ for ‘calendar year 
1992’ in subparagraph (B) thereof. 
‘‘(2) ROUNDING.—If any amount as adjusted 
under clause (i) is not a multiple of $100, such 
amount shall be rounded to the nearest multiple of 
$100.’’. 
(b) CONFORMING AMENDMENT.—The table of sec-
tions for part I of subchapter A of chapter 1 of such Code 
is amended by striking the item relating to section 5 and 
inserting after the item relating to section 4 the following: 
‘‘Sec. 5. Simplified Individual Income Tax System. 
‘‘Sec. 6. Cross references relating to tax on individuals.’’. 
(c) CAPITAL GAINS AND DIVIDENDS RATE MADE 
PERMANENT.—The Jobs and Growth Tax Relief Rec-
onciliation Act of 2003 is amended by striking section 
303. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2008. 
Æ 
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