I
105TH CONGRESS
2D SESSION
H. R. 4379
To amend the Internal Revenue Code of 1986 to use 331⁄3 percent of any
Federal budget surplus in the general fund to rebate taxpayers based
on their payroll taxes and to provide that the remainder of the surplus
shall be used to increase discretionary nondefense spending and to reduce
the outstanding public debt.
IN THE HOUSE OF REPRESENTATIVES
JULY 31, 1998
Mr. SCHUMER introduced the following bill; which was referred to the Com-
mittee on Ways and Means, and in addition to the Committee on the
Budget, for a period to be subsequently determined by the Speaker, in
each case for consideration of such provisions as fall within the jurisdic-
tion of the committee concerned
A BILL
To amend the Internal Revenue Code of 1986 to use 331⁄3
percent of any Federal budget surplus in the general
fund to rebate taxpayers based on their payroll taxes
and to provide that the remainder of the surplus shall
be used to increase discretionary nondefense spending
and to reduce the outstanding public debt.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Budget Surplus Divi-
dend Act of 1998’’.
SEC. 2. 331⁄3 PERCENT OF FEDERAL BUDGET SURPLUS TO
REIMBURSE EMPLOYERS AND EMPLOYEES
FOR A PORTION OF THEIR SOCIAL SECURITY
TAXES.
(a) IN GENERAL.—Subpart C of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 (relating to refundable credits) is amended by redes-
ignating section 35 as section 36 and by inserting after
section 34 the following new section:
‘‘SEC. 35. CREDIT FOR PORTION OF SOCIAL SECURITY
TAXES.
‘‘(a) ALLOWANCE OF CREDIT.—In the case of a tax-
able year to which this section applies, there shall be al-
lowed as a credit against the tax imposed by this subtitle
for the taxable year an amount equal to the applicable per-
centage of the taxpayer’s social security taxes for the tax-
able year.
‘‘(b) TAXABLE YEARS
TO WHICH SECTION AP-
PLIES.—
‘‘(1) IN
GENERAL.—Except as provided by
paragraph (2), this section shall apply to any taxable
year beginning in the first calendar year beginning
after a fiscal year if there is a Federal budget sur-
plus 
for 
such 
fiscal 
year 
of 
more 
than
$1,000,000,000.
‘‘(2) SOCIAL
SECURITY
TRUST
FUNDS
RE-
QUIRED
TO
BE
SOLVENT
BEFORE
CREDIT
AL-
LOWED.—This section shall not apply to any taxable
year beginning before the date on which the Board
of Trustees of the Federal Old Age and Survivors
Insurance Trust Fund and the Federal Disability
Insurance Trust Fund makes the solvency deter-
mination described in section 5 of the Budget Sur-
plus Dividend Act of 1998.
‘‘(c) APPLICABLE PERCENTAGE.—For purposes of
this section—
‘‘(1) IN GENERAL.—The term ‘applicable per-
centage’ means—
‘‘(A) the base percentage with respect to so
much of the taxpayer’s social security taxes as
does not exceed $3,000, and
‘‘(B) the phasedown percentage with re-
spect to so much of the taxpayer’s social secu-
rity taxes as exceeds $3,000.
‘‘(2) BASE PERCENTAGE.—The term ‘base per-
centage’ means, for taxable years beginning in a cal-
endar year, the percentage which the Secretary esti-
mates will result in a reduction of revenues to the
Treasury by reason of this section for such taxable
year equal to 331⁄3 percent of the Federal budget
surplus for the most recent fiscal year ending before
such calendar year. Proper adjustments shall be
made in the percentage determined under the pre-
ceding sentence with respect to any subsequent fiscal
year to the extent that prior estimates were in ex-
cess of or less than the proper percentage.
‘‘(3) PHASEDOWN
PERCENTAGE.—The term
‘phasedown percentage’ means the base percentage
reduced (but not below zero) by the number of per-
centage points which bears the same ratio to the
base percentage as—
‘‘(A) the excess of the taxpayer’s social se-
curity taxes over $3,000 bears to
‘‘(B) the excess of the maximum social se-
curity taxes over $3,000.
‘‘(4) MAXIMUM SOCIAL SECURITY TAXES.—The
term ‘maximum social security taxes’ means the
amount which would be the social security taxes of
the taxpayer if the amount on which such taxes are
determined were equal to the maximum amount of
remuneration which may be taken into account
under section 3101(a).
‘‘(5) SPECIAL RULES.—
‘‘(A) DOLLAR LIMITATIONS ON PER EM-
PLOYEE BASIS.—The dollar limitations in para-
graphs (1) and (3) shall be applied on a per
employee basis.
‘‘(B) 
SELF-EMPLOYED
INDIVIDUALS.—
Paragraphs (1) and (3) shall be applied by sub-
stituting ‘$6,000’ for ‘$3,000’ each place it ap-
pears in the case of the taxes referred to in
subparagraph (C) or (D) of subsection (d)(1).
‘‘(d) SOCIAL SECURITY TAXES.—For purposes of this
section—
‘‘(1) IN GENERAL.—The term ‘social security
taxes’ means, with respect to any taxpayer for any
taxable year—
‘‘(A) the taxes imposed by sections 3101
and 3201(a) (relating to taxes on employees) on
amounts received by the taxpayer during the
calendar year in which the taxable year begins,
‘‘(B) the taxes imposed by sections 3111
and 3221(a) (relating to taxes on employers) on
amounts paid by the taxpayer during the cal-
endar year in which the taxable year begins,
‘‘(C) the taxes imposed by section 1401 on
the self-employment income of the taxpayer for
the taxable year, and
‘‘(D) 
the 
taxes 
imposed 
by 
section
3211(a)(1) on amounts received by the taxpayer
during the calendar year in which the taxable
year begins.
‘‘(2) COORDINATION WITH SPECIAL REFUND OF
SOCIAL SECURITY TAXES.—The term ‘social security
taxes’ shall not include any taxes to the extent the
taxpayer is entitled to a special refund of such taxes
under section 6413(c).
‘‘(3) SPECIAL RULE.—Any amounts paid pursu-
ant to an agreement under section 3121(l) (relating
to agreements entered into by American employers
with respect to foreign affiliates) which are equiva-
lent to the taxes referred to in paragraph (1)(A)
shall be treated as taxes referred to in such para-
graph.’’
(b) CLERICAL AMENDMENT.—The table of sections
for subpart C of part IV of subchapter A of chapter 1
of such Code is amended by striking the item relating to
section 35 and inserting the following:
‘‘Sec. 35. Credit for portion of social security taxes.
‘‘Sec. 36. Overpayments of tax.’’
SEC. 3. APPROPRIATION TO USE 331⁄3 PERCENT OF FED-
ERAL BUDGET SURPLUS TO REDUCE OUT-
STANDING PUBLIC DEBT.
There is hereby appropriated for the first fiscal year
following each fiscal year (beginning after this Act takes
effect) for which there is a Federal budget surplus an
amount equal to 331⁄3 percent of such surplus for purpose
of paying at maturity, or to redeem or buy before matu-
rity, obligations of the Government included in the public
debt. An obligation of the Government that is paid, re-
deemed, or bought with funds appropriated by the preced-
ing sentence shall be canceled and retired and may not
be reissued.
SEC. 4. USE 331⁄3 PERCENT OF FEDERAL BUDGET SURPLUS
TO INCREASE NONDEFENSE DISCRETIONARY
SPENDING LIMITS.
For the first fiscal year following each fiscal year (be-
ginning after this Act takes effect) for which there is a
Federal budget surplus, the Director of the Office of Man-
agement and Budget shall increase (on a pro rata basis
between the applicable nondefense categories for that fis-
cal year) the discretionary spending limit for new budget
authority under section 251(c) of the Balanced Budget
and Emergency Deficit Control Act of 1985 by an amount
equal to 331⁄3 percent of such surplus and shall adjust
the outlays flowing from that budget authority accord-
ingly.
SEC. 5. EFFECTIVE DATE BASED ON SOLVENCY OF SOCIAL
SECURITY TRUST FUNDS.
This Act and the amendments made by this Act shall
take effect on the date on which the Board of Trustees
of the Federal Old Age and Survivors Insurance Trust
Fund and the Federal Disability Insurance Trust Fund
determines (using intermediate assumptions) that both
the Federal Old Age and Survivors Insurance Trust Fund
and the Federal Disability Insurance Trust Fund are in
close actuarial balance through the year 2070. Such deter-
mination shall be included in the first annual report of
such Board made after such determination is made.
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