To amend the Internal Revenue Code of 1986 to reduce individual income tax rates.

SECTION 1. SHORT TITLE; ETC.

    (a) Short Title.--This Act may be cited as the ``Economic Growth 
and Tax Relief Act of 2001''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.
    (c) Section 15 Not To Apply.--No amendment made by section 2 shall 
be treated as a change in a rate of tax for purposes of section 15 of 
the Internal Revenue Code of 1986.

SEC. 2. REDUCTION IN INCOME TAX RATES FOR INDIVIDUALS.

    (a) In General.--Section 1 is amended by adding at the end the 
following new subsection:
    ``(i) Rate Reductions After 2000.--
            ``(1) New lowest rate bracket.--
                    ``(A) In general.--In the case of taxable years 
                beginning after December 31, 2000--
                            ``(i) the rate of tax under subsections 
                        (a), (b), (c), and (d) on taxable income not 
                        over the initial bracket amount shall be 12 
                        percent (as modified by paragraph (2)), and
                            ``(ii) the 15 percent rate of tax shall 
                        apply only to taxable income over the initial 
                        bracket amount.
                    ``(B) Initial bracket amount.--For purposes of this 
                subsection, the initial bracket amount is--
                            ``(i) $12,000 in the case of subsection 
                        (a),
                            ``(ii) $10,000 in the case of subsection 
                        (b), and
                            ``(iii) \1/2\ the amount applicable under 
                        clause (i) in the case of subsections (c) and 
                        (d).
                    ``(C) Inflation adjustment.--In prescribing the 
                tables under subsection (f) which apply with respect to 
                taxable years beginning in calendar years after 2001--
                            ``(i) the Secretary shall make no 
                        adjustment to the initial bracket amount for 
                        any taxable year beginning before January 1, 
                        2007,
                            ``(ii) the cost-of-living adjustment used 
                        in making adjustments to the initial bracket 
                        amount for any taxable year beginning after 
                        December 31, 2006, shall be determined under 
                        subsection (f)(3) by substituting `2005' for 
                        `1992' in subparagraph (B) thereof, and
                            ``(iii) such adjustment shall not apply to 
                        the amount referred to in subparagraph 
                        (B)(iii).
                If any amount after adjustment under the preceding 
                sentence is not a multiple of $50, such amount shall be 
                rounded to the next lowest multiple of $50.
            ``(2) Reductions in rates after 2001.--In the case of 
        taxable years beginning in a calendar year after 2001, the 
        corresponding percentage specified for such calendar year in 
        the following table shall be substituted for the otherwise 
        applicable tax rate in the tables under subsections (a), (b), 
        (c), (d), and, to the extent applicable, (e).


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           ``In the case of     The corresponding percentages shall be
            taxable years    substituted for  the following percentages:
           beginning during --------------------------------------------
            calendar year:     12%      28%      31%      36%     39.6%
------------------------------------------------------------------------
          2002.............    12%      27%      30%      35%      38%
          2003.............    11%      27%      29%      35%      37%
          2004.............    11%      26%      28%      34%      36%
          2005.............    11%      26%      27%      34%      35%
          2006 and             10%      25%      25%      33%      33%
           thereafter.
------------------------------------------------------------------------

            ``(3) Adjustment of tables.--The Secretary shall adjust the 
        tables prescribed under subsection (f) to carry out this 
        subsection.''.
    (b) Repeal of Reduction of Refundable Tax Credits.--
            (1) Subsection (d) of section 24 is amended by striking 
        paragraph (2) and redesignating paragraph (3) as paragraph (2).
            (2) Section 32 is amended by striking subsection (h).
    (c) Conforming Amendments.--
            (1) Subparagraph (B) of section 1(g)(7) is amended--
                    (A) by striking ``15 percent'' in clause (ii)(II) 
                and inserting ``the first bracket percentage'', and
                    (B) by adding at the end the following flush 
                sentence:
                ``For purposes of clause (ii), the first bracket 
                percentage is the percentage applicable to the lowest 
                income bracket in the table under subsection (c).''
            (2) Section 1(h) is amended--
                    (A) by striking ``28 percent'' both places it 
                appears in paragraphs (1)(A)(ii)(I) and (1)(B)(i) and 
                inserting ``25 percent'', and
                    (B) by striking paragraph (13).
            (3) Section 15 is amended by adding at the end the 
        following new subsection:
    ``(f) Rate Reductions Enacted by Economic Growth and Tax Relief Act 
of 2001.--This section shall not apply to any change in rates under 
subsection (i) of section 1 (relating to rate reductions after 
2000).''.
            (4) Section 531 is amended by striking ``equal to'' and all 
        that follows and inserting ``equal to the product of the 
        highest rate of tax under section 1(c) and the accumulated 
        taxable income.''.
            (5) Section 541 is amended by striking ``equal to'' and all 
        that follows and inserting ``equal to the product of the 
        highest rate of tax under section 1(c) and the undistributed 
        personal holding company income.''.
            (6) Section 3402(p)(1)(B) is amended by striking ``7, 15, 
        28, or 31 percent'' and inserting ``7 percent, any percentage 
        applicable to any of the 3 lowest income brackets in the table 
        under section 1(c),''.
            (7) Section 3402(p)(2) is amended by striking ``equal to 15 
        percent of such payment'' and inserting ``equal to the product 
        of the lowest rate of tax under section 1(c) and such 
        payment''.
            (8) Section 3402(q)(1) is amended by striking ``equal to 28 
        percent of such payment'' and inserting ``equal to the product 
        of the third to the lowest rate of tax under section 1(c) and 
        such payment''.
            (9) Section 3402(r)(3) is amended by striking ``31 
        percent'' and inserting ``the third to the lowest rate of tax 
        under section 1(c)''.
            (10) Section 3406(a)(1) is amended by striking ``equal to 
        31 percent of such payment'' and inserting ``equal to the 
        product of the third to the lowest rate of tax under section 
        1(c) and such payment''.
            (11) Section 13273 of the Revenue Reconciliation Act of 
        1993 is amended by striking ``28 percent'' and inserting ``the 
        third to the lowest rate of tax under section 1(c) of the 
        Internal Revenue Code of 1986''.
    (d) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        beginning after December 31, 2000.
            (2) Amendments to withholding provisions.--The amendments 
        made by paragraphs (6), (7), (8), (9), (10), and (11) of 
        subsection (c) shall apply to amounts paid after the 60th day 
        after the date of the enactment of this Act.

SEC. 3. PROTECTION OF SOCIAL SECURITY AND MEDICARE.

    The amounts transferred to any trust fund under the Social Security 
Act shall be determined as if this Act had not been enacted.

            Passed the House of Representatives March 8, 2001.

            Attest:

                                                 JEFF TRANDAHL,

                                                                 Clerk.

Summary: Economic Growth and Tax Relief Act of 2001 - States that tax rate revisions made by this Act shall not be treated as a tax rate change for purposes of applying the pre-and post-change tax rates under section 15 of the Internal Revenue Code. (Such provision would otherwise apply two tax rates to income in the same tax year, depending upon effective date.)Amends the Code, as of tax year 2001, to establish (in addition to existing brackets) a 12 percent individual tax bracket for each filing status. Caps taxable income levels for the 12 percent bracket at: (1) $12,000 for married individuals filing jointly; (2) $10,000 for heads of households; and (3) $6,000 for unmarried individuals or married individuals filing separately. Applies the current 15 percent bracket to income levels above the 12 percent caps but below current 15 percent caps.Prohibits minimum bracket amount inflation adjustments through tax year 2006. Revises the cost-of-living adjustment formula, as of tax year 2007.Provides, beginning in tax year 2002, for specified reductions in the 12, (maintaining the revised 15 percent bracket without further change), 28, 31, 36, and 39.6 percent individual (and estate) brackets, so that as of 2006 and thereafter, there shall be four tax brackets of 10, 15, 25, and 33 percent.Repeals mandatory reductions in the additional (three or more children) child tax credit and the earned income credit for taxpayers subject to the alternative minimum tax.Revises current tax rates in conformity with the amendments made by this Act respecting: (1) accumulated corporate earnings; (2) personal holding companies; (3) voluntary withholding on certain Federal payments, unemployment benefits, gambling winnings, and Indian casino profits; (3) backup withholding; and (4) supplemental wage payments.States that amounts transferred to any Social Security Act trust fund shall be determined as if this Act had not been enacted.