Debt Buy-Down Act

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Debt Buy-Down Act''.

SEC. 2. DESIGNATION OF AMOUNTS FOR REDUCTION OF PUBLIC DEBT.

    (a) In General.--Subchapter A of chapter 61 of the Internal Revenue 
Code of 1986 (relating to returns and records) is amended by adding at 
the end the following new part:

          ``PART IX--DESIGNATION FOR REDUCTION OF PUBLIC DEBT

                              ``Sec. 6097. Designation.

``SEC. 6097. DESIGNATION.

    ``(a) In General.--Every individual with adjusted income tax 
liability for any taxable year may designate that a portion of such 
liability (not to exceed 10 percent thereof) shall be used to reduce 
the public debt.
    ``(b) Manner and Time of Designation.--A designation under 
subsection (a) may be made with respect to any taxable year only at the 
time of filing the return of tax imposed by chapter 1 for the taxable 
year. The designation shall be made on the first page of the return or 
on the page bearing the taxpayer's signature.
    ``(c) Adjusted Income Tax Liability.--For purposes of this section, 
the term `adjusted income tax liability' means income tax liability (as 
defined in section 6096(b)) reduced by any amount designated under 
section 6096 (relating to designation of income tax payments to 
Presidential Election Campaign Fund).''
    (b) Clerical Amendment.--The table of parts for such subchapter A 
is amended by adding at the end the following new item:

                              ``Part IX. Designation for reduction of 
                                        public debt.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after the date of the enactment of this 
Act.

SEC. 3. PUBLIC DEBT REDUCTION TRUST FUND.

    (a) In General.--Subchapter A of chapter 98 of the Internal Revenue 
Code of 1986 (relating to trust fund code) is amended by adding at the 
end the following section:

``SEC. 9511. PUBLIC DEBT REDUCTION TRUST FUND.

    ``(a) Creation of Trust Fund.--There is established in the Treasury 
of the United States a trust fund to be known as the `Public Debt 
Reduction Trust Fund', consisting of any amount appropriated or 
credited to the Trust Fund as provided in this section or section 
9602(b).
    ``(b) Transfers to Trust Fund.--There are hereby appropriated to 
the Public Debt Reduction Trust Fund amounts equivalent to the amounts 
designated under section 6097 (relating to designation for public debt 
reduction).
    ``(c) Expenditures.--Amounts in the Public Debt Reduction Trust 
Fund shall be used by the Secretary of the Treasury for purposes of 
paying at maturity, or to redeem or buy before maturity, any obligation 
of the Federal Government included in the public debt (other than an 
obligation held by the Federal Old-Age and Survivors Insurance Trust 
Fund, the Civil Service Retirement and Disability Fund, or the 
Department of Defense Military Retirement Fund). Any obligation which 
is paid, redeemed, or bought with amounts from the Public Debt 
Reduction Trust Fund shall be canceled and retired and may not be 
reissued.''
    (b) Clerical Amendment.--The table of sections for such subchapter 
is amended by adding at the end the following new item:

                              ``Sec. 9511. Public Debt Reduction Trust 
                                        Fund.''
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts received after the date of the enactment of this Act.

SEC. 4. TAXPAYER-GENERATED SEQUESTRATION OF FEDERAL SPENDING TO REDUCE 
              THE PUBLIC DEBT.

    (a) Sequestration To Reduce the Public Debt.--Part C of the 
Balanced Budget and Emergency Deficit Control Act of 1985 is amended by 
inserting after section 253 the following new section:

``SEC. 253A. SEQUESTRATION TO REDUCE THE PUBLIC DEBT.

    ``(a) Sequestration.--Notwithstanding sections 255 and 256, within 
15 days after Congress adjourns to end a session, and on the same day 
as sequestration (if any) under sections 251, 252, and 253, but after 
any sequestration required by those sections, there shall be a 
sequestration equivalent to the estimated aggregate amount designated 
under section 6097 of the Internal Revenue Code of 1986 for the last 
taxable year ending one year before the beginning of that session of 
Congress, as estimated by the Department of the Treasury on October 1 
and as modified by the total of (1) any amounts by which net 
discretionary spending is reduced by legislation below the 
discretionary spending limits enacted after the enactment of this 
section related to the fiscal year subject to the sequestration (or, in 
the absence of such limits, any net deficit change from the baseline 
amount calculated under section 257 (except that such baseline for 
fiscal year 1999 and thereafter shall be based upon fiscal year 1998 
enacted appropriations less any 1998 sequesters); and (2) the net 
deficit change that has resulted from all direct spending legislation 
enacted after the enactment of this section related to the fiscal year 
subject to the sequestration, as estimated by OMB. If the reduction in 
spending under clauses (1) and (2) for a fiscal year is greater than 
the estimated aggregate amount designated under section 6097 of the 
Internal Revenue Code of 1986 respecting that fiscal year, then there 
shall be no sequestration under this section.
    ``(b) Applicability.--
            ``(1) In general.--Except as provided by paragraph (2), 
        each account of the United States shall be reduced by a dollar 
        amount calculated by multiplying the level of budgetary 
        resources in that account at that time by the uniform 
        percentage necessary to carry out subsection (a). All 
        obligational authority reduced under this section shall be done 
        in a manner that makes such reductions permanent.
            ``(2) Exempt accounts.--No order issued under this part 
        may--
                    ``(A) reduce benefits payable to the old-age and 
                survivors insurance program established under title II 
                of the Social Security Act;
                    ``(B) reduce retired or retainer pay payable to a 
                member or former member of the uniformed services;
                    ``(C) reduce benefits payable under a retirement 
                system for employees of the Government;
                    ``(D) reduce payments for net interest (all of 
                major functional category 900); or
                    ``(E) make any reduction in the following accounts:
                            ``Federal Deposit Insurance Corporation, 
                        Bank Insurance Fund;
                            ``Federal Deposit Insurance Corporation, 
                        FSLIC Resolution Fund;
                            ``Federal Deposit Insurance Corporation, 
                        Savings Association Insurance Fund;
                            ``National Credit Union Administration, 
                        credit union share insurance fund; or
                            ``Resolution Trust Corporation.''.
    (b) Reports.--Section 254 of the Balanced Budget and Emergency 
Deficit Control Act of 1985 is amended--
            (1) in subsection (a), by adding at the end of the table 
        the following new item:

    ``October 1....................
                                        Department of Treasury report 
                                                to Congress estimating 
                                                amount of income tax 
                                                designated pursuant to 
                                                section 6097 of the 
                                                Internal Revenue Code 
                                                of 1986.'';
            (2) in subsection (c)(1), by inserting ``, and 
        sequestration to reduce the public debt,'' after 
        ``sequestration'';
            (3) in subsection (c), by redesignating paragraph (5) as 
        paragraph (6) and by inserting after paragraph (4) the 
        following new paragraph:
            ``(5) Reports on sequestration to reduce the public debt.--
        The preview reports shall set forth for the budget year 
        estimates for each of the following:
                    ``(A) The aggregate amount designated under section 
                6097 of the Internal Revenue Code of 1986 for the last 
                taxable year ending before the budget year.
                    ``(B) The amount of reductions required under 
                section 253A and the deficit remaining after those 
                reductions have been made.
                    ``(C) The sequestration percentage necessary to 
                achieve the required reduction in accounts under 
                section 253A(b).''; and
            (4) in subsection (f), by redesignating paragraphs (4) and 
        (5) as paragraphs (5) and (6), respectively, and by inserting 
        after paragraph (3) the following new paragraph:
            ``(4) Reports on sequestration to reduce the public debt.--
        The final reports shall contain all of the information 
        contained in the public debt taxation designation report 
        required on October 1.''.
    (c) Conforming Amendment.--The table of contents in section 250(a) 
of the the Balanced Budget and Emergency Deficit Control Act of 1985 is 
amended by inserting after the item relating to section 253 the 
following new item:

                              ``Sec. 253A. Sequestration to reduce the 
                                        public debt.''.
    (d) Effective Date.--Notwithstanding section 275(b) of the Balanced 
Budget and Emergency Deficit Control Act of 1985, the expiration date 
set forth in that section shall not apply to the amendments made by 
this section. The amendments made by this section shall cease to have 
any effect after the first fiscal year during which there is no public 
debt.

Summary: Establishes a Public Debt Reduction Trust Fund for the deposit of designated amounts. Makes amounts in such Trust Fund available only to pay at maturity, or to redeem or buy before maturity, any obligation of the Federal Government included in the public debt (other than an obligation of the Federal Old-Age and Survivors Insurance Trust Fund, the Civil Service Retirement and Disability Fund, or the Department of Defense Military Retirement Fund). Prohibits the reissuance of any obligation which is paid, redeemed, or bought with amounts from the Trust Fund.
Amends the Balanced Budget and Emergency Deficit Control Act of 1985 (Gramm-Rudman-Hollings Act) to provide for the sequestration of amounts designated to the Trust Fund. Specifies accounts exempt from such sequestration. Includes aggregated amounts designated to the Trust Fund and amounts sequestered to reduce the public debt in sequestration preview and final reports.