Economic Growth Act of 1998

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Economic Growth Act of 1998''.

SEC. 2. REDUCTION IN INDIVIDUAL CAPITAL GAINS TAX RATES.

    (a) In General.--Subsection (h) of section 1 of the Internal 
Revenue Code of 1986 is amended to read as follows:
    ``(h) Maximum Capital Gains Rate.--
            ``(1) In general.--If a taxpayer has a net capital gain for 
        any taxable year, the tax imposed by this section for such 
        taxable year shall not exceed the sum of--
                    ``(A) a tax computed at the rates and in the same 
                manner as if this subsection had not been enacted on 
                taxable income reduced by the net capital gain,
                    ``(B) 7.5 percent of so much of the net capital 
                gain (or, if less, taxable income) as does not exceed 
                the excess (if any) of--
                            ``(i) the amount of taxable income which 
                        would (without regard to this paragraph) be 
                        taxed at a rate below 28 percent, over
                            ``(ii) the taxable income reduced by the 
                        net capital gain, and
                    ``(C) 15 percent of the amount of taxable income in 
                excess of the sum of the amounts on which tax is 
                determined under subparagraphs (A) and (B).
            ``(2) Net capital gain taken into account as investment 
        income.--For purposes of this subsection, the net capital gain 
        for any taxable year shall be reduced (but not below zero) by 
        the amount which the taxpayer takes into account as investment 
        income under section 163(d)(4)(B)(iii).''.
    (b) Alternative Minimum Tax.--Paragraph (3) of section 55(b) of 
such Code is amended to read as follows:
            ``(3) Maximum rate of tax on net capital gain of 
        noncorporate taxpayers.--The amount determined under the first 
        sentence of paragraph (1)(A)(i) shall not exceed the sum of--
                    ``(A) the amount determined under such first 
                sentence computed at the rates and in the same manner 
                as if this paragraph had not been enacted on the 
                taxable excess reduced by the net capital gain,
                    ``(B) 7.5 percent of so much of the net capital 
                gain (or, if less, taxable excess) as does not exceed 
                the amount on which a tax is determined under section 
                1(h)(1)(B), and
                    ``(C) 15 percent of the amount of taxable excess in 
                excess of the sum of the amounts on which tax is 
determined under subparagraphs (A) and (B).''.
    (c) Conforming Amendments.--
            (1) Paragraph (1) of section 1445(e) of such Code is 
        amended by striking ``20 percent'' and inserting ``15 
        percent''.
            (2) The second sentence of section 7518(g)(6)(A) of such 
        Code, and the second sentence of section 607(h)(6)(A) of the 
        Merchant Marine Act, 1936, are each amended by striking ``20 
        percent'' and inserting ``15 percent''.
            (3) Section 311 of the Taxpayer Relief Act of 1997 is 
        amended by striking subsection (e).
            (4) Paragraph (7) of section 57(a) of such Code (as amended 
        by the Internal Revenue Service Restructuring and Reform Act of 
        1998) is amended by striking the last sentence.
            (5) Paragraphs (11) and (12) of section 1223, and section 
        1235(a), of such Code (as amended by the Internal Revenue 
        Service Restructuring and Reform Act of 1998) are each amended 
        by striking ``18 months'' each place it appears and inserting 
        ``1 year''.
    (d) Transitional Rules For Taxable Years Which Include June 24, 
1998.--
            (1) In general.--Subsection (h) of section 1 of such Code 
        (as amended by the Internal Revenue Service Restructuring and 
        Reform Act of 1998) is amended by adding at the end the 
        following new paragraph:
            ``(14) Special rules for taxable years which include june 
        24, 1998.--For purposes of applying this subsection in the case 
        of a taxable year which includes June 24, 1998--
                    ``(A) Gains or losses properly taken into account 
                for the period on or after such date shall be 
                disregarded in applying paragraph (5)(A)(i), subclauses 
                (I) and (II) of paragraph (5)(A)(ii), paragraph (5)(B), 
                paragraph (6), and paragraph (7)(A).
                    ``(B) The amount determined under subparagraph (B) 
                of paragraph (1) shall be the sum of--
                            ``(i) 7.5 percent of the amount which would 
                        be determined under such subparagraph if the 
                        amount of gain taken into account under such 
                        subparagraph did not exceed the net capital 
                        gain taking into account only gain or loss 
                        properly taken into account for the portion of 
                        the taxable year on or after such date, plus
                            ``(ii) 10 percent of the excess of the 
                        amount determined under such subparagraph 
                        (determined without regard to this paragraph) 
                        over the amount determined under clause (i).
                    ``(C) The amount determined under subparagraph (C) 
                of paragraph (1) shall be the sum of--
                            ``(i) 15 percent of the amount which would 
                        be determined under such subparagraph if the 
                        adjusted net capital gain did not exceed the 
                        net capital gain taking into account only gain 
                        or loss properly taken into account for the 
                        portion of the taxable year on or after such 
                        date, plus
                            ``(ii) 20 percent of the excess of the 
                        amount determined under such subparagraph 
                        (determined without regard to this paragraph) 
                        over the amount determined under clause (i).
                    ``(D) Rules similar to the rules of paragraph 
                (13)(C) shall apply.''.
            (2) Alternative minimum tax.--Paragraph (3) of section 
        55(b) of such Code (as amended by the Internal Revenue Service 
        Restructuring and Reform Act of 1998) is amended by adding at 
        the end the following new sentence: ``For purposes of applying 
        this paragraph for a taxable year which includes June 24, 1998, 
        rules similar to the rules of section 1(h)(14) shall apply.''.
    (e) Effective Dates.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        taxable years beginning on or after June 24, 1998.
            (2) Transitional rules for taxable years which include june 
        24, 1998.--The amendments made by subsection (d) shall apply to 
        taxable years beginning before such date and ending on or after 
        June 24, 1998.
            (3) Withholding.--The amendment made by subsection (c)(1) 
        shall apply only to amounts paid after the date of the 
        enactment of this Act.
            (4) Certain conforming amendments.--The amendments made by 
        subsection (c)(5) shall take effect on June 24, 1998.

Summary: Economic Growth Act of 1998 - Amends the Internal Revenue Code to reduce individual capital gains tax rates.