Middle-Class Savings and Investment Act
Bill: S.4393 | Sponsor: Sen. Grassley, Chuck (R-IA)
Policy area: Taxation

Summary:
Middle-Class Savings and Investment Act
This bill provides tax incentives for savings and investment for middle-income taxpayers. Specifically, it (1) increases the current tax bracket for capital gains and dividends; (2) allows an exclusion from gross income for up to $300 of interest income received by a taxpayer; (3) increases the threshold for the net investment tax for married couples filing jointly to $400,000, adjusted for inflation (thus eliminating the tax effect known as the marriage penalty); and (4) increases the maximum contribution amount and the rate of the saver's tax credit. As an offset to the cost of these incentives, the bill extends through 2028 the limitation on the deduction for state and local taxes.

To amend the Internal Revenue Code of 1986 to modify the maximum 
capital gains tax rate, to modify the tax on net investment income, and 
                          for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Middle-Class Savings and Investment 
Act''.

SEC. 2. MODIFICATION OF CAPITAL GAIN RATES.

    (a) Expansion of Zero Percent Rate.--
            (1) In general.--Section 1(h)(1)(B)(i) of the Internal 
        Revenue Code of 1986 is amended by striking ``which would 
        (without regard to this paragraph) be taxed at a rate below 25 
        percent'' and inserting ``below the maximum zero rate amount''.
            (2) Maximum zero rate amount.--Section 1(h) of the Internal 
        Revenue Code of 1986 is amended by adding at the end the 
        following new paragraph:
            ``(12) Maximum zero rate amount.--
                    ``(A) In general.--The maximum zero rate amount 
                shall be--
                            ``(i) in the case of a joint return or 
                        surviving spouse, $165,000,
                            ``(ii) in the case of any other individual 
                        (other than an estate or trust), an amount 
                        equal to \1/2\ of the amount in effect for the 
                        taxable year under clause (i), and
                            ``(iii) in the case of an estate or trust, 
                        $2,600.
                    ``(B) Inflation adjustment.--In the case of any 
                taxable year beginning after 2021, each of the dollar 
                amounts in subparagraph (A) shall be increased by an 
                amount equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under subsection (f)(3) for the 
                        calendar year in which the taxable year begins, 
                        determined by substituting `calendar year 2017' 
                        for `calendar year 2016' in subparagraph 
                        (A)(ii) thereof.
                If any increase under this subparagraph is not a 
                multiple of $50, such increase shall be rounded to the 
                next lowest multiple of $50.''.
            (3) Conforming amendments.--Paragraph (5) of section 1(j) 
        of such Code is amended--
                    (A) in subparagraph (A), by striking ``shall be 
                applied'' and all that follows through ``by 
                substituting `below the maximum 15-percent rate 
                amount''' and inserting ``shall be applied by 
                substituting `below the maximum 15-percent rate 
                amount''',
                    (B) in subparagraph (B)--
                            (i) by striking all that preceding clause 
                        (ii),
                            (ii) by redesignating clause (ii) as 
                        subparagraph (B),
                            (iii) by redesignating subclauses (I) 
                        through (IV) of subparagraph (B) (as so 
                        redesignated) as clauses (i) through (iv), 
                        respectively, and
                            (iv) by moving subparagraph (B) and each of 
                        clauses (i) through (iv) (as so redesignated) 2 
                        ems to the left, and
                    (C) in subparagraph (C), by striking ``clauses (i) 
                and (ii) of''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2021.

SEC. 3. PARTIAL EXCLUSION OF CERTAIN INTEREST RECEIVED BY INDIVIDUALS.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to amounts specifically 
excluded from gross income) is amended by inserting after section 115 
the following new section:

``SEC. 116. PARTIAL EXCLUSION OF CERTAIN INTEREST RECEIVED BY 
              INDIVIDUALS.

    ``(a) Exclusion From Gross Income.--Gross income does not include 
the sum of the amounts received during the taxable year by an 
individual as qualified interest.
    ``(b) Limitations.--The aggregate amount excluded under subsection 
(a) for any taxable year shall not exceed $300 ($600 in the case of a 
joint return).
    ``(c) Qualified Interest.--For purposes of this section--
            ``(1) In general.--The term `qualified interest' means any 
        interest other than interest excluded from gross income under 
        any other provision of this chapter.
            ``(2) Special rules for dividends received from certain 
        money market mutual funds.--
                    ``(A) In general.--The term `qualified interest' 
                shall include qualified interest-related dividends.
                            ``(i) In general.--Except as provided in 
                        clause (ii), a qualified interest-related 
                        dividend is any dividend or part thereof (other 
                        than a capital gain dividend or exempt interest 
                        dividend)--
                                    ``(I) paid by a regulated 
                                investment company regulated as a money 
                                market fund under section 270.2a-7 of 
                                title 17, Code of Federal Regulations, 
                                and
                                    ``(II) reported by the company as a 
                                qualified interest-related dividend in 
                                written statements furnished to its 
                                shareholders.
                            ``(ii) Excess reported amounts.--If the 
                        aggregate reported amount with respect to the 
                        company for any taxable year exceeds the 
                        applicable qualified interest of the company 
                        for such taxable year, a qualified interest-
                        related dividend is the excess of--
                                    ``(I) the reported qualified 
                                interest-related dividend amount, over
                                    ``(II) the excess reported amount 
                                which is allocable to such reported 
                                qualified interest-related dividend 
                                amount.
                            ``(iii) Allocation of excess reported 
                        amount.--
                                    ``(I) In general.--Except as 
                                provided in subclause (II), the excess 
                                reported amount (if any) which is 
                                allocable to the reported qualified 
                                interest-related dividend amount is 
                                that portion of the excess reported 
                                amount which bears the same ratio to 
                                the excess reported amount as the 
                                reported qualified interest-related 
                                dividend amount bears to the aggregate 
                                reported amount.
                                    ``(II) Special rule for noncalendar 
                                year taxpayers.--In the case of any 
                                taxable year which does not begin and 
                                end in the same calendar year, if the 
                                post-December reported amount equals or 
                                exceeds the excess reported amount for 
                                such taxable year, subclause (I) shall 
                                be applied by substituting `post-
                                December reported amount' for 
                                `aggregate reported amount' and no 
                                excess reported amount shall be 
                                allocated to any dividend paid on or 
                                before December 31 of such taxable 
                                year.
                            ``(iv) Definitions.--For purposes of this 
                        subparagraph--
                                    ``(I) Reported qualified interest-
                                related dividend amount.--The term 
                                `reported qualified interest-related 
                                dividend amount' means the amount 
                                reported to its shareholders under 
                                clause (i) as a qualified interest-
                                related dividend.
                                    ``(II) Excess reported amount.--The 
                                term `excess reported amount' means the 
                                excess of the aggregate reported amount 
                                over the applicable qualified interest 
                                of the company for the taxable year.
                                    ``(III) Aggregate reported 
                                amount.--The term `aggregate reported 
                                amount' means the aggregate amount of 
                                dividends reported by the company under 
                                clause (i) as qualified interest-
                                related dividends for the taxable year 
                                (including qualified interest-related 
                                dividends paid after the close of the 
                                taxable year described in section 855).
                                    ``(IV) Post-december reported 
                                amount.--The term `post-December 
                                reported amount' means the aggregate 
                                reported amount determined by taking 
                                into account only dividends paid after 
                                December 31 of the taxable year.
                                    ``(V) Applicable qualified 
                                interest.--The term `applicable 
                                qualified interest' means interest 
                                described in paragraph (1).
    ``(d) Nonresident Aliens Ineligible for Exclusion.--Subsection (a) 
shall not apply to any nonresident alien individual.
    ``(e) Regulations.--The Secretary may prescribe such regulations as 
are appropriate (including regulations requiring reporting) to apply 
this section in the case of interest received--
            ``(1) from partnerships and S corporations, and
            ``(2) from a trade or business of the taxpayer.''.
    (b) Conforming Amendments.--
            (1) The table of sections for part III of subchapter B of 
        chapter 1 of such Code is amended by inserting after the item 
        relating to section 115 the following new item:

``Sec. 116. Partial exclusion of certain interest received by 
                            individuals.''.
            (2) Paragraph (2) of section 265(a) of such Code is amended 
        by inserting before the period at the end the following: ``, or 
        to purchase or carry obligations or shares, or to make 
        deposits, to the extent the interest thereon is excludable from 
        gross income under section 116''.
            (3) Subsection (c) of section 584 of such Code is amended 
        by adding at the end the following: ``The proportionate share 
        of each participant in the amount of qualified interest (as 
        defined in section 116) received by the common trust fund shall 
        be considered for purposes of such section as having been 
        received by such participant.''.
            (4) Subsection (a) of section 643 of such Code is amended 
        by redesignating paragraph (7) as paragraph (8) and by 
        inserting after paragraph (6) the following new paragraph:
            ``(7) Qualified interest.--There shall be included the 
        amount of any qualified interest (as defined in section 116) 
        excluded from gross income pursuant to section 116 (reduced by 
        amounts which would be deductible in respect of disbursements 
        allocable to such income but for the provisions of section 
        265).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2021.

SEC. 4. MODIFICATION OF THRESHOLD AMOUNT UNDER NET INVESTMENT INCOME 
              TAX.

    (a) In General.--Section 1411(b) of the Internal Revenue Code of 
1986 is amended to read as follows:
    ``(b) Threshold Amount.--For purposes of this chapter--
            ``(1) In general.--The term `threshold amount' means--
                    ``(A) in the case of a taxpayer making a joint 
                return under section 6013 or a surviving spouse (as 
                defined in section 2(a)), $400,000, and
                    ``(B) in any other case, \1/2\ of the dollar amount 
                determined under paragraph (1).
            ``(2) Inflation adjustment.--In the case of any taxable 
        year beginning in a calendar year after 2022, the dollar amount 
        in paragraph (1)(A) shall be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, determined by substituting 
                `calendar year 2021' for `calendar year 2016' in 
                subparagraph (A)(ii) thereof.
        Any increase determined under the preceding sentence shall be 
        rounded to the nearest multiple of $1,000.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2021.

SEC. 5. ENHANCEMENT OF SAVER'S CREDIT.

    (a) Maximum Contribution Amount.--Section 25B(a) of the Internal 
Revenue Code of 1986 is amended by striking ``$2,000'' and inserting 
``$2,500''.
    (b) Modification of Credit Rate.--
            (1) 50 percent credit rate.--Section 25B(a) of the Internal 
        Revenue Code of 1986 is amended by striking ``the applicable 
        percentage'' and inserting ``50 percent''.
            (2) Adjusted gross income phaseouts.--Section 25B(b) of 
        such Code is amended to read as follows:
    ``(b) Limitation.--For purposes of this section--
            ``(1) In general.--The amount of credit allowable under 
        subsection (a) (determined without regard to this subsection) 
        shall be reduced (but not below zero) by an amount which bears 
        the same ratio to the credit otherwise so allowable as--
                    ``(A) the excess (if any) of--
                            ``(i) adjusted gross income of the 
                        taxpayer, over
                            ``(ii) the threshold amount, bears to
                    ``(B) the phaseout amount.
            ``(2) Threshold amount.--The term `threshold amount' 
        means--
                    ``(A) in the case of a joint return or a surviving 
                spouse (as defined in section 2(a)), $45,000,
                    ``(B) in the case of a head of household, 75 
                percent of the amount in effect for the taxable year 
                under subparagraph (A), and
                    ``(C) in the case of any other individual, 50 
                percent of the amount in effect for the taxable year 
                under subparagraph (A).
            ``(3) Phaseout amount.--The term `phaseout amount' means--
                    ``(A) in the case of a joint return or a surviving 
                spouse (as defined in 2(a)), $40,000,
                    ``(B) in the case of a head of household (as 
                defined in section 2(b)), 75 percent of the amount in 
                effect for the taxable year under subparagraph (A), and
                    ``(C) in the case of any other individual, 50 
                percent of the amount in effect for the taxable year 
                under subparagraph (A).
            ``(4) Inflation adjustment.--
                    ``(A) In general.--In the case of any taxable year 
                beginning in a calendar year after 2022, the $45,000 
                dollar amount in paragraph (2) and the $40,000 in 
                paragraph (3) shall each be increased by an amount 
                equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for the 
                        calendar year in which the taxable year begins, 
                        determined by substituting `calendar year 2021' 
                        for `calendar year 2016' in subparagraph 
                        (A)(ii) thereof.
                    ``(B) Rounding.--Any increase determined under 
                subparagraph (A) that is not a multiple of $500 shall 
                be rounded to the nearest multiple of $500.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2021.

SEC. 6. EXTENSION OF LIMITATION ON DEDUCTION FOR STATE AND LOCAL TAXES.

    (a) In General.--Section 164(b)(6) of the Internal Revenue Code of 
1986 is amended--
            (1) by striking ``January 1, 2026'' and inserting ``January 
        1, 2029'', and
            (2) by striking ``2025'' in the heading thereof and 
        inserting ``2028''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2022.
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