[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 568 Introduced in Senate (IS)]







104th CONGRESS
  1st Session
                                 S. 568

To provide a tax credit for families, to provide certain tax incentives 
to encourage investment and increase savings, and to place limitations 
                       on the growth of spending.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 16, 1995

Mr. Coats (for himself, Mr. Grams, Mr. Craig, Mr. Lott, Mr. Brown, Mr. 
McCain, Mr. Kyl, Mr. Inhofe, Mrs. Hutchison, and Mr. Gramm) introduced 
the following bill; which was read twice and referred to the Committee 
                               on Finance

_______________________________________________________________________

                                 A BILL


 
To provide a tax credit for families, to provide certain tax incentives 
to encourage investment and increase savings, and to place limitations 
                       on the growth of spending.

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

SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Family, 
Investment, Retirement, Savings, and Tax Fairness Act of 1995''.
    (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) Table of Contents.--

Sec. 1. Short title; amendment of 1986 Code; table of contents.
                       TITLE I--FAMILY TAX CREDIT

Sec. 101. Family tax credit.
 TITLE II--REDUCING THE COST OF CAPITAL BY REDUCING CAPITAL GAINS TAX 
             RATES AND INDEXING THE BASIS OF CERTAIN ASSETS

Sec. 201. Reduction in individual capital gains rate.
Sec. 202. Reduction in corporate capital gains rate.
Sec. 203. Reduction of minimum tax rate on capital gains.
Sec. 204. Indexing of certain assets for purposes of determining gain 
                            or loss.
Sec. 205. Indexing of limitation on capital losses of individuals.
Sec. 206. Effective dates.
                    TITLE III--NEUTRAL COST RECOVERY

Sec. 301. Depreciation adjustment for certain property placed in 
                            service in taxable years beginning after 
                            December 31, 1994.
Sec. 302. Special depreciation rules applicable under the adjusted 
                            current earnings provisions of the minimum 
                            tax.
  TITLE IV--INCREASING NATIONAL SAVINGS THROUGH INDIVIDUAL RETIREMENT 
PLUS ACCOUNTS, INDEXING FOR INFLATION THE INCOME THRESHOLDS FOR TAXING 
                     SOCIAL SECURITY BENEFITS, ETC.

Sec. 401. Establishment of individual retirement plus accounts.
Sec. 402. Inflation adjustment of income thresholds for taxation of 
                            social security benefits; income from 
                            individual retirement plans excluded.
Sec. 403. Inflation adjustment of maximum amount of IRA deduction.
  TITLE V--CAP ON FEDERAL SPENDING AND ESTABLISHMENT OF COMMISSION TO 
                        REDUCE FEDERAL SPENDING

Sec. 501. Establishment.
Sec. 502. Duties of Commission.
Sec. 503. Membership and operation of Commission.
Sec. 504. Procedure for making recommendation for proposed cuts.
Sec. 505. Budget outlay reductions.
Sec. 506. Budget outlay reductions permanent.
Sec. 507. Additional enforcement provisions.
Sec. 508. Compliance report by Comptroller General.
Sec. 509. Amendments to the Balanced Budget and Emergency Deficit 
                            Control Act of 1985 to limit Federal 
                            spending.
Sec. 510. Definitions.
         TITLE VI--ELIMINATION OF SOCIAL SECURITY EARNINGS TEST

Sec. 601. Elimination of social security earnings test.

                       TITLE I--FAMILY TAX CREDIT

SEC. 101. FAMILY TAX CREDIT.

    (a) In General.--Subpart C of part IV of subchapter A of chapter 1 
is amended by redesignating section 35 as section 36 and by inserting 
after section 34 the following new section:

``SEC. 35. FAMILY TAX CREDIT.

    ``(a) General Rule.--In the case of an eligible individual, there 
shall be allowed as a credit against the tax imposed by this subtitle 
for the taxable year an amount equal to $500 multiplied by the number 
of qualifying children of the taxpayer who have not attained the age of 
18 as of the close of the calendar year in which the taxable year of 
the taxpayer begins.
    ``(b) Limitation Based on Amount of Tax.--The credit allowed by 
subsection (a) for a taxable year shall not exceed the excess (if any) 
of--
            ``(1) the sum of--
                    ``(A) the tax imposed by this subtitle for the 
                taxable year (reduced by the credits allowable against 
                such tax other than the credits allowable under this 
                subpart), and
                    ``(B) the taxes imposed by sections 3101 and 3111 
                on wages received by the taxpayer during such taxable 
                year, over
            ``(2) the credit allowable for the taxable year under 
        section 32.
    ``(c) Inflation Adjustments.--
            ``(1) In general.--In the case of a taxable year beginning 
        in a calendar year after 1995, the $500 amount contained in 
        subsection (a) shall be increased by an amount equal to--
                    ``(A) $500, 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 
                `1994' for `1992' in subparagraph (B) thereof.
            ``(2) Rounding.--If any increase determined under paragraph 
        (1) is not a multiple of $5, such increase shall be rounded to 
        the next higher multiple of $5.
    ``(d) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Eligible individual.--The term `eligible individual' 
        has the meaning given to such term by section 32(c)(1) 
        (determined without regard to subparagraph (B) thereof).
            ``(2) Qualifying child.--The term `qualifying child' has 
        the meaning given to such term by section 32(c)(3) (determined 
        without regard to subparagraphs (C) and (E) thereof).
            ``(3) Certain other rules apply.--Subsections (d) and (e) 
        of section 32 shall apply.''
    (b) Denial of Double Benefit.--Subparagraph (A) of section 21(b)(1) 
(defining qualifying individual) is amended by inserting ``(other than 
an individual described in section 35(a))'' after ``taxpayer''.
    (c) Conforming Amendment.--The table of sections for such subpart C 
is amended by striking the item relating to section 35 and inserting 
the following new items:

                              ``Sec. 35. Family tax credit.
                              ``Sec. 36. Overpayments of tax.''
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1994.

 TITLE II--REDUCING THE COST OF CAPITAL BY REDUCING CAPITAL GAINS TAX 
             RATES AND INDEXING THE BASIS OF CERTAIN ASSETS

SEC. 201. REDUCTION IN INDIVIDUAL CAPITAL GAINS RATE.

    (a) General Rule.--Subsection (h) of section 1 (relating to maximum 
capital gains rate) 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, then the tax imposed by this section 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 
                the taxable income reduced by the net capital gain, 
                plus
                    ``(B) a tax equal to the sum of--
                            ``(i) 7.5 percent of so much of the net 
                        capital gain as does not exceed--
                                    ``(I) the maximum amount of taxable 
                                income to which the 15-percent rate 
                                applies under the table applicable to 
                                the taxpayer, reduced by
                                    ``(II) the taxable income to which 
                                subparagraph (A) applies, plus
                            ``(ii) 15 percent of the net capital gain 
                        in excess of the net capital gain to which 
                        clause (i) applies.
        For purposes of the preceding sentence, the net capital gain 
        for any taxable year shall be reduced (but not below zero) by 
        the amount which the taxpayer elects to take into account as 
        investment income for the taxable year under section 
        163(d)(4)(B)(iii).
            ``(2) Transitional rule.--In the case of a taxable year 
        which includes January 1, 1995, the amount of the net capital 
        gain for purposes of paragraph (1) shall not exceed the net 
        capital gain determined by only taking into account gains and 
        losses properly taken into account for the portion of the 
        taxable year on or after such date.''
    (b) Phase-Out of Personal Exemptions and Limitation on Deduction of 
Itemized Deductions Not To Result From Net Capital Gain.--
            (1)(A) Subparagraphs (A) and (B) of section 151(d)(3) 
        (relating to phaseout of exemption amount) are each amended by 
        inserting ``modified'' before ``adjusted gross income''.
            (B) Paragraph (3) of section 151(d) is amended by 
        redesignating subparagraph (D) as subparagraph (E) and by 
        inserting after subparagraph (C) the following new 
        subparagraph:
                    ``(D) Modified adjusted gross income.--For purposes 
                of this paragraph--
                            ``(i) In general.--The term `modified 
                        adjusted gross income' means adjusted gross 
                        income reduced by net capital gain.
                            ``(ii) Transitional rule.--In the case of a 
                        taxable year which includes January 1, 1995, 
                        the amount of the net capital gain for purposes 
                        of clause (i) shall not exceed the net capital 
                        gain determined by only taking into account 
                        gains and losses properly taken into account 
                        for the portion of the taxable year on or after 
                        such date.''
            (2) Subsection (a) of section 68 (relating to overall 
        limitation on itemized deductions) is amended by adding at the 
        end the following new sentence:
``For purposes of paragraph (1), adjusted gross income shall be 
computed without regard to net capital gain (determined after 
application of the rule of section 151(d)(3)(D)(ii)).''
    (c) Technical Amendments.--
            (1) Paragraph (1) of section 170(e) is amended by striking 
        ``the amount of gain'' in the material following subparagraph 
        (B)(ii) and inserting ``24.6/39.6 (20/35 in the case of a 
        corporation) of the amount of gain''.
            (2)(A) The second sentence of section 7518(g)(6)(A) is 
        amended by striking ``28 percent (34 percent in the case of a 
        corporation)'' and inserting ``15 percent''.
            (B) The second sentence of section 607(h)(6)(A) of the 
        Merchant Marine Act, 1936, is amended by striking ``28 percent 
        (34 percent in the case of a corporation)'' and inserting ``15 
        percent''.

SEC. 202. REDUCTION IN CORPORATE CAPITAL GAINS RATE.

    (a) General Rule.--Section 1201 (relating to alternative tax for 
corporations) is amended by redesignating subsection (b) as subsection 
(c), and by striking subsection (a) and inserting the following:
    ``(a) General Rule.--If for any taxable year a corporation has a 
net capital gain, then, in lieu of the tax imposed by section 11, 511, 
or 831(a) (whichever applies), there is hereby imposed a tax (if such 
tax is less than the tax imposed by such section) which shall consist 
of the sum of--
            ``(1) a tax computed on the taxable income reduced by the 
        net capital gain, at the same rates and in the same manner as 
        if this subsection had not been enacted, plus
            ``(2) a tax of 15 percent of the net capital gain.
    ``(b) Transitional Rule.--In the case of a taxable year which 
includes January 1, 1995, the amount of the net capital gain for 
purposes of subsection (a) shall not exceed the net capital gain 
determined by only taking into account gains and losses properly taken 
into account for the portion of the taxable year on or after such 
date.''
    (b) Technical Amendments.--
            (1) Clause (iii) of section 852(b)(3)(D) is amended by 
        striking ``65 percent'' and inserting ``85 percent''.
            (2) Paragraphs (1) and (2) of section 1445(e) are each 
        amended by striking ``35 percent'' and inserting ``15 
        percent''.
            (3) Paragraph (1) of section 1445(e) is amended by striking 
        ``(or, to the extent provided in regulations, 28 percent)''.

SEC. 203. REDUCTION OF MINIMUM TAX RATE ON CAPITAL GAINS.

    Section 55(b)(1) (relating to tentative minimum tax) is amended by 
adding at the end the following new subparagraph:
                    ``(C) Special rule for capital gains.--If a 
                taxpayer has a net capital gain for any taxable year, 
                the tentative minimum tax for the taxable year is the 
                sum of--
                            ``(i) 15 percent of the lesser of--
                                    ``(I) the net capital gain 
                                (determined with the adjustments 
                                provided in this part and (to the 
                                extent applicable) the limitations of 
                                sections 1(h)(2) and 1201(b)), or
                                    ``(II) so much of the alternative 
                                minimum taxable income for the taxable 
                                year as exceeds the exemption amount, 
                                plus
                            ``(ii) a tax computed on the amount (if 
                        any) by which the excess referred to in clause 
                        (i)(II) exceeds the net capital gain (as so 
                        determined), at the same rates and in the same 
                        manner as if this subparagraph had not been 
                        enacted.''

SEC. 204. INDEXING OF CERTAIN ASSETS FOR PURPOSES OF DETERMINING GAIN 
              OR LOSS.

    (a) In General.--Part II of subchapter O of chapter 1 (relating to 
basis rules of general application) is amended by inserting after 
section 1021 the following new section:

``SEC. 1022. INDEXING OF CERTAIN ASSETS FOR PURPOSES OF DETERMINING 
              GAIN OR LOSS.

    ``(a) General Rule.--
            ``(1) Indexed basis substituted for adjusted basis.--Except 
        as provided in paragraph (2), if an indexed asset which has 
        been held for more than 1 year is sold or otherwise disposed 
        of, then, for purposes of this title, the indexed basis of the 
        asset shall be substituted for its adjusted basis.
            ``(2) Exception for depreciation, etc.--The deduction for 
        depreciation, depletion, and amortization shall be determined 
        without regard to the application of paragraph (1) to the 
        taxpayer or any other person.
    ``(b) Indexed Asset.--
            ``(1) In general.--For purposes of this section, the term 
        `indexed asset' means--
                    ``(A) stock in a corporation, and
                    ``(B) tangible property (or any interest therein), 
                which is a capital asset or property used in the trade 
                or business (as defined in section 1231(b)).
            ``(2) Certain property excluded.--For purposes of this 
        section, the term `indexed asset' does not include--
                    ``(A) Creditor's interest.--Any interest in 
                property which is in the nature of a creditor's 
                interest.
                    ``(B) Options.--Any option or other right to 
                acquire an interest in property.
                    ``(C) Net lease property.--In the case of a lessor, 
                net lease property (within the meaning of subsection 
                (h)(1)).
                    ``(D) Certain preferred stock.--Stock which is 
                preferred as to dividends and does not participate in 
                corporate growth to any significant extent.
                    ``(E) Stock in certain corporations.--Stock in--
                            ``(i) an S corporation (within the meaning 
                        of section 1361),
                            ``(ii) a personal holding company (as 
                        defined in section 542), and
                            ``(iii) a foreign corporation.
            ``(3) Exception for stock in foreign corporation which is 
        regularly traded on national or regional exchange.--Clause 
        (iii) of paragraph (2)(E) shall not apply to stock in a foreign 
        corporation the stock of which is listed on the New York Stock 
        Exchange, the American Stock Exchange, or any domestic regional 
        exchange for which quotations are published on a regular basis 
        other than--
                    ``(A) stock of a foreign investment company (within 
                the meaning of section 1246(b)), and
                    ``(B) stock in a foreign corporation held by a 
                United States person who meets the requirements of 
                section 1248(a)(2).
    ``(c) Indexed Basis.--For purposes of this section--
            ``(1) Indexed basis.--The indexed basis for any asset is--
                    ``(A) the adjusted basis of the asset, multiplied 
                by
                    ``(B) the applicable inflation ratio.
            ``(2) Applicable inflation ratio.--The applicable inflation 
        ratio for any asset is the percentage arrived at by dividing--
                    ``(A) the gross national product deflator for the 
                calendar quarter in which the disposition takes place, 
                by
                    ``(B) the gross national product deflator for the 
                calendar quarter in which the asset was acquired by the 
                taxpayer (or, if later, the calendar quarter ending 
                December 31, 1994).
        The applicable inflation ratio shall not be taken into account 
        unless it is greater than 1. The applicable inflation ratio for 
        any asset shall be rounded to the nearest one-tenth of 1 
        percent.
            ``(3) Gross national product deflator.--The gross national 
        product deflator for any calendar quarter is the implicit price 
        deflator for the gross national product for such quarter (as 
        shown in the first revision thereof).
            ``(4) Secretary to publish tables.--The Secretary shall 
        publish tables specifying the applicable inflation ratios for 
        each calendar quarter.
    ``(d) Special Rules.--For purposes of this section--
            ``(1) Treatment as separate asset.--In the case of any 
        asset, the following shall be treated as a separate asset:
                    ``(A) a substantial improvement to property,
                    ``(B) in the case of stock of a corporation, a 
                substantial contribution to capital, and
                    ``(C) any other portion of an asset to the extent 
                that separate treatment of such portion is appropriate 
                to carry out the purposes of this section.
            ``(2) Assets which are not indexed assets throughout 
        holding period.--
                    ``(A) In general.--The applicable inflation ratio 
                shall be appropriately reduced for calendar months at 
                any time during which the asset was not an indexed 
                asset.
                    ``(B) Certain short sales.--For purposes of 
                applying subparagraph (A), an asset shall be treated as 
                not an indexed asset for any short sale period during 
                which the taxpayer or the taxpayer's spouse sells short 
                property substantially identical to the asset. For 
                purposes of the preceding sentence, the short sale 
                period begins on the day after the substantially 
                identical property is sold and ends on the closing date 
                for the sale.
            ``(3) Treatment of certain distributions.--A distribution 
        with respect to stock in a corporation which is not a dividend 
        shall be treated as a disposition.
            ``(4) Section cannot increase ordinary loss.--To the extent 
        that (but for this paragraph) this section would create or 
        increase a net ordinary loss to which section 1231(a)(2) 
        applies or an ordinary loss to which any other provision of 
        this title applies, such provision shall not apply. The 
        taxpayer shall be treated as having a long-term capital loss in 
        an amount equal to the amount of the ordinary loss to which the 
        preceding sentence applies.
            ``(5) Acquisition date where there has been prior 
        application of subsection (a)(1) with respect to the 
        taxpayer.--If there has been a prior application of subsection 
        (a)(1) to an asset while such asset was held by the taxpayer, 
        the date of acquisition of such asset by the taxpayer shall be 
        treated as not earlier than the date of the most recent such 
        prior application.
            ``(6) Collapsible corporations.--The application of section 
        341(a) (relating to collapsible corporations) shall be 
        determined without regard to this section.
    ``(e) Certain Conduit Entities.--
            ``(1) Regulated investment companies; real estate 
        investment trusts; common trust funds.--
                    ``(A) In general.--Stock in a qualified investment 
                entity shall be an indexed asset for any calendar month 
                in the same ratio as the fair market value of the 
                assets held by such entity at the close of such month 
                which are indexed assets bears to the fair market value 
                of all assets of such entity at the close of such 
                month.
                    ``(B) Ratio of 90 percent or more.--If the ratio 
                for any calendar month determined under subparagraph 
                (A) would (but for this subparagraph) be 90 percent or 
                more, such ratio for such month shall be 100 percent.
                    ``(C) Ratio of 10 percent or less.--If the ratio 
                for any calendar month determined under subparagraph 
                (A) would (but for this subparagraph) be 10 percent or 
                less, such ratio for such month shall be zero.
                    ``(D) Valuation of assets in case of real estate 
                investment trusts.--Nothing in this paragraph shall 
                require a real estate investment trust to value its 
                assets more frequently than once each 36 months (except 
                where such trust ceases to exist). The ratio under 
                subparagraph (A) for any calendar month for which there 
                is no valuation shall be the trustee's good faith 
                judgment as to such valuation.
                    ``(E) Qualified investment entity.--For purposes of 
                this paragraph, the term `qualified investment entity' 
                means--
                            ``(i) a regulated investment company 
                        (within the meaning of section 851),
                            ``(ii) a real estate investment trust 
                        (within the meaning of section 856), and
                            ``(iii) a common trust fund (within the 
                        meaning of section 584).
            ``(2) Partnerships.--In the case of a partnership, the 
        adjustment made under subsection (a) at the partnership level 
        shall be passed through to the partners.
            ``(3) Subchapter s corporations.--In the case of an 
        electing small business corporation, the adjustment under 
        subsection (a) at the corporate level shall be passed through 
        to the shareholders.
    ``(f) Dispositions Between Related Persons.--
            ``(1) In general.--This section shall not apply to any sale 
        or other disposition of property between related persons except 
        to the extent that the basis of such property in the hands of 
        the transferee is a substituted basis.
            ``(2) Related persons defined.--For purposes of this 
        section, the term `related persons' means--
                    ``(A) persons bearing a relationship set forth in 
                section 267(b), and
                    ``(B) persons treated as single employer under 
                subsection (b) or (c) of section 414.
    ``(g) Transfers To Increase Indexing Adjustment or Depreciation 
Allowance.--If any person transfers cash, debt, or any other property 
to another person and the principal purpose of such transfer is--
            ``(1) to secure or increase an adjustment under subsection 
        (a), or
            ``(2) to increase (by reason of an adjustment under 
        subsection (a)) a deduction for depreciation, depletion, or 
        amortization,
the Secretary may disallow part or all of such adjustment or increase.
    ``(h) Definitions.--For purposes of this section--
            ``(1) Net lease property defined.--The term `net lease 
        property' means leased real property where--
                    ``(A) the term of the lease (taking into account 
                options to renew) was 50 percent or more of the useful 
                life of the property, and
                    ``(B) for the period of the lease, the sum of the 
                deductions with respect to such property which are 
                allowable to the lessor solely by reason of section 162 
                (other than rents and reimbursed amounts with respect 
                to such property) is 15 percent or less of the rental 
                income produced by such property.
            ``(2) Stock includes interest in common trust fund.--The 
        term `stock in a corporation' includes any interest in a common 
        trust fund (as defined in section 584(a)).
    ``(i) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
section.''
    (b) Clerical Amendment.--The table of sections for part II of 
subchapter O of such chapter 1 is amended by inserting after the item 
relating to section 1021 the following new item:

                              ``Sec. 1022. Indexing of certain assets 
                                        for purposes of determining 
                                        gain or loss.''
    (c) Adjustment To Apply for Purposes of Determining Earnings and 
Profits.--Subsection (f) of section 312 (relating to effect on earnings 
and profits of gain or loss and of receipt of tax-free distributions) 
is amended by adding at the end thereof the following new paragraph:
            ``(3) Effect on earnings and profits of indexed basis.--

                                For substitution of indexed basis for 
adjusted basis in the case of the disposition of certain assets after 
December 31, 1993, see section 1022(a)(1).''

SEC. 205. INDEXING OF LIMITATION ON CAPITAL LOSSES OF INDIVIDUALS.

    Section 1211 (relating to limitation on capital losses) is amended 
by adding at the end thereof the following new subsection:
    ``(c) Indexation of Limitation on Noncorporate Taxpayers.--
            ``(1) In general.--In the case of any taxable year 
        beginning in a calendar year after 1994, the $3,000 and $1,500 
        amounts under subsection (b)(1) shall be increased by an amount 
        equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the applicable inflation adjustment for the 
                calendar year in which the taxable year begins.
            ``(2) Applicable inflation adjustment.--For purposes of 
        paragraph (1), the applicable inflation adjustment for any 
        calendar year is the percentage (if any) by which--
                    ``(A) the gross national product deflator for the 
                last calendar quarter of the preceding calendar year, 
                exceeds
                    ``(B) the gross national product deflator for the 
                last calendar quarter of 1993.
        For purposes of this paragraph, the term `gross national 
        product deflator' has the meaning given such term by section 
        1022(c)(3).''

SEC. 206. EFFECTIVE DATES.

    (a) In General.--Except as provided in subsection (b), the 
amendments made by this title shall apply to sales or exchanges 
occurring after December 31, 1994, in taxable years ending after such 
date.
    (b) Indexing of Loss Limitation.--The amendments made by section 
205 shall apply to taxable years beginning after December 31, 1994.

                    TITLE III--NEUTRAL COST RECOVERY

SEC. 301. DEPRECIATION ADJUSTMENT FOR CERTAIN PROPERTY PLACED IN 
              SERVICE IN TAXABLE YEARS BEGINNING AFTER DECEMBER 31, 
              1994.

    (a) In General.--Section 168 (relating to accelerated cost recovery 
system) is amended by adding at the end the following new subsection:
    ``(k) Deduction Adjustment To Allow Equivalent of Expensing for 
Certain Property Placed in Service in Taxable Years Beginning After 
December 31, 1994.--
            ``(1) In general.--In the case of tangible property placed 
        in service in a taxable year beginning after December 31, 1994, 
        the deduction allowable under this section with respect to such 
        property for any taxable year (after the taxable year during 
        which the property is placed in service) shall be--
                    ``(A) the amount so allowable for such taxable year 
                without regard to this subsection, multiplied by
                    ``(B) the applicable neutral cost recovery ratio 
                for such taxable year.
        For purposes of subparagraph (A), paragraphs (1) and (2) of 
        subsection (b) shall be applied by substituting `150 percent' 
        for `200 percent'.
            ``(2) Applicable neutral cost recovery ratio.--For purposes 
        of paragraph (1), the applicable neutral cost recovery ratio 
        for any taxable year is the number determined by--
                    ``(A) dividing--
                            ``(i) the gross national product deflator 
                        for the calendar quarter ending in such taxable 
                        year which corresponds to the calendar quarter 
                        during which the property was placed in service 
                        by the taxpayer, by
                            ``(ii) the gross national product deflator 
                        for the calendar quarter during which the 
                        property was placed in service by the taxpayer, 
                        and
                    ``(B) then multiplying the number determined under 
                subparagraph (A) by the number equal to 1.035 to the 
                nth power where `n' is the number of full years in the 
                period beginning on the 1st day of the calendar quarter 
                during which the property was placed in service by the 
                taxpayer and ending on the day before the beginning of 
                the corresponding calendar quarter ending during such 
                taxable year.
        The applicable neutral cost recovery ratio shall not be taken 
        into account unless it is greater than 1. The applicable 
        neutral cost recovery ratio shall be rounded to the nearest 
        one-tenth of 1 percent.
            ``(3) Gross national product deflator.--For purposes of 
        paragraph (2), the gross national product deflator for any 
        calendar quarter is the implicit price deflator for the gross 
        national product for such quarter (as shown in the first 
        revision thereof).
            ``(4) Election not to have subsection apply.--This 
        subsection shall not apply to any property if the taxpayer 
        elects not to have this subsection apply to such property. Such 
        an election, once made, shall be irrevocable.''
    (b) Minimum Tax Treatment.--Paragraph (1) of section 56(a) is 
amended by adding at the end the following new subparagraph:
                    ``(E) Use of neutral cost recovery ratio.--In the 
                case of tangible property placed in service in a 
                taxable year beginning after December 31, 1994, the 
                deduction allowable under this paragraph with respect 
                to such property for any taxable year (after the 
taxable year during which the property is placed in service) shall be--
                            ``(i) the amount so allowable for such 
                        taxable year without regard to this 
                        subparagraph, multiplied by
                            ``(ii) the applicable neutral cost recovery 
                        ratio for such taxable year (as determined 
                        under section 168(k)).
                This subparagraph shall not apply to any property with 
                respect to which there is an election in effect not to 
                have section 168(k) apply.''
    (c) Disallowance of Interest Deduction To Ensure Equity Financing 
Receives Same Treatment as Debt Financing.--Section 163 (relating to 
deduction for interest) is amended by redesignating subsection (k) as 
subsection (l) and by inserting after subsection (j) the following new 
subsection:
    ``(k) Disallowance of Deduction for Property Subject to Neutral 
Cost Recovery.--No deduction shall be allowed for any amount otherwise 
allowable as a deduction for interest on indebtedness incurred or 
continued to purchase or carry tangible property with respect to which 
an election is made under section 168(k) (relating to neutral cost 
recovery).''
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1994.

SEC. 302. SPECIAL DEPRECIATION RULES APPLICABLE UNDER THE ADJUSTED 
              CURRENT EARNINGS PROVISIONS OF THE MINIMUM TAX.

    (a) In General.--Subparagraph (A) of section 56(g)(4) (relating to 
adjustments) is amended by adding at the end the following new clauses:
                            ``(vi) Special basis rules for 1994.--
                                    ``(I) In general.--Notwithstanding 
                                clause (i), the adjusted basis of any 
                                depreciable property held by the 
                                taxpayer as of the beginning of the 
                                taxpayer's first taxable year beginning 
                                after December 31, 1994, shall be 
                                determined as if the provisions of the 
                                last sentence of clause (i) had also 
                                applied to taxable years beginning in 
                                1991, 1992, 1993, or 1994.
                                    ``(II) Lost basis recovered over 5 
                                years.--The amount determined under 
                                clause (vii) shall be allowed as a 
                                deduction ratably over the 60-month 
                                period beginning with the first month 
                                of the taxpayer's first taxable year 
                                beginning after December 31, 1994.
                            ``(vii) Amount of lost basis.--For purposes 
                        of clause (vi)(II), the amount determined under 
                        this clause is the excess of--
                                    ``(I) the aggregate adjusted bases 
                                of depreciable property held by the 
                                taxpayer as of the beginning of the 
                                taxpayer's first taxable year beginning 
                                after December 31, 1994, which would 
                                have been determined (as of such time) 
                                under clause (i) without regard to 
                                clause (vi), over
                                    ``(II) the aggregate adjusted bases 
                                of such property (as of such time) as 
                                determined under the rules of clause 
                                (vi).''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 1994.

  TITLE IV--INCREASING NATIONAL SAVINGS THROUGH INDIVIDUAL RETIREMENT 
PLUS ACCOUNTS, INDEXING FOR INFLATION THE INCOME THRESHOLDS FOR TAXING 
                     SOCIAL SECURITY BENEFITS, ETC.

SEC. 401. ESTABLISHMENT OF INDIVIDUAL RETIREMENT PLUS ACCOUNTS.

    (a) In General.--Subpart A of part I of subchapter D of chapter 1 
(relating to pension, profit-sharing, stock bonus plans, etc.) is 
amended by inserting after section 408 the following new section:

``SEC. 408A. INDIVIDUAL RETIREMENT PLUS ACCOUNTS.

    ``(a) General Rule.--Except as provided in this section, an 
individual retirement plus account shall be treated for purposes of 
this title in the same manner as an individual retirement plan.
    ``(b) Individual Retirement Plus Account.--For purposes of this 
title, the term `individual retirement plus account' means an 
individual retirement plan which is designated at the time of the 
establishment of the plan as an individual retirement plus account. 
Such designation shall be made in such manner as the Secretary may 
prescribe.
    ``(c) Contribution Rules.--
            ``(1) No deduction allowed.--No deduction shall be allowed 
        under section 219 for a contribution to an individual 
        retirement plus account.
            ``(2) Contribution limit.--
                    ``(A) In general.--Except in the case of rollover 
                contributions, the aggregate amount which may be 
                accepted as contributions to an individual retirement 
                plus account shall not be greater than the excess (if 
                any) of--
                            ``(i) the nondeductible limit with respect 
                        to the individual for the taxable year under 
                        section 408(o) (after application of 
                        subparagraph (B)(ii) thereof), over
                            ``(ii) the designated nondeductible 
                        contributions made by the individual for such 
                        taxable year to 1 or more individual retirement 
                        plans.
                    ``(B) $1,000 increase after 1995.--
                            ``(i) In general.--In the case of any 
                        taxable year beginning after December 31, 1996, 
                        the amount determined under subparagraph (A)(i) 
(without regard to this subparagraph) shall be increased by $1,000.
                            ``(ii) Adjustment for inflation.--In the 
                        case of any taxable year beginning in a 
                        calendar year after 1998, the $1,000 amount in 
                        clause (i) shall be increased by an amount 
                        equal to--
                                    ``(I) such dollar amount, 
                                multiplied by
                                    ``(II) the cost-of-living 
                                adjustment under section 1(f)(3) for 
                                the calendar year in which the taxable 
                                year begins, determined by substituting 
                                `calendar year 1997' for `calendar year 
                                1992' in subparagraph (B) thereof.
                            ``(iii) Rounding.--If any amount as 
                        adjusted under clause (ii) is not a multiple of 
                        $50, such amount shall be rounded to the 
                        nearest multiple of $50 (or, if such amount is 
                        a multiple of $25, such amount shall be rounded 
                        to the next highest multiple of $50).
                    ``(C) Special rule for married individuals.--The 
                nondeductible limits under subparagraph (A) for an 
                individual or for such individual's spouse shall be an 
                amount equal to the excess (if any) of--
                            ``(i) the amount determined under 
                        subparagraph (A)(i) (after application of 
                        subparagraph (B)), over
                            ``(ii) the sum of the amount allowed as a 
                        deduction under section 219 for contributions 
                        on behalf of such individual or such spouse, 
                        plus the amount determined under subparagraph 
                        (A)(ii) with respect to each.
                In no event shall the sum of such limits exceed an 
                amount equal to the sum of the compensation includible 
                in the individual's and spouse's gross income for the 
                taxable year, reduced by the sum of the amounts 
                determined under clause (ii).
            ``(3) Contributions after age 70\1/2\.--Contributions may 
        be made by an individual to an individual retirement plus 
        account after such individual has attained the age of 70\1/2\.
            ``(4) Limitations on rollover contributions.--No rollover 
        contributions may be made to an individual retirement plus 
        account unless such rollover contribution is a contribution of 
        a distribution or payment out of--
                    ``(A) another individual retirement plus account, 
                or
                    ``(B) an individual retirement plan which is not 
                allocable to any amount transferred to such plan which 
                represented any portion of the balance to the credit of 
                an employee in a qualified trust (or any income 
                allocable to such portion).
    ``(d) Distribution Rules.--For purposes of this title--
            ``(1) In general.--Except in the case of a qualified 
        distribution, the rules of paragraphs (1) and (2) of section 
        408(d) shall apply to any distribution from an individual 
        retirement plus account.
            ``(2) Treatment of qualified distribution.--In the case of 
        a qualified distribution from an individual retirement plus 
        account--
                    ``(A) the amount of such distribution shall not be 
                includible in gross income, and
                    ``(B) section 72(t) shall not apply.
            ``(3) Qualified distribution.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `qualified 
                distribution' means any distribution--
                            ``(i) made on or after the date on which 
                        the individual attains age 59\1/2\,
                            ``(ii) made to a beneficiary (or to the 
                        estate of an individual) on or after the death 
                        of the individual,
                            ``(iii) attributable to the employee's 
                        being disabled (within the meaning of section 
                        72(m)(7)), or
                            ``(iv) which is a qualified special purpose 
                        distribution (within the meaning of subsection 
                        (e)).
                    ``(B) Distributions within 5 years.--No 
                distribution shall be treated as a qualified 
                distribution if--
                            ``(i) it is made within the 5-taxable year 
                        period beginning with the 1st taxable year in 
                        which the individual made a contribution to an 
                        individual retirement plus account, or
                            ``(ii) in the case of a distribution 
                        properly allocable to a rollover contribution 
                        (or income allocable thereto), it is made 
                        within 5 years of the date on which such 
                        rollover contribution was made.
            ``(4) Special rules relating to rollovers from regular 
        individual retirement accounts.--
                    ``(A) In general.--Except as provided in this 
                paragraph, any amount paid or distributed out of an 
                individual retirement plan on or before the earlier 
                of--
                            ``(i) the date on which the individual 
                        attains age 55, or
                            ``(ii) January 1, 1996,
                shall not be included in gross income (and section 
                72(t) shall not apply to such amount) if the individual 
                receiving such amount transfers, within 60 days of 
                receipt, the entire amount received to an individual 
                retirement plus account.
                    ``(B) Treatment of tax-favored amounts.--
                            ``(i) In general.--Notwithstanding 
                        subparagraph (A), there shall be included in 
                        gross income (but section 72(t) shall not apply 
                        to) the portion of any amount transferred which 
                        bears the same ratio to such amount as--
                                    ``(I) the aggregate amount of 
                                contributions to individual 
retirement plans with respect to which a deduction was allowable under 
section 219, bears to
                                    ``(II) the aggregate balance of 
                                such plans.
                            ``(ii) Time for inclusion.--Any amount 
                        described in clause (i) shall be included in 
                        gross income ratably over the 4-taxable year 
                        period beginning with the taxable year in which 
                        the amount was paid or distributed out of the 
                        individual retirement plan.
    ``(e) Qualified Special Purpose Distribution.--For purposes of this 
section--
            ``(1) In general.--The term `qualified special purpose 
        distribution' means--
                    ``(A) a qualified first-time homebuyer 
                distribution, or
                    ``(B) an applicable medical or educational 
                distribution.
            ``(2) 25 percent account limit.--A distribution shall not 
        be treated as a qualified special purpose distribution to the 
        extent it exceeds the amount (if any) by which--
                    ``(A) 25 percent of the sum of--
                            ``(i) the aggregate balance of individual 
                        retirement plus accounts established on behalf 
                        of an individual, plus
                            ``(ii) the aggregate amounts previously 
                        treated as qualified special purpose 
                        distributions, exceeds
                    ``(B) the amount determined under subparagraph 
                (A)(ii).
            ``(3) Distributions used to purchase a home by first-time 
        homebuyer.--For purposes of paragraph (1)--
                    ``(A) In general.--The term `qualified first-time 
                homebuyer distribution' means any payment or 
                distribution received by a first-time homebuyer from an 
                individual retirement plan to the extent such payment 
                or distribution is used by the individual before the 
                close of the 60th day after the day on which such 
                payment or distribution is received to pay qualified 
                acquisition costs with respect to a principal residence 
                for such individual.
                    ``(B) Basis reduction.--The basis of any principal 
                residence described in subparagraph (A) shall be 
                reduced by any amount excluded from the gross income of 
                such first-time homebuyer by reason of this section.
                    ``(C) Recognition of gain as ordinary income.--
                            ``(i) In general.--Notwithstanding any 
                        other provision of this subtitle, except as 
                        provided in clause (ii)--
                                    ``(I) gain (if any) on the sale or 
                                exchange of a principal residence to 
                                which subparagraph (A) applies shall, 
                                to the extent of the amount excluded 
                                from gross income under this section, 
                                be treated as ordinary income by such 
                                individual, and
                                    ``(II) section 72(t) shall apply to 
                                such amount.
                            ``(ii) Exception.--Clause (i) shall not 
                        apply to any taxable year to the extent of any 
                        amount which, before the due date (without 
                        extensions) for filing the return for such 
                        year, the taxpayer contributes to an individual 
                        retirement plus account. Such amount shall not 
                        be taken into account for purposes of any 
                        provision of this title relating to excess 
                        contributions.
                            ``(iii) Coordination with other 
                        provisions.--In the event all or part of the 
                        gain referred to in clause (i) is treated as 
                        ordinary income under any other provision of 
                        this subtitle, such provision shall be applied 
                        before clause (i).
                    ``(D) Special rule where delay in acquisition.--
                If--
                            ``(i) any amount is paid or distributed 
                        from an individual retirement plus account to 
                        an individual for purposes of being used as 
                        provided in subparagraph (A), and
                            ``(ii) by reason of a delay in the 
                        acquisition of the residence, such amount 
                        cannot be so used,
                the amount so paid or distributed may be paid into an 
                individual retirement plus account as provided in 
                section 408(d)(3)(A)(i) without regard to section 
                408(d)(3)(B), and, if so paid into such other plan, 
                such amount shall not be taken into account in 
                determining whether section 408(d)(3)(A)(i) applies to 
                any other amount.
                    ``(E) Definitions.--For purposes of this 
                paragraph--
                            ``(i) Qualified acquisition costs.--The 
                        term `qualified acquisition costs' means the 
                        costs of acquiring, constructing, or 
                        reconstructing a residence. Such term includes 
                        any usual or reasonable settlement, financing, 
                        or other closing costs.
                            ``(ii) First-time homebuyer.--The term 
                        `first-time homebuyer' means any individual if 
                        such individual (and if married, such 
                        individual's spouse) had no present ownership 
                        interest in a principal residence during the 3-
                        year period ending on the date of acquisition 
                        of the principal residence to which this 
                        paragraph applies.
                            ``(iii) Principal residence.--The term 
                        `principal residence' has the same meaning as 
                        when used in section 1034.
                            ``(iv) Date of acquisition.--The term `date 
                        of acquisition' means the date--
                                    ``(I) on which a binding contract 
                                to acquire the principal residence to 
                                which subparagraph (A) applies is 
                                entered into, or
                                    ``(II) on which construction or 
                                reconstruction of such a principal 
                                residence is commenced.
            ``(4) Applicable medical distributions.--For purposes of 
        paragraph (1), the term `applicable medical distributions' 
        means any distributions made to an individual (not otherwise 
        taken into account under this subsection) to the extent such 
        distributions do not exceed the amount allowable as a deduction 
        under section 213 for amounts paid during the taxable year for 
        medical care (without regard to whether the individual itemized 
        deductions for the taxable year).
            ``(5) Distributions from individual retirement plus 
        accounts for educational expenses.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the term `applicable educational distributions' means 
                distributions to an individual to the extent that the 
                amount of such distributions (not otherwise treated as 
                qualified special purpose distributions, determined 
                after application of paragraph (4)) does not exceed the 
                qualified higher education expenses of the individual 
                for the taxable year.
                    ``(B) Qualified higher education expenses.--For 
                purposes of subparagraph (A)--
                            ``(i) In general.--The term `qualified 
                        higher education expenses' means tuition, fees, 
                        books, supplies, and equipment required for the 
                        enrollment or attendance of--
                                    ``(I) the taxpayer,
                                    ``(II) the taxpayer's spouse, or
                                    ``(III) the taxpayer's child (as 
                                defined in section 151(c)(3)) or 
                                grandchild,
                        at an eligible educational institution (as 
                        defined in section 135(c)(3)).
                            ``(ii) Coordination with savings bond 
                        provisions.--The amount of qualified higher 
                        education expenses for any taxable year shall 
                        be reduced by any amount excludable from gross 
                        income under section 135.
    ``(f) Rollover Contributions.--For purposes of this section, the 
term `rollover contributions' means contributions described in sections 
402(a)(5), 402(a)(7), 403(a)(4), 403(b)(8), and 408(d)(3).
    ``(g) Determinations.--For purposes of this section, any 
determinations with respect to aggregate contributions to, or the 
balance of, individual retirement plus accounts shall be made as of the 
close of the calendar year preceding the calendar year in which the 
taxable year begins.''
    (b) Conforming Amendment.--The table of sections for subpart A of 
part I of subchapter D of chapter 1 is amended by inserting after the 
item relating to section 408 the following new item:

                              ``Sec. 408A. Individual retirement plus 
                                        accounts.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1994.

SEC. 402. INFLATION ADJUSTMENT OF INCOME THRESHOLDS FOR TAXATION OF 
              SOCIAL SECURITY BENEFITS; INCOME FROM INDIVIDUAL 
              RETIREMENT PLANS EXCLUDED.

    (a) Adjustment of Income Thresholds for Inflation.--Subsection (c) 
of section 86 (relating to social security and tier 1 railroad 
retirement benefits) is amended by adding at the end the following new 
paragraph:
            ``(3) Adjustment of income thresholds for inflation.--
                    ``(A) In general.--In the case of any taxable year 
                beginning in a calendar year after 1997, each dollar 
                amount contained in paragraphs (1) and (2) shall be 
                increased by an amount equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment under 
                        section 1(f)(3) for the calendar year in which 
                        the taxable year begins, determined by 
                        substituting `calendar year 1996' for `calendar 
                        year 1992' in subparagraph (B) thereof.
                    ``(B) Rounding.--If any amount as adjusted under 
                subparagraph (A) is not a multiple of $50, such amount 
                shall be rounded to the nearest multiple of $50 (or, if 
                such amount is a multiple of $25, such amount shall be 
                rounded to the next highest multiple of $50).''
    (b) Income From Individual Retirement Plans Excluded.--Paragraph 
(2) of section 86(b) is amended by striking ``and'' at the end of 
subparagraph (A), by striking the period at the end of subparagraph (B) 
and inserting ``, and'', and by adding at the end the following new 
subparagraph:
                    ``(C) decreased by the portion of such income which 
                is attributable to a distribution or payment from an 
                individual retirement plan.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1997.

SEC. 403. INFLATION ADJUSTMENT OF MAXIMUM AMOUNT OF IRA DEDUCTION.

    (a) In General.--Section 219 (relating to retirement savings) is 
amended by redesignating subsection (h) as subsection (i) and by 
inserting after subsection (g) the following new subsection:
    ``(h) Adjustment of Maximum Deduction for Inflation.--
            ``(1) In general.--In the case of any taxable year 
        beginning in a calendar year after 1997, each applicable dollar 
        amount shall be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment under section 
                1(f)(3) for the calendar year in which the taxable year 
                begins, determined by substituting `calendar year 1996' 
                for `calendar year 1992' in subparagraph (B) thereof.
            ``(2) Applicable dollar amount.--For purposes of paragraph 
        (1), the term `applicable dollar amount' means--
                    ``(A) the $2,000 amount in subsections (b)(1)(A) 
                and (c)(2) of this section, in subsections (a)(1), (b), 
                and (j) of section 408, and in section 408A(c)(2)(C), 
                and
                    ``(B) the $2,250 amount in subsection (c)(2) of 
                this section and in section 408(d)(5).
            ``(3) Rounding.--If any amount as adjusted under paragraph 
        (1) is not a multiple of $50, such amount shall be rounded to 
        the nearest multiple of $50 (or, if such amount is a multiple 
        of $25, such amount shall be rounded to the next highest 
        multiple of $50).''
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1997.

  TITLE V--CAP ON FEDERAL SPENDING AND ESTABLISHMENT OF COMMISSION TO 
                        REDUCE FEDERAL SPENDING

SEC. 501. ESTABLISHMENT.

    There is established an independent commission to be known as the 
``Spending Reduction Commission'' (hereinafter referred to as the 
``Commission'').

SEC. 502. DUTIES OF COMMISSION.

    The Commission is authorized and directed to--
            (1) review all Federal spending, including entitlement 
        programs, in order to identify and recommend specific 
        reductions in any Federal project, program, or activity to 
        assure that aggregate Federal spending does not grow at a rate 
        in excess of 2 percent per annum for any fiscal year beginning 
        after 1995, and
            (2) take the actions required by this title to achieve the 
        reductions in Federal spending described in paragraph (1).

SEC. 503. MEMBERSHIP AND OPERATION OF COMMISSION.

    (a) Appointment.--(1)(A) The Commission shall be composed of 7 
members appointed by the President, by and with the advice and consent 
of the Senate.
    (B) Not later than January 15th of any calendar year, the President 
shall transmit to the Senate the nominations for appointment to the 
Commission for the fiscal year beginning in the calendar year.
    (2) In selecting individuals for nominations for appointments to 
the Commission, the President shall select--
            (A) 4 of the members from a list of 10 individuals 
        submitted by the Speaker of the House of Representatives and 
        the Majority Leader of the Senate, and
            (B) 3 of the members from a list of 10 individuals 
        submitted by the Minority Leader of the House of 
        Representatives and the Minority Leader of the Senate.
    (3) At the time the President nominates individuals for appointment 
to the Commission, the President shall designate 1 such individual who 
shall serve as Chairman and Vice Chairman of the Commission.
    (4) No current Member of Congress, employee of the executive 
branch, or current or former registered lobbyist may serve on the 
Commission.
    (b) Terms.--(1) Except as provided in paragraph (2), each member of 
the Commission shall serve until November 1st of the calendar year in 
which the member is appointed.
    (2) The Chairman of the Commission shall serve until the 
confirmation of a successor.
    (c) Meetings.--(1) Each meeting of the Commission, other than 
meetings in which classified information is to be discussed, shall be 
open to the public.
    (2) All the proceedings, information, and deliberations of the 
Commission shall be open, upon request, to the Chairman and the ranking 
minority member of the Budget and Appropriations Committees of each 
House.
    (d) Vacancies.--A vacancy in the Commission shall be filled in the 
same manner as the original appointment.
    (e) Pay and Travel Expenses.--(1)(A) Each member, other than the 
Chairman, shall be paid at a rate not to exceed the daily equivalent of 
the minimum annual rate of basic pay payable for level IV of the 
Executive Schedule under section 5315 of title 5, United States Code, 
for each day (including travel time) during vested in the Commission.
    (B) The Chairman shall be paid for each day referred to in 
subparagraph (A) at a rate not to exceed the daily equivalent of the 
minimum annual rate of basic pay payable for level III of the Executive 
Schedule under section 5314 of title 5, United States Code.
    (2) Members shall receive travel expenses, including per diem in 
lieu of subsistence, in accordance with sections 5702 and 5703 of title 
5, United States Code.
    (f) Director of Staff.--(1) The Commission shall, without regard to 
section 5311(b) of title 5, United States Code, appoint a Director who 
has not been employed by the Federal Government during the 1-year 
period preceding the date of such appointment and who is not a former 
Member of Congress or registered lobbyist.
    (2) The Director shall be paid at a rate not to exceed the rate of 
basic pay payable for level IV of the Executive Schedule under section 
5315 of title 5, United States Code.
    (g) Staff.--(1) Subject to paragraphs (2) and (3), the Director, 
with the approval of the Commission, may appoint and fix pay of 
additional personnel.
    (2) The Director may take such appointments without regard to the 
provisions of title 5, United States Code, governing appointment in the 
competitive service, and any personnel so appointed may be paid without 
regard to the provisions of chapter 51 and subchapter III of chapter 53 
of that title relating to classification and General Schedule pay 
rates, except that an individual so appointed may not receive pay in 
excess of the annual rate of basic pay payable for GS-18 of the General 
Schedule.
    (3) Not more than one-third of the personnel employed by or 
detailed to the Commission may be on detail from any Government agency.
    (4) Upon request of the Director, the head of any Federal 
department or agency may detail any of the personnel of that department 
or agency to the Commission to assist the Commission in carrying out 
its duties under this Act.
    (5) The Comptroller General of the United States shall provide 
assistance, including the detailing of employees, to the Commission in 
accordance with an agreement entered into with the Commission.
    (h) Other Authority.--(1) The Commission may procure by contract, 
to the extent funds are available, the temporary or intermittent 
services of experts or consultants pursuant to section 3109 of title 5, 
United States Code.
    (2) The Commission may lease space and acquire personal property to 
the extent funds are available.
    (i) Funding.--Each department and agency shall transfer necessary 
funding to the Commission on a pro rata basis based on that agency's or 
department's funding percentage of the total Executive budget.
    (j) Termination.--Each Commission shall terminate on November 1st 
of the calendar year in which the Commission is appointed.

SEC. 504. PROCEDURE FOR MAKING RECOMMENDATION FOR PROPOSED CUTS.

    (a) Selection Criteria.--(1) OMB shall, by no later than January 
1st of each year, publish in the Federal Register and transmit to the 
Budget and Appropriations committees of each House the criteria 
proposed to be used by OMB in making budget outlay reduction 
recommendations required by this section. OMB shall provide an 
opportunity for public comment on the proposed criteria for a period of 
at least 10 days and shall include notice of that opportunity in the 
publication required under the preceding sentence.
    (2)(A) OMB shall, by no later than January 15th, publish in the 
Federal Register and transmit to the congressional budget and 
appropriations committees the final criteria to be used in making 
recommendations for program cuts. Except as provided in subparagraph 
(B), such criteria shall be the final criteria to be used in making 
such recommendations unless disapproved by a joint resolution of 
Congress enacted on or before February 1st.
    (B) OMB shall amend such criteria, but such amendments may not 
become effective until they have been published in the Federal 
Register, opened to public comment for at least 10 days, and then 
transmitted to the Budget and Appropriations committees of each House 
in final form by no later than February 1st. Such amended criteria 
shall be the final criteria to be used in making such recommendations 
unless disapproved by a joint resolution of Congress enacted on or 
before February 15th.
    (b) OMB Recommendations.--(1) OMB may, by no later than April 1st, 
publish in the Federal Register and transmit to the congressional 
budget and appropriations committees and to the Commission OMB's 
recommendations for budget outlay reductions which meet the 
requirements of section 502(1).
    (2) OMB shall include, with the list of recommendations published 
and transmitted pursuant to paragraph (1), a summary of the selection 
process that resulted in the recommendation.
    (3) In considering such outlay reductions, OMB shall consider all 
programs without regard to whether such programs have previously been 
considered or proposed for elimination.
    (4) OMB shall make available to the Commission and the Comptroller 
General of the United States all information used by OMB in making its 
recommendations.
    (c) Review and Recommendations by the Commission.--(1) After 
receiving the recommendations from OMB pursuant to subsection (b), the 
Commission shall conduct public hearings on the recommendations.
    (2) The Director of the Congressional Budget Office shall notify 
the Commission on August 1st of any savings that have been enacted into 
law for the upcoming fiscal year. The target for such fiscal year shall 
be reduced by the amount of such savings.
    (3)(A) The Commission shall, by no later than August 15th, transmit 
to the President a report containing the Commission's findings and 
conclusions based on a review and analysis of the recommendations.
    (B) In making its recommendations, the Commission may make changes 
in any of the recommendations made by OMB.
    (4) The Commission shall explain and justify in its report 
submitted to the President pursuant to paragraph (2) any recommendation 
made by the Commission that is different from the recommendations made 
by OMB pursuant to subsection (b). The Commission shall transmit a copy 
of such report to the Budget and Appropriations committees of each 
House on the same date on which it transmits its recommendations to the 
President under paragraph (2).
    (5) After August 15th, the Commission shall promptly provide, upon 
request, to any Member of Congress information used by the Commission 
in making its recommendations.
    (6) The Congressional Budget Office shall--
            (A) assist the Commission, to the extent requested, in the 
        Commission's review and analysis of the recommendations made by 
        OMB pursuant to subsection (b); and
            (B) by no later than June 1st, transmit to the Congress and 
        to the Commission a report containing a detailed analysis of 
        OMB's recommendations and selection process.
    (d) Review by the President.--(1) The President shall, by no later 
than September 1st, transmit to the Commission and to the Congress, a 
report containing the President's approval or disapproval of the 
Commission's recommendations.
    (2) If the President approves all the recommendations of the 
Commission, the President shall transmit a copy of such recommendations 
to the Congress, together with a certification of such approval and 
legislative language implementing such recommendations.
    (3) If the President disapproves the recommendations of the 
Commission, in whole or in part, the President shall transmit to the 
Commission and the Congress the reasons for that disapproval. The 
Commission shall then transmit to the President, by no later than 
September 5th, a revised list of recommendations.
    (4) If the President approves all of the revised recommendations of 
the Commission transmitted to the President under paragraph (3), the 
President shall transmit a copy of such revised recommendation to the 
Congress, together with a certification of such approval.
    (5) If the President does not transmit to the Congress an approval 
and certification described in paragraph (2) or (4) by September 10th, 
the process by which budget outlay reductions may occur under this 
title with respect to that year shall be terminated.

SEC. 505. BUDGET OUTLAY REDUCTIONS.

    (a) In General.--The President shall submit recommendations to 
Congress together with a joint resolution containing legislative 
language implementing such recommendations not later than September 
10th, as provided in section 504.
    (b) Congressional Consideration of President's Recommendations.--
            (1) Terms of the resolution.--For the purposes of 
        subsection (a), the term ``joint resolution'' means a joint 
        resolution that--
                    (A) is introduced within the 2-day period beginning 
                on the date on which the President transmits a report 
                to the Congress under section 3(d);
                    (B) does not have a preamble;
                    (C) states after the resolving clause ``That 
                Congress approves the recommendations of the Spending 
                Reduction Commission submitted by the President on 
                ______'', the blank space being filled in with the 
                appropriate date and contains the President's 
legislative language described in subsection (a); and
                    (D) is entitled a ``Joint resolution approving the 
                recommendations of the Spending Reduction Commission.''
            (2) Referral.--(A) A resolution described in paragraph (1) 
        that is introduced in the House of Representatives shall be 
        referred to the Committee on Government Operations of the House 
        of Representatives.
            (B) A resolution described in paragraph (1) that is 
        introduced in the Senate shall be referred to the Committee on 
        Governmental Affairs of the Senate.
            (3) Discharge.--If the committee to which a resolution 
        described in paragraph (1) is referred has not reported the 
        resolution (or an identical resolution) by the end of the 5-day 
        period beginning on the date on which the President transmits 
        the report to the Congress, such committee shall, at the end of 
        that period, be discharged from further consideration of the 
        resolution, and the resolution shall be placed on the 
        appropriate calendar of the House of Representatives or the 
        Senate, as the case may be.
            (4) Consideration.--(A)(i) On or after the first day after 
        the date on which the committee to which a joint resolution 
        described in paragraph (1) is referred has reported, or has 
        been discharged (under paragraph (3)) from further 
        consideration of, such a resolution, it is in order (even 
        though a previous motion to the same effect has been disagreed 
        to) for any member of the House of Representatives or the 
        Senate, respectively, to move to proceed to the consideration 
        of the resolution (but only on the date after the calendar day 
        on which the member announces to the House concerned the 
        member's intention to do so).
            (ii) All points of order against a resolution described in 
        paragraph (1) (and against consideration of the resolution) are 
        waived.
            (iii)(I) A motion to proceed to the consideration of a 
        joint resolution described in paragraph (1) is highly 
        privileged in the House of Representatives and is privileged in 
        the Senate and is not debatable.
            (II) A motion described in subclause (I) is not subject to 
        amendment, to a motion to postpone consideration of the 
        resolution, or to a motion to proceed to the consideration of 
        other business.
            (III) A motion to reconsider the vote by which a motion 
        described in subclause (I) is agreed to or not agreed to shall 
        not be in order.
            (IV) If a motion described in subclause (I) is agreed to, 
        the House of Representatives or the Senate, as the case may be, 
        shall immediately proceed to consideration of the joint 
        resolution without intervening motion, order, or other 
        business, and the resolution shall remain the unfinished 
        business of the House of Representatives or the Senate, as the 
        case may be, until disposed of.
            (B)(i) Debate on a joint resolution described in paragraph 
        (1) and on all debatable motions and appeals in connection 
        therewith shall be limited to not more than 5 hours, which 
        shall be divided equally between those favoring and those 
        opposing the resolution.
            (ii) An amendment to a joint resolution described in 
        paragraph (1) is not in order.
            (iii) A motion further to limit debate on a joint 
        resolution described in paragraph (1) is in order and not 
        debatable.
            (iv) A motion to postpone consideration of a joint 
        resolution described in paragraph (1), a motion to proceed to 
        the consideration of other business, or a motion to recommit 
        the resolution is not in order.
            (v) A motion to reconsider the vote by which a resolution 
        described in paragraph (1) is agreed to or not agreed to is not 
        in order.
            (C) Immediately following the conclusion of the debate on a 
        joint resolution described in paragraph (1) and a single quorum 
        call at the conclusion of the debate if requested in accordance 
        with the rules of the House of Representatives or the Senate, 
        as the case may be, the vote on final passage of the resolution 
        shall occur.
            (D) Appeals from the decisions of the Chair relating to the 
        application of the rules of the House of Representatives or of 
        the Senate, as the case may be, to the procedure relating to a 
        joint resolution described in paragraph (1) shall be decided 
        without debate.
            (5) Consideration by other house.--(A) If, before the 
        passage by one House of a joint resolution described in 
        paragraph (1) that was introduced in that House, that House 
        receives from the other House a joint resolution described in 
        paragraph (1)--
                    (i) the resolution of the other House shall not be 
                referred to a committee and may not be considered in 
                the House that receives it otherwise than on final 
                passage under clause (ii)(II); and
                    (ii)(I) the procedure in the House that receives 
                such a resolution with respect to such a resolution 
                that was introduced in that House shall be the same as 
                if no resolution had been received from the other 
                House; but
                    (II) the vote on final passage shall be on the 
                resolution of the other House.
            (B) Upon disposition of a joint resolution described in 
        paragraph (1) that is received by one House from the other 
        House, it shall no longer be in order to consider such a 
        resolution that was introduced in the receiving House.
            (6) Date certain.--If the Senate and the House of 
        Representatives have not acted upon the joint resolution by 
        September 30th, then on that day or the next day of session 
        thereafter the joint resolution shall be called up by the 
        Presiding Officer of each House upon convening and a roll call 
        vote shall be conducted on passage. If the joint 
resolution passes one House a vote on final passage shall be 
immediately conducted in the other House.
            (7) Rules of the senate and house of representatives.--This 
        subsection is enacted by Congress--
                    (A) as an exercise of the rulemaking power of the 
                Senate and House of Representatives, respectively, and 
                is deemed to be part of the rules of each House, 
                respectively, but applicable only with respect to the 
                procedure to be followed in that House in the case of a 
                joint resolution described in paragraph (1), and it 
                supersedes other rules only to the extent that it is 
                inconsistent with such rules; and
                    (B) with full recognition of the constitutional 
                right of either House to change the rules (so far as 
                they relate to the procedure of that House) at any 
                time, in the same manner, and to the same extent as in 
                the case of any other rule of that House.

SEC. 506. BUDGET OUTLAY REDUCTIONS PERMANENT.

    All obligational authority reduced pursuant to this title shall be 
done in a manner that shall make such reductions permanent.

SEC. 507. ADDITIONAL ENFORCEMENT PROVISIONS.

    (a) Paygo Scorecard.--No reductions in direct spending pursuant to 
this title shall be treated as a net deficit decrease for purposes of 
section 252 of the Balanced Budget and Emergency Deficit Control Act of 
1985.
    (b) Discretionary Spending Limits.--When OMB submits a 
sequestration report under section 254 (g) or (h) of the Balanced 
Budget and Emergency Deficit Control Act of 1985, OMB shall include 
downward adjustments to discretionary spending limits (in new budget 
authority and outlays) for the budget year and each outyear to take 
full account of all reductions in discretionary spending pursuant to 
this title for that fiscal year.

SEC. 508. COMPLIANCE REPORT BY COMPTROLLER GENERAL.

    Within 15 days after the end of a session of Congress, the 
Comptroller General shall submit to the Congress and the President a 
report stating whether the requirements of this title have been 
complied with and indicating which requirements (if any) have not been 
complied with.

SEC. 509. AMENDMENTS TO THE BALANCED BUDGET AND EMERGENCY DEFICIT 
              CONTROL ACT OF 1985 TO LIMIT FEDERAL SPENDING.

    The Balanced Budget and Emergency Deficit Control Act of 1985 is 
amended by adding after section 252 the following new section:

``SEC. 252A. LIMITATIONS ON DIRECT SPENDING.

    ``(a) Enforcement.--The purpose of this section is to assure that 
any increase in the annual amount of total Federal spending exceeding 
the amount resulting from an annual rate of inflation of 2 percent will 
trigger an offsetting sequestration.
    ``(b) Sequestration.--Within 15 calendar days after Congress 
adjourns to end a session and on the same day as a sequestration (if 
any) under sections 251 and 252, and prior to any sequestration under 
section 253, there shall be a sequestration to offset the amount of any 
excess Federal spending in that fiscal year. The amount of excess 
Federal spending for a fiscal year shall be the amount by which OMB 
projects total Federal spending for that year to exceed the direct 
spending limit for that year set forth in the following table:

  

------------------------------------------------------------------------
                                                    Outlay limits (in   
                  Fiscal Year                      billions of dollars) 
------------------------------------------------------------------------
1996...........................................            1578         
1997...........................................            1609         
1998...........................................            1642         
1999...........................................            1675         
2000...........................................            1708         
------------------------------------------------------------------------

    ``(c) Eliminating Excess Federal Spending.--The amount required to 
be sequestered in a fiscal year under subsection (b) shall be obtained 
from all non-exempt accounts. Each non-exempt account shall be reduced 
by the uniform percentage necessary to make the required reduction in 
Federal spending. The uniform reduction required shall be made without 
application of the exemptions, limitations, and special rules set forth 
in sections 255 and 256, except for the following: section 255(a) (with 
respect to social security benefits), 255(c) and prior legal 
obligations of the Government in sections 255(g)(1) and 255(g)(2).
    ``(d) Reports.--The requirements of section 254 for reports and 
orders that are applicable to section 252 shall also apply to this 
section except that such reports and orders for this section shall 
refer to and apply the requirements, calculations and sequestrations of 
this section.
    ``(e) Reconciliation Process To Avoid Sequestration.--Whenever an 
update report for this section indicates that a sequester would be 
necessary to eliminate excess Federal spending, the special 
reconciliation process set forth in section 258C shall apply for 
consideration of alternatives to the order envisioned by such report.
    ``(f) Trigger.--This section shall only be effective if the 
recommendations of the Spending Reduction Commission established under 
title V of the Family Investment, Retirement Savings, and Tax Fairness 
Act of 1995 are not enacted into law.''

SEC. 510. DEFINITIONS.

    As used in this title--
            (1) the terms ``budget outlay'', ``outlay'', ``new budget 
        authority'', ``direct spending'', and ``OMB'' have the meanings 
        given to such terms by section 250(c) of the Balanced Budget 
        and Emergency Deficit Control Act of 1985;
            (2) the term ``aggregate Federal spending'' shall not 
        include Federal deposit insurance outlays and receipts; and
            (3) the term ``reductions in Federal spending'' shall not 
        include any offsetting reductions and receipts.

         TITLE VI--ELIMINATION OF SOCIAL SECURITY EARNINGS TEST

SEC. 601. ELIMINATION OF SOCIAL SECURITY EARNINGS TEST.

    (a) In General.--Section 203 of the Social Security Act is 
amended--
            (1) in paragraph (1) of subsection (c) and paragraphs 
        (1)(A) and (2) of subsection (d), by striking ``the age of 
        seventy'' and inserting ``retirement age (as defined in section 
        216(l))'';
            (2) in subsection (f)(1)(B), by striking ``was age seventy 
        or over'' and inserting ``was at or above retirement age (as 
        defined in section 216(l))'';
            (3) in subsection (f)(3), by striking ``33\1/3\ percent'' 
        and all that follows through ``any other individual,'' and 
        inserting ``50 percent of such individual's earnings for such 
        year in excess of the product of the exempt amount as 
        determined under paragraph (8),'' and by striking ``age 70'' 
        and inserting ``retirement age (as defined in section 
        216(l))'';
            (4) in subsection (h)(1)(A), by striking ``age 70'' each 
        place it appears and inserting ``retirement age (as defined in 
        section 216(l))''; and
            (5) in subsection (j), by striking ``Age Seventy'' in the 
        heading and inserting ``Retirement Age'', and by striking 
        ``seventy years of age'' and inserting ``having attained 
        retirement age (as defined in section 216(l))''.
    (b) Conforming Amendments Eliminating the Special Exempt Amount for 
Individuals Who Have Attained Retirement Age.--
            (1) Uniform exempt amount.--Section 203(f)(8)(A) of such 
        Act is amended by striking ``the new exempt amounts (separately 
        stated for individuals described in subparagraph (D) and for 
        other individuals) which are to be applicable'' and inserting 
        ``a new exempt amount which shall be applicable''.
            (2) Conforming amendments.--Section 203(f)(8)(B) of such 
        Act is amended--
                    (A) in the matter preceding clause (i), by striking 
                ``Except'' and all that follows through ``whichever'' 
                and inserting ``The exempt amount which is applicable 
                for each month of a particular taxable year shall be 
                whichever'';
                    (B) in clause (i), by striking ``corresponding''; 
                and
                    (C) in the last sentence, by striking ``an exempt 
                amount'' and inserting ``the exempt amount''.
            (3) Repeal of basis for computation of special exempt 
        amount.--Section 203(f)(8)(D) of such Act is repealed.
    (c) Elimination of Redundant References to Retirement Age.--Section 
203 of such Act is amended--
            (1) in the last sentence of subsection (c), by striking 
        ``nor shall any deduction'' and all that follows and inserting 
        ``nor shall any deduction be made under this subsection from 
        any widow's or widower's insurance benefit if the widow, 
        surviving divorced wife, widower, or surviving divorced husband 
        involved became entitled to such benefit prior to attaining age 
        60.''; and
            (2) in subsection (f)(1), by striking clause (D) and 
        inserting the following: ``(D) for which such individual is 
        entitled to widow's or widower's insurance benefits if such 
        individual became so entitled prior to attaining age 60, or''.
    (d) Conforming Amendment to Provisions for Determining Amount of 
Increase on Account of Delayed Retirement.--Section 202(w)(2)(B)(ii) of 
such Act is amended--
            (1) by striking ``either''; and
            (2) by striking ``or suffered deductions under section 
        203(b) or 203(c) in amounts equal to the amount of such 
        benefit''.
    (e) Effective Date.--The amendments made by this section shall 
apply with respect to taxable years beginning after December 31, 1994.
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