[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1040 Introduced in House (IH)]







105th CONGRESS
  1st Session
                                H. R. 1040

To promote freedom, fairness, and economic opportunity for families by 
       reducing the power and reach of the Federal establishment.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 12, 1997

  Mr. Armey introduced the following bill; which was referred to the 
   Committee on Ways and Means, and in addition to the Committees on 
 Rules, and the Budget, for a period to be subsequently determined by 
the Speaker, in each case for consideration of such provisions as fall 
           within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
To promote freedom, fairness, and economic opportunity for families by 
       reducing the power and reach of the Federal establishment.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Freedom and 
Fairness Restoration Act of 1997''.
    (b) Table of Contents.--

Sec. 1. Short title; table of contents.
 TITLE I--TAX REDUCTION AND SIMPLIFICATION; SUPERMAJORITY REQUIRED FOR 
                              TAX CHANGES

              Subtitle A--Tax Reduction and Simplification

Sec. 101. Individual income tax.
Sec. 102. Tax on business activities.
Sec. 103. Simplification of rules relating to qualified retirement 
                            plans.
Sec. 104. Repeal of alternative minimum tax.
Sec. 105. Repeal of credits.
Sec. 106. Repeal of estate and gift taxes and obsolete income tax 
                            provisions.
Sec. 107. Effective date.
           Subtitle B--Supermajority Required for Tax Changes

Sec. 111. Supermajority required.
         TITLE II--SPENDING RESTRAINT AND BUDGET PROCESS REFORM

            Subtitle A--Balanced Budget by Fiscal Year 2002

Sec. 201. Maximum spending amounts.
Sec. 202. Enforcing maximum spending sequestration.
Sec. 203. Total spending point of order.
       Subtitle B--Zero Based Budgeting and Decennial Sunsetting

Sec. 211. Reauthorization of discretionary programs and unearned 
                            entitlements.
Sec. 212. Point of order.
Sec. 213. Decennial sunsetting.

 TITLE I--TAX REDUCTION AND SIMPLIFICATION; SUPERMAJORITY REQUIRED FOR 
                              TAX CHANGES

              Subtitle A--Tax Reduction and Simplification

SEC. 101. INDIVIDUAL INCOME TAX.

    (a) In General.--Section 1 of the Internal Revenue Code of 1986 is 
amended to read as follows:

``SECTION 1. TAX IMPOSED.

    ``There is hereby imposed on the taxable income of every individual 
a tax equal to 20 percent (17 percent in the case of taxable years 
beginning after December 31, 1998) of the taxable income of such 
individual for such taxable year.''
    (b) Taxable Income.--Section 63 of such Code is amended to read as 
follows:

``SEC. 63. TAXABLE INCOME.

    ``(a) In General.--For purposes of this subtitle, the term `taxable 
income' means the excess of--
            ``(1) the sum of--
                    ``(A) wages (as defined in section 3121(a) without 
                regard to paragraph (1) thereof) which are paid in cash 
                and which are received during the taxable year for 
                services performed in the United States,
                    ``(B) retirement distributions which are includible 
                in gross income for such taxable year, plus
                    ``(C) amounts received under any law of the United 
                States or of any State which is in the nature of 
                unemployment compensation, over
            ``(2) the standard deduction.
    ``(b) Standard Deduction.--
            ``(1) In general.--For purposes of this subtitle, the term 
        `standard deduction' means the sum of--
                    ``(A) the basic standard deduction, plus
                    ``(B) the additional standard deduction.
            ``(2) Basic standard deduction.--For purposes of paragraph 
        (1), the basic standard deduction is--
                    ``(A) $22,000 in the case of--
                            ``(i) a joint return, or
                            ``(ii) a surviving spouse (as defined in 
                        section 2(a)),
                    ``(B) $14,400 in the case of a head of household 
                (as defined in section 2(b)), and
                    ``(C) $11,000 in the case of an individual--
                            ``(i) who is not married and who is not a 
                        surviving spouse or head of household, or
                            ``(ii) who is a married individual filing a 
                        separate return.
            ``(3) Additional standard deduction.--For purposes of 
        paragraph (1), the additional standard deduction is $5,000 for 
        each dependent (as defined in section 152) who is described in 
        section 151(c)(1) for the taxable year and who is not required 
        to file a return for such taxable year.
    ``(c) Retirement Distributions.--For purposes of subsection (a), 
the term `retirement distribution' means any distribution from--
            ``(1) a plan described in section 401(a) which includes a 
        trust exempt from tax under section 501(a),
            ``(2) an annuity plan described in section 403(a),
            ``(3) an annuity contract described in section 403(b),
            ``(4) an individual retirement account described in section 
        408(a),
            ``(5) an individual retirement annuity described in section 
        408(b),
            ``(6) an eligible deferred compensation plan (as defined in 
        section 457),
            ``(7) a governmental plan (as defined in section 414(d)), 
        or
            ``(8) a trust described in section 501(c)(18).
Such term includes any plan, contract, account, annuity, or trust 
which, at any time, has been determined by the Secretary to be such a 
plan, contract, account, annuity, or trust.
    ``(d) Income of Certain Children.--For purposes of this subtitle--
            ``(1) an individual's taxable income shall include the 
        taxable income of each dependent child of such individual who 
        has not attained age 14 as of the close of such taxable year, 
        and
            ``(2) such dependent child shall have no liability for tax 
        imposed by section 1 with respect to such income and shall not 
        be required to file a return for such taxable year.
    ``(e) Inflation Adjustment.--
            ``(1) In general.--In the case of any taxable year 
        beginning in a calendar year after 1997, each dollar amount 
        contained in subsection (b) shall be increased by an amount 
        determined by the Secretary to be equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment for such 
                calendar year.
            ``(2) Cost-of-living adjustment.--For purposes of paragraph 
        (1), the cost-of-living adjustment for any calendar year is the 
        percentage (if any) by which--
                    ``(A) the CPI for the preceding calendar year, 
                exceeds
                    ``(B) the CPI for the calendar year 1996.
            ``(3) CPI for any calendar year.--For purposes of paragraph 
        (2), the CPI for any calendar year is the average of the 
        Consumer Price Index as of the close of the 12-month period 
        ending on August 31 of such calendar year.
            ``(4) Consumer price index.--For purposes of paragraph (3), 
        the term `Consumer Price Index' means the last Consumer Price 
        Index for all-urban consumers published by the Department of 
        Labor. For purposes of the preceding sentence, the revision of 
        the Consumer Price Index which is most consistent with the 
        Consumer Price Index for calendar year 1986 shall be used.
            ``(5) Rounding.--If any increase determined under paragraph 
        (1) is not a multiple of $10, such increase shall be rounded to 
        the next highest multiple of $10.
    ``(f) Marital Status.--For purposes of this section, marital status 
shall be determined under section 7703.''

SEC. 102. TAX ON BUSINESS ACTIVITIES.

    (a) In General.--Section 11 of the Internal Revenue Code of 1986 
(relating to tax imposed on corporations) is amended to read as 
follows:

``SEC. 11. TAX IMPOSED ON BUSINESS ACTIVITIES.

    ``(a) Tax Imposed.--There is hereby imposed on every person engaged 
in a business activity a tax equal to 20 percent (17 percent in the 
case of taxable years beginning after December 31, 1998) of the 
business taxable income of such person.
    ``(b) Liability for Tax.--The tax imposed by this section shall be 
paid by the person engaged in the business activity, whether such 
person is an individual, partnership, corporation, or otherwise.
    ``(c) Business Taxable Income.--For purposes of this section--
            ``(1) In general.--The term `business taxable income' means 
        gross active income reduced by the deductions specified in 
        subsection (d).
            ``(2) Gross active income.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the term `gross active income' means gross receipts 
                from--
                            ``(i) the sale or exchange of property or 
                        services in the United States by any person in 
                        connection with a business activity, and
                            ``(ii) the export of property or services 
                        from the United States in connection with a 
                        business activity.
                    ``(B) Exchanges.--For purposes of this section, the 
                amount treated as gross receipts from the exchange of 
                property or services is the fair market value of the 
                property or services received, plus any money received.
                    ``(C) Coordination with special rules for financial 
                services, etc.--Except as provided in subsection (e)--
                            ``(i) the term `property' does not include 
                        money or any financial instrument, and
                            ``(ii) the term `services' does not include 
                        financial services.
            ``(3) Exemption from tax for activities of governmental 
        entities and tax-exempt organizations.--For purposes of this 
        section, the term `business activity' does not include any 
        activity of a governmental entity or of any other organization 
        which is exempt from tax under this chapter.
    ``(d) Deductions.--
            ``(1) In general.--The deductions specified in this 
        subsection are--
                    ``(A) the cost of business inputs for the business 
                activity,
                    ``(B) wages (as defined in section 3121(a) without 
                regard to paragraph (1) thereof) which are paid in cash 
                for services performed in the United States as an 
                employee, and
                    ``(C) retirement contributions to or under any plan 
                or arrangement which makes retirement distributions (as 
                defined in section 63(c)) for the benefit of such 
                employees to the extent such contributions are allowed 
                as a deduction under section 404.
            ``(2) Business inputs.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the term `cost of business inputs' means--
                            ``(i) the amount paid for property sold or 
                        used in connection with a business activity,
                            ``(ii) the amount paid for services (other 
                        than for the services of employees, including 
                        fringe benefits paid by reason of such 
                        services) in connection with a business 
                        activity, and
                            ``(iii) any excise tax, sales tax, customs 
                        duty, or other separately stated levy imposed 
                        by a Federal, State, or local government on the 
                        purchase of property or services which are for 
                        use in connection with a business activity.
                Such term shall not include any tax imposed by chapter 
                2 or 21.
                    ``(B) Exceptions.--Such term shall not include--
                            ``(i) items described in subparagraphs (B) 
                        and (C) of paragraph (1), and
                            ``(ii) items for personal use not in 
                        connection with any business activity.
                    ``(C) Exchanges.--For purposes of this section, the 
                amount treated as paid in connection with the exchange 
                of property or services is the fair market value of the 
                property or services exchanged, plus any money paid.
    ``(e) Special Rules for Financial Inter- mediation Service 
Activities.--In the case of the business activity of providing 
financial intermediation services, the taxable income from such 
activity shall be equal to the value of the intermediation services 
provided in such activity.
    ``(f) Exception for Services Performed as Employee.--For purposes 
of this section, the term `business activity' does not include the 
performance of services by an employee for the employee's employer.
    ``(g) Carryover of Credit-Equivalent of Excess Deductions.--
            ``(1) In general.--If the aggregate deductions for any 
        taxable year exceed the gross active income for such taxable 
        year, the credit-equivalent of such excess shall be allowed as 
        a credit against the tax imposed by this section for the 
        following taxable year.
            ``(2) Credit-equivalent of excess deductions.--For purposes 
        of paragraph (1), the credit-equivalent of the excess described 
        in paragraph (1) for any taxable year is an amount equal to--
                    ``(A) the sum of--
                            ``(i) such excess, plus
                            ``(ii) the product of such excess and the 
                        3-month Treasury rate for the last month of 
                        such taxable year, multiplied by
                    ``(B) the rate of the tax imposed by subsection (a) 
                for such taxable year.
            ``(3) Carryover of unused credit.--If the credit allowable 
        for any taxable year by reason of this subsection exceeds the 
        tax imposed by this section for such year, then (in lieu of 
        treating such excess as an overpayment) the sum of--
                    ``(A) such excess, plus
                    ``(B) the product of such excess and the 3-month 
                Treasury rate for the last month of such taxable year,
        shall be allowed as a credit against the tax imposed by this 
        section for the following taxable year.
            ``(4) 3-month treasury rate.--For purposes of this 
        subsection, the 3-month Treasury rate is the rate determined by 
        the Secretary based on the average market yield (during any 1-
        month period selected by the Secretary and ending in the 
        calendar month in which the determination is made) on 
        outstanding marketable obligations of the United States with 
        remaining periods to maturity of 3 months or less.''
    (b) Tax on Tax-Exempt Entities Providing Noncash Compensation to 
Employees.--Section 4977 of such Code is amended to read as follows:

``SEC. 4977. TAX ON NONCASH COMPENSATION PROVIDED TO EMPLOYEES NOT 
              ENGAGED IN BUSINESS ACTIVITY.

    ``(a) Imposition of Tax.--There is hereby imposed a tax equal to 20 
percent (17 percent in the case of calendar years beginning after 
December 31, 1998) of the value of excludable compensation provided 
during the calendar year by an employer for the benefit of employees to 
whom this section applies.
    ``(b) Liability for Tax.--The tax imposed by this section shall be 
paid by the employer.
    ``(c) Excludable Compensation.--For purposes of subsection (a), the 
term `excludable compensation' means any remuneration for services 
performed as an employee other than--
            ``(1) wages (as defined in section 3121(a) without regard 
        to paragraph (1) thereof) which are paid in cash,
            ``(2) remuneration for services performed outside the 
        United States, and
            ``(3) retirement contributions to or under any plan or 
        arrangement which makes retirement distributions (as defined in 
        section 63(c)).
    ``(d) Employees to Whom Section Applies.--This section shall apply 
to an employee who is employed in any activity by--
            ``(1) any organization which is exempt from taxation under 
        this chapter, or
            ``(2) any agency or instrumentality of the United States, 
        any State or political subdivision of a State, or the District 
        of Columbia.''

SEC. 103. SIMPLIFICATION OF RULES RELATING TO QUALIFIED RETIREMENT 
              PLANS.

    (a) In General.--The following provisions of the Internal Revenue 
Code of 1986 are hereby repealed:
            (1) Nondiscrimination rules.--
                    (A) Paragraphs (4) and (5) of section 401(a) 
                (relating to nondiscrimination requirements).
                    (B) Sections 401(a)(10)(B) and 416 (relating to top 
                heavy plans).
                    (C) Section 401(a)(17) (relating to compensation 
                limit).
                    (D) Sections 401(a)(26) and 410(b) (relating to 
                minimum participation and coverage requirements).
                    (E) Paragraphs (3), (8), (11), and (12) of sections 
                401(k), and section 4979, (relating to actual deferral 
                percentage).
                    (F) Section 401(l) (relating to permitted disparity 
                in plan contributions or benefits).
                    (G) Section 401(m) (relating to nondiscrimination 
                test for matching contributions and employee 
                contributions).
                    (H) Paragraphs (1)(D) and (12) of section 403(b) 
                (relating to nondiscrimination requirements).
                    (I) Paragraph (3) of section 408(k) and paragraph 
                (6) (other than subparagraph (A)(i)) of such section 
                (relating to simplified employee pensions).
            (2) Contribution limits.--
                    (A) Sections 401(a)(16), 403(b) (2) and (3), and 
                415 (relating to limitations on benefits and 
                contributions under qualified plans).
                    (B) Sections 401(a)(30) and 402(g) (relating to 
                limitation on exclusion for elective deferrals).
                    (C) Paragraphs (3) and (7) of section 404(a) 
                (relating to percentage of compensation limits).
                    (D) Section 404(l) (relating to limit on includible 
                compensation).
            (3) Restrictions on distributions.--
                    (A) Section 72(t) (relating to 10-percent 
                additional tax on early distributions from qualified 
                retirement plans).
                    (B) Sections 401(a)(9), 403(b)(10), and 4974 
                (relating to minimum distribution rules).
                    (C) Section 402(e)(4) (relating to net unrealized 
                appreciation).
                    (D) Section 4980A (relating to tax on excess 
                distributions from qualified retirement plans).
            (4) Special requirements for plan benefiting self-employed 
        individuals.--Subsections (a)(10)(A) and (d) of section 401.
            (5) Prohibition of tax-exempt organizations and governments 
        from having qualified cash or deferred arrangements.--Section 
        401(k)(4)(B).
    (b) Employer Reversions of Excess Pension Assets Permitted Subject 
Only to Income Inclusion.--
            (1) Repeal of tax on employer reversions.--Section 4980 of 
        such Code is hereby repealed.
            (2) Employer reversions permitted without plan 
        termination.--Section 420 of such Code is amended to read as 
        follows:

``SEC. 420. TRANSFERS OF EXCESS PENSION ASSETS.

    ``(a) In General.--If there is a qualified transfer of any excess 
pension assets of a defined benefit plan (other than a multiemployer 
plan) to an employer--
            ``(1) a trust which is part of such plan shall not be 
        treated as failing to meet the requirements of section 401(a) 
        or any other provision of law solely by reason of such transfer 
        (or any other action authorized under this section), and
            ``(2) such transfer shall not be treated as a prohibited 
        transaction for purposes of section 4975.
The gross income of the employer shall include the amount of any 
qualified transfer made during the taxable year.
    ``(b) Qualified Transfer.--For purposes of this section--
            ``(1) In general.--The term `qualified transfer' means a 
        transfer--
                    ``(A) of excess pension assets of a defined benefit 
                plan to the employer, and
                    ``(B) with respect to which the vesting 
                requirements of subsection (c) are met in connection 
                with the plan.
            ``(2) Only 1 transfer per year.--No more than 1 transfer 
        with respect to any plan during a taxable year may be treated 
        as a qualified transfer for purposes of this section.
    ``(c) Vesting Requirements of Plans Transferring Assets.--The 
vesting requirements of this subsection are met if the plan provides 
that the accrued pension benefits of any participant or beneficiary 
under the plan become nonforfeitable in the same manner which would be 
required if the plan had terminated immediately before the qualified 
transfer (or in the case of a participant who separated during the 1-
year period ending on the date of the transfer, immediately before such 
separation).
    ``(d) Definition and Special Rule.--For purposes of this section--
            ``(1) Excess pension assets.--The term `excess pension 
        assets' means the excess (if any) of--
                    ``(A) the amount determined under section 
                412(c)(7)(A)(ii), over
                    ``(B) the greater of--
                            ``(i) the amount determined under section 
                        412(c)(7)(A)(i), or
                            ``(ii) 125 percent of current liability (as 
                        defined in section 412(c)(7)(B)).
        The determination under this paragraph shall be made as of the 
        most recent valuation date of the plan preceding the qualified 
        transfer.
            ``(2) Coordination with section 412.--In the case of a 
        qualified transfer--
                    ``(A) any assets transferred in a plan year on or 
                before the valuation date for such year (and any income 
                allocable thereto) shall, for purposes of section 412, 
                be treated as assets in the plan as of the valuation 
                date for such year, and
                    ``(B) the plan shall be treated as having a net 
                experience loss under section 412(b)(2)(B)(iv) in an 
                amount equal to the amount of such transfer and for 
                which amortization charges begin for the first plan 
                year after the plan year in which such transfer occurs, 
                except that such section shall be applied to such 
                amount by substituting `10 plan years' for `5 plan 
                years'.''

SEC. 104. REPEAL OF ALTERNATIVE MINIMUM TAX.

    Part VI of subchapter A of chapter 1 of the Internal Revenue Code 
of 1986 is hereby repealed.

SEC. 105. REPEAL OF CREDITS.

    Part IV of subchapter A of chapter 1 of the Internal Revenue Code 
of 1986 is hereby repealed.

SEC. 106. REPEAL OF ESTATE AND GIFT TAXES AND OBSOLETE INCOME TAX 
              PROVISIONS.

    (a) Repeal of Estate and Gift Taxes.--
            (1) In general.--Subtitle B of the Internal Revenue Code of 
        1986 is hereby repealed.
            (2) Effective date.--The repeal made by paragraph (1) shall 
        apply to the estates of decedents dying, and gifts and 
        generation-skipping transfers made, after December 31, 1996.
    (b) Repeal of Obsolete Income Tax Provisions.--
            (1) In general.--Except as provided in paragraph (2), 
        chapter 1 of the Internal Revenue Code of 1986 is hereby 
        repealed.
            (2) Exceptions.--Paragraph (1) shall not apply to--
                    (A) sections 1, 11, and 63 of such Code, as amended 
                by this Act,
                    (B) those provisions of chapter 1 of such Code 
                which are necessary for determining whether or not--
                            (i) retirement distributions are includible 
                        in the gross income of employees, or
                            (ii) an organization is exempt from tax 
                        under such chapter, and
                    (C) subchapter D of such chapter 1 (relating to 
                deferred compensation).

SEC. 107. EFFECTIVE DATE.

    Except as otherwise provided in this subtitle, the amendments made 
by this subtitle shall apply to taxable years beginning after December 
31, 1996.

           Subtitle B--Supermajority Required for Tax Changes

SEC. 111. SUPERMAJORITY REQUIRED.

    (a) In General.--It shall not be in order in the House of 
Representatives or the Senate to consider any bill, joint resolution, 
amendment thereto, or conference report thereon that includes any 
provision that--
            (1) increases any Federal income tax rate,
            (2) creates any additional Federal income tax rate,
            (3) reduces the standard deduction, or
            (4) provides any exclusion, deduction, credit or other 
        benefit which results in a reduction in Federal revenues.
    (b) Waiver or Suspension.--This section may be waived or suspended 
in the House of Representatives or the Senate only by the affirmative 
vote of three-fifths of the Members, duly chosen and sworn.

         TITLE II--SPENDING RESTRAINT AND BUDGET PROCESS REFORM

            Subtitle A--Balanced Budget by Fiscal Year 2002

SEC. 201. MAXIMUM SPENDING AMOUNTS.

    Section 601(a)(1) of the Congressional Budget Act of 1974 is 
amended to read as follows:
            ``(1) Maximum spending amount.--The term `maximum spending 
        amount' means--
                    ``(A) with respect to fiscal year 1998, 
                $1,653,000,000,000 in outlays;
                    ``(B) with respect to fiscal year 1999, 
                $1,687,000,000,000 in outlays;
                    ``(C) with respect to fiscal year 2000, 
                $1,748,000,000,000 in outlays;
                    ``(D) with respect to fiscal year 2001, 
                $1,799,000,000,000 in outlays; and
                    ``(E) with respect to fiscal year 2002, 
                $1,851,000,000,000 in outlays.''.

SEC. 202. ENFORCING MAXIMUM SPENDING SEQUESTRATION.

    (a) Sequestration.--Section 253(a) of the Balanced Budget and 
Emergency Deficit Control Act of 1985 is amended to read as follows:
    ``(a) Sequestration.--Within 15 days after Congress adjourns to end 
a session (other than the One Hundred Third Congress), and on the same 
day as sequestration (if any) under sections 251 and 252, but after any 
sequestration required by those sections, there shall be a 
sequestration (if necessary) to reduce total Federal spending to the 
maximum permissible level as set forth in section 601(a)(1) of the 
Congressional Budget Act of 1974.''.
    (b) Conforming Amendment to Heading.--The section heading of 
section 253 of the Balanced Budget and Emergency Deficit Control Act of 
1985 is amended to read as follows:

``SEC. 253. ENFORCING MAXIMUM SPENDING LIMITS.''.

    (c) Additional Conforming Amendments.--Section 253 of the Balanced 
Budget and Emergency Deficit Control Act of 1985 is amended--
            (1) by repealing subsections (b), (g), and (h), and by 
        redesignating subsections (c), (d), (e), and (f), as 
        subsections (b), (c), (d), and (e), respectively;
            (2) in subsection (b) (as redesignated), by amending the 
        first sentence to read as follows: ``To reduce total Federal 
        spending to the maximum permissible level for a budget year, 20 
        percent of the required outlay reductions shall be obtained 
        from non-exempt defense accounts (accounts designated as 
        function 050 in the President's fiscal year 1998 budget 
        submission) and 80 percent from non-exempt, non-defense 
        accounts (all other non-exempt accounts).'';
            (3) in subsection (c) (as redesignated), by striking 
        ``subsection (c)'' and inserting ``subsection (b)''; and
            (4) in subsection (e) (as redesignated), by striking ``(b), 
        (c), (d), and (e)'' and inserting ``(b), (c), and (d)'' and by 
        striking ``(d) or (e)'' and inserting ``(c) or ``(d)''.
    (d) Look-Back Sequester.--Section 253 of the Balanced Budget and 
Emergency Deficit Control Act of 1985 is amended by adding at the end 
the following new subsection:
    ``(f) Look-Back Sequester.--
            ``(1) In general.--On July 1 of each fiscal year, the 
        Director of OMB shall determine if laws effective during the 
        current fiscal year will cause spending to exceed the maximum 
        spending amount for such fiscal year. If the limit is exceeded, 
        there shall be a preliminary sequester on July 1 to eliminate 
        the excess.
            ``(2) Permanent sequester.--Budget authority sequestered on 
        July 1 pursuant to paragraph (1) shall be permanently canceled 
        on July 15.
            ``(3) No margin.--The margin for determining a sequester 
        under this subsection shall be zero.
            ``(4) Sequestration procedures.--The provision of 
        subsections (b), (c), and (d) of this section shall apply to a 
        sequester under this subsection.''.
    (e) Reports.--Section 254 of the Balanced Budget and Emergency 
Deficit Control Act of 1985 is amended--
            (1) by striking subsection (c);
            (2) in subsection (d)(1), by striking ``deficit 
        sequestration'' and inserting ``total spending sequestration'';
            (3) in subsection (d) by repealing paragraph (4) and 
        inserting the following new paragraph:
            ``(4) Total spending sequestration reports.--The preview 
        reports shall set forth for the budget year estimates for each 
        of the following:
                    ``(A) The amount of reductions required from 
                defense accounts and the reductions required from non-
                defense accounts.
                    ``(B) The sequestration percentage necessary to 
                achieve the required reduction in defense accounts 
                under section 253(c).
                    ``(C) The reductions required under sections 
                253(d)(1) and 253(d)(2).
                    ``(D) The sequestration percentage necessary to 
                achieve the required reduction in non-defense accounts 
                under section 253(d)(3).''; and
            (4) in subsection (g)(3), by striking ``Deficit'' and 
        inserting ``Total Spending'' in the side heading and in the 
        first sentence by striking ``deficit'' and inserting ``total 
        spending''.
    (f) Conforming Amendment to Table of Contents.--The item relating 
to section 253 is amended by striking ``Enforcing deficit targets'' and 
inserting ``Enforcing maximum spending limits''.

SEC. 203. TOTAL SPENDING POINT OF ORDER.

    Section 605(b) of the Congressional Budget Act of 1974 is amended 
to read as follows:
    ``(b) Total Spending Point of Order.--
            ``(1) In general.--It shall not be in order in the House of 
        Representatives or the Senate to consider any bill, joint 
        resolution, amendment thereto, or conference report thereon, 
        that includes any provision that would result in total spending 
        for a fiscal year that exceeds the maximum permissible total 
spending amount for such fiscal year as set forth in section 601(a)(1).
            ``(2) Waiver or suspension.--This subsection may be waived 
        or suspended in the House of Representatives or the Senate only 
        by the affirmative vote of three-fifths of its Members, duly 
        chosen and sworn.''.

       Subtitle B--Zero Based Budgeting and Decennial Sunsetting

SEC. 211. REAUTHORIZATION OF DISCRETIONARY PROGRAMS AND UNEARNED 
              ENTITLEMENTS.

    (a) Fiscal Year 1998.--Effective October 1, 1997, spending 
authority for each unearned entitlement and high-cost discretionary 
spending program is terminated unless such spending authority is 
reauthorized after the date of enactment of this Act.
    (b) Fiscal Year 1999.--Effective October 1, 1998, spending 
authority for each discretionary spending program (not including high-
cost discretionary spending programs) is terminated unless such 
spending authority is reauthorized after the date of enactment of this 
Act.
    (c) Definitions.--For purposes of this subtitle--
            (1) the term ``unearned entitlement'' means an entitlement 
        not earned by service or paid for in total or in part by 
        assessments or contributions such as Social Security, veterans' 
        benefits, retirement programs, and medicare; and
            (2) the term ``high-cost discretionary program'' means the 
        most expensive one-third of discretionary program within each 
        budget function account.

SEC. 212. POINT OF ORDER.

    (a) In General.--It shall not be in order in the House of 
Representatives or the Senate to consider any bill, joint resolution, 
amendment, or conference report that includes any provision that 
appropriates funds unless such appropriation has been previously 
authorized by law.
    (b) Waiver or Suspension.--This section may be waived or suspended 
in the House of Representatives or the Senate only by the affirmative 
vote of three-fifths of the Members, duly chosen and sworn.

SEC. 213. DECENNIAL SUNSETTING.

    (a) First Decennial Census Year.--Effective on the first day of the 
fiscal year beginning in the first decennial census year after the year 
2001 and each 10 years thereafter, the spending authority described in 
section 211(a) is terminated unless such spending authority is 
reauthorized after the last date the spending authority was required to 
be reauthorized under this subtitle.
    (b) Second Decennial Census Year.--Effective on the first day of 
the fiscal year beginning in the year after the first decennial census 
year after the year 2001 and each 10 years thereafter, the spending 
authority described in section 211(b) is terminated unless such 
spending authority is reauthorized after the last date the spending 
authority was required to be reauthorized under this subtitle.
                                 <all>