[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[S. 2147 Introduced in Senate (IS)]







105th CONGRESS
  2d Session
                                S. 2147

 To amend the Internal Revenue Code of 1986 to provide a deduction for 
 two-earner married couples, to allow self-employed individuals a 100-
 percent deduction for health insurance costs, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             June 11, 1998

  Mr. Daschle (for himself and Mr. Johnson) introduced the following 
  bill; which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to provide a deduction for 
 two-earner married couples, to allow self-employed individuals a 100-
 percent deduction for health insurance costs, and for other purposes.

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

SECTION 1. DEDUCTION FOR TWO-EARNER MARRIED COUPLES.

    (a) In General.--Part VII of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to additional itemized 
deductions for individuals) is amended by redesignating section 222 as 
section 223 and by inserting after section 221 the following new 
section:

``SEC. 222. DEDUCTION FOR MARRIED COUPLES TO ELIMINATE THE MARRIAGE 
              PENALTY.

    ``(a) In General.--In the case of a joint return under section 6013 
for the taxable year, there shall be allowed as a deduction an amount 
equal to the applicable percentage of the qualified earned income of 
the spouse with the lower qualified earned income for the taxable year.
    ``(b) Applicable Percentage.--For purposes of this section
            ``(1) In general.--The term `applicable percentage' means 
        20 percent, reduced by 2 percentage points for each $1,000 (or 
        fraction thereof) by which the taxpayer's modified adjusted 
        gross income for the taxable year exceeds $50,000.
            ``(2) Transition rule for 1999 and 2000.--In the case of 
        taxable years beginning in 1999 and 2000, paragraph (1) shall 
        be applied by substituting `10 percent' for `20 percent' and `1 
        percentage point' for `2 percentage points'.
            ``(3) Modified adjusted gross income.--For purposes of this 
        subsection, the term `modified adjusted gross income' means 
        adjusted gross income determined--
                    ``(A) after application of sections 86, 219, and 
                469, and
                    ``(B) without regard to sections 135, 137, and 911 
                or the deduction allowable under this section.
            ``(4) Cost-of-living adjustment.--In the case of any 
        taxable year beginning in a calendar year after 2002, the 
        $50,000 amount under paragraph (1) shall be increased by an 
        amount equal to such dollar amount multiplied by the cost-of-
        living adjustment determined under section 1(f)(3) for the 
        calendar year in which the taxable year begins, except that 
        subparagraph (B) thereof shall be applied by substituting 
        `calendar year 2002' for `calendar year 1992'. If any amount as 
        adjusted under this paragraph is not a multiple of $2,000, such 
        amount shall be rounded to the next lowest multiple of $2,000.
    ``(c) Qualified Earned Income Defined.--
            ``(1) In general.--For purposes of this section, the term 
        `qualified earned income' means an amount equal to the excess 
        of--
                    ``(A) the earned income of the spouse for the 
                taxable year, over
                    ``(B) an amount equal to the sum of the deductions 
                described in paragraphs (1), (2), (7), and (15) of 
                section 62 to the extent such deductions are properly 
allocable to or chargeable against earned income described in 
subparagraph (A).
        The amount of qualified earned income shall be determined 
        without regard to any community property laws.''
            ``(2) Earned income.--For purposes of paragraph (1), the 
        term `earned income' means income which is earned income within 
        the meaning of section 911(d)(2) or 401(c)(2)(C), except that--
                    ``(A) such term shall not include any amount--
                            ``(i) not includible in gross income,
                            ``(ii) received as a pension or annuity,
                            ``(iii) paid or distributed out of an 
                        individual retirement plan (within the meaning 
                        of section 7701(a)(37)),
                            ``(iv) received as deferred compensation, 
                        or
                            ``(v) received for services performed by an 
                        individual in the employ of his spouse (within 
                        the meaning of section 3121(b)(3)(A)), and
                    ``(B) section 911(d)(2)(B) shall be applied without 
                regard to the phrase `not in excess of 30 percent of 
                his share of net profits of such trade or business'.''
    (b) Deduction To Be Above-the-Line.--Section 62(a) of the Internal 
Revenue Code of 1986 (defining adjusted gross income) is amended by 
adding after paragraph (17) the following new paragraph:
            ``(18) Deduction for two-earner married couples.--The 
        deduction allowed by section 222.''
    (c) Earned Income Credit Phaseout To Reflect Deduction.--Section 
32(c)(2) of the Internal Revenue Code of 1986 (defining earned income) 
is amended by adding at the end the following new subparagraph:
                    ``(C) Marriage penalty reduction.--Solely for 
                purposes of applying subsection (a)(2)(B), earned 
                income for any taxable year shall be reduced by an 
                amount equal to the amount of the deduction allowed to 
                the taxpayer for such taxable year under section 222.''
    (d) Clerical Amendment.--The table of sections for part VII of 
subchapter B of chapter 1 of such Code is amended by striking the item 
relating to section 222 and inserting the following new items:

                              ``Sec. 222. Deduction for married couples 
                                        to eliminate the marriage 
                                        penalty.
                              ``Sec. 223. Cross reference.''
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1998.

SEC. 2. DEDUCTION FOR HEALTH INSURANCE COSTS FOR SELF-EMPLOYED 
              INDIVIDUALS.

    (a) In General.--Paragraph (1) of section 162(l) of the Internal 
Revenue Code of 1986 is amended to read as follows:
            ``(1) Allowance of deduction.--In the case of an individual 
        who is an employee within the meaning of section 401(c)(1), 
        there shall be allowed as a deduction under this section an 
        amount equal to 100 percent (75 percent in the case of taxable 
        years beginning in 1999 and 2000) of the amount paid during the 
        taxable year for insurance which constitutes medical care for 
        the taxpayer, his spouse, and dependents.''
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1998.
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