[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 397 Introduced in Senate (IS)]







108th CONGRESS
  1st Session
                                 S. 397

To amend the Internal Revenue Code of 1986 to allow a deduction for the 
 old-age, survivors, and disability insurance taxes paid by employees 
         and self-employed individuals, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           February 13, 2003

 Mr. Ensign (for himself and Mrs. Hutchison) 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 allow a deduction for the 
 old-age, survivors, and disability insurance taxes paid by employees 
         and self-employed individuals, and for other purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Payroll Tax Deduction Act''.

SEC. 2. DEDUCTION FOR OLD-AGE, SURVIVORS, AND DISABILITY INSURANCE 
              TAXES OF EMPLOYEES AND SELF-EMPLOYED INDIVIDUALS.

    (a) Taxes of Employees.--
            (1) Deduction allowed in arriving at adjusted gross 
        income.--Section 62(a) of the Internal Revenue Code of 1986 
        (defining adjusted gross income) is amended by inserting after 
        paragraph (18) the following new paragraph:
            ``(19) Employees' oasdi taxes.--The deduction allowed by 
        section 164(g).''.
            (2) Determination of deduction.--Section 164 of such Code 
        (relating to deduction for taxes) is amended by redesignating 
        subsection (g) as subsection (h) and by inserting after 
        subsection (f) the following new subsection:
    ``(g) Employees' OASDI Taxes.--
            ``(1) In general.--In the case of an individual, in 
        addition to the taxes described in subsection (a), there shall 
        be allowed as a deduction for the taxable year an amount equal 
        to the sum of--
                    ``(A) the taxes imposed by section 3101(a) for the 
                taxable year, and
                    ``(B) the taxes imposed by section 3201(a) for the 
                taxable year but only to the extent attributable to the 
                percentage in effect under section 3101(a).
            ``(2) Special rule for certain agreements.--For purposes of 
        paragraph (1), taxes imposed by section 3101(a) shall include 
        amounts equivalent to such taxes imposed with respect to 
        remuneration covered by--
                    ``(A) an agreement under section 218 of the Social 
                Security Act, or
                    ``(B) an agreement under section 3121(l) (relating 
                to agreements entered into by American employers with 
                respect to foreign affiliates).
            ``(3) Coordination with special refund of social security 
        taxes.--Taxes shall not be taken into account under paragraph 
        (1) to the extent the taxpayer is entitled to a special refund 
        of such taxes under section 6413(c).
            ``(4) Coordination with earned income credit.--No deduction 
        shall be allowed under paragraph (1) for any taxable year if 
        the individual elects to claim the earned income credit under 
        section 32 for the taxable year.''.
            (3) Conforming amendment.--Subsection (a) of section 275 of 
        such Code is amended in the matter following paragraph (6) by 
        inserting ``or 164(g)'' after ``164(f)''.
    (b) Deduction for Self-Employed Individuals.--
            (1) In general.--Paragraph (1) of section 164(f) of the 
        Internal Revenue Code of 1986 (relating to deduction for one-
        half of self-employment taxes) is amended to read as follows:
            ``(1) In general.--In the case of an individual, in 
        addition to the taxes described in subsection (a), there shall 
        be allowed as a deduction for the taxable year an amount equal 
        to the sum of--
                    ``(A) the taxes imposed by section 1401(a) for such 
                taxable year, plus
                    ``(B) 50 percent of the taxes imposed by section 
                1401(b) for such taxable year.
        In the case of an individual who elects to claim the earned 
        income credit under section 32 for the taxable year, only 50 
        percent of the taxes described in subparagraph (A) shall be 
        taken into account.''.
            (2) Conforming amendments.--
                    (A) Section 32(a)(1) of such Code is amended by 
                inserting ``who elects the application of this 
                section'' after ``eligible individual''.
                    (B) The heading for section 164(f) of such Code is 
                amended by striking ``One-Half'' and inserting 
                ``Portion''.
                    (C) Section 1402(a)(12) of such Code is amended--
                            (i) by striking ``one-half'' the first 
                        place it appears and inserting ``portion'', and
                            (ii) by striking subparagraph (B) and 
                        inserting:
                    ``(B) a percentage equal to the sum for such year 
                of the rate of tax under section 1401(a) and one-half 
                of the rate of tax under section 1401(b);''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2004.
                                 <all>