[Congressional Record Volume 141, Number 40 (Friday, March 3, 1995)]
[Senate]
[Page S3477]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                         ADDITIONAL STATEMENTS

                                 ______


                              FLAT TAX ACT

 Mr. SPECTER. Mr. President, I ask that the text of my bill, S. 
488, the Flat Tax Act of 1995, which I introduced on March 2, 1995, be 
printed in today's Record. The bill was inadvertently not printed in 
the Record on March 2, 1995, when it was introduced.
  The bill follows:
                                 S. 488

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

     SECTION 1. INDIVIDUALS TAXED ONLY ON EARNED INCOME.

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

     ``SECTION 1. TAX IMPOSED.

       ``(a) Imposition of Tax.--There is hereby imposed on the 
     income of every individual a tax equal to 20 percent of the 
     excess (if any) of--
       ``(1) the taxable earned income received or accrued during 
     the taxable year, over
       ``(2) the standard deduction (as defined in section 63) for 
     such taxable year.
       ``(b) Taxable Earned Income.--For purposes of this section, 
     the term `taxable earned income' means the excess (if any) of 
     earned income (as defined in section 911(d)(2)) over the 
     foreign earned income (as defined in section 911(b)(1)).''
       (b) Increase in Standard Deduction.--Section 63 of such 
     Code is amended to read as follows:

     ``SEC. 63. STANDARD DEDUCTION.

       ``(a) In General.--For purposes of this subtitle, the term 
     `standard deduction' means the sum of--
       ``(1) the basic standard deduction, plus
       ``(2) the additional standard deduction.
       ``(b) Basic Standard Deduction.--For purposes of subsection 
     (a), the basic standard deduction is--
       ``(1) $16,500 in the case of--
       ``(A) a joint return, and
       ``(B) a surviving spouse (as defined in section 2(a)),
       ``(2) $14,000 in the case of a head of household (as 
     defined in section 2(b)), and
       ``(3) $9,500 in the case of an individual--
       ``(A) who is not married and who is not a surviving spouse 
     or head of household, or
       ``(B) who is a married individual filing a separate return.
       ``(c) Additional Standard Deduction.--For purposes of 
     subsection (a), the additional standard deduction is $4,500 
     for each dependent (as defined in section 152) described in 
     section 151(c)(1) for the taxable year.
       ``(d) Inflation Adjustment.--
       ``(1) In general.--In the case of any taxable year 
     beginning in a calendar year after 1995, each dollar amount 
     contained in subsections (b) and (c) 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 1994' for `calendar 
     year 1992' in subparagraph (B) of such section.
       ``(2) Rounding.--If any increase determined under paragraph 
     (1) is not a multiple of $50, such amount shall be rounded to 
     the next lowest multiple of $50.''

     SEC. 2. INCOME TAX DEDUCTION FOR CASH CHARITABLE 
                   CONTRIBUTIONS.

       (a) In General.--Subsection (a) of section 170 of the 
     Internal Revenue Code of 1986 (relating to charitable, etc., 
     contributions and gifts) is amended--
       (1) by striking paragraph (1) and inserting the following 
     new paragraph:
       ``(1) General rule.--There shall be allowed as a deduction 
     any charitable contribution (as defined in subsection (c)) 
     not to exceed $2,500 ($1,250, in the case of a married 
     individual filing a separate return), payment of which is 
     made within the taxable year.'', and
       (2) by striking paragraph (3).
       (b) Conforming Amendments.--
       (1) Section 170(b) of the Internal Revenue Code of 1986 is 
     amended by adding at the end the following new paragraph:
       ``(3) Termination of subsection.--This subsection shall not 
     apply to taxable years beginning after December 31, 1995.''
       (2) Section 170(c) of such Code is amended by inserting 
     ``of cash or its equivalent'' after ``means a contribution or 
     gift''.
       (3) Subsections (d) and (e) of section 170 of such Code are 
     repealed.
       (4) Section 170(f) of such Code is amended by striking 
     paragraphs (1) through (7) and by redesignating paragraphs 
     (8) and (9) as paragraphs (1) and (2), respectively.
       (5) Subsections (h) and (i) of section 170 of such Code are 
     repealed.

     SEC. 3. LIMITATION OF HOME MORTGAGE DEDUCTION TO ACQUISITION 
                   INDEBTEDNESS.

       Paragraph (3) of section 163(h) of the Internal Revenue 
     Code of 1986 (relating to interest) is amended--
       (1) by striking subparagraphs (A), (C), and (D) and 
     inserting before subparagraph (B) the following new 
     subparagraph:
       ``(A) In general.--The term `qualified residence interest' 
     means any interest which is paid or accrued during the 
     taxable year on acquisition indebtedness with respect to any 
     qualified residence of the taxpayer. For purposes of the 
     preceding sentence, the determination of whether any property 
     is a qualified residence of the taxpayer shall be made as of 
     the time the interest is accrued.'', and
       (2) by striking ``$1,000,000'' each place it appears and 
     ``$500,000'' in subparagraph (B)(ii) and inserting 
     ``$100,000'' and ``$50,000'', respectively.

     SEC. 4. MODIFICATION OF TAX ON BUSINESS ACTIVITIES.

       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 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.--
       ``(1) In general.--For purposes of this section, the term 
     `business taxable income' means gross active income reduced 
     by the deductions specified in subsection (d).
       ``(2) Gross active income.--For purposes of paragraph (1), 
     the term `gross active income' means gross income other than 
     investment income.
       ``(d) Deductions.--
       ``(1) In general.--The deductions specified in this 
     subsection are--
       ``(A) the cost of business inputs for the business 
     activity,
       ``(B) the compensation (including contributions to 
     qualified retirement plans but not including other fringe 
     benefits) paid for employees performing services in such 
     activity, and
       ``(C) the cost of tangible personal and real property used 
     in such activity.
       ``(2) Business inputs.--For purposes of subparagraph (A), 
     the term `cost of business inputs' means--
       ``(A) the actual amount paid for goods, services, and 
     materials, whether or not resold during the taxable year,
       ``(B) the fair market value of business inputs brought into 
     the United States, and
       ``(C) the actual cost, if reasonable, of travel and 
     entertainment expenses for business purposes.

     Such term shall not include purchases of goods and services 
     provided to employees or owners.
       ``(e) Carryover of Excess Deductions.--
       ``(1) In general.--If the aggregate deductions for any 
     taxable year exceed the gross active income for such taxable 
     year, the amount of the deductions specified in subsection 
     (d) for the succeeding taxable year (determined without 
     regard to this subsection) shall be increased by 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.
       ``(2) 3-month treasury rate.--For purposes of paragraph 
     (1), 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.''

     SEC. 5. EFFECTIVE DATE.

       The amendments made by this Act shall apply to taxable 
     years beginning after December 31, 1995.
     

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