[Congressional Record (Bound Edition), Volume 146 (2000), Part 10]
[Senate]
[Pages 14433-14441]
[From the U.S. Government Publishing Office, www.gpo.gov]



   MARRIAGE TAX PENALTY RELIEF RECONCILIATION ACT OF 2000--Continued

  Mr. BUNNING. Mr. President, I will talk just a little bit about the 
marriage penalty bill that we have before us.
  I rise in strong support of this legislation to repeal the marriage 
penalty.
  I am going to vote for this bill because it restores fairness and 
equity to married Americans under the Tax Code. It is the right and 
honorable thing to do.
  By now I think all of my colleagues know the sad facts about the 
marriage penalty, and how it cruelly punishes married couples by 
forcing them to pay higher taxes on their income than if they were 
single.
  For example, a married couple where both spouses earned $30,000 in 
1999 would pay $7,655 in federal income taxes. Two individuals earning 
$30,000 each but filing single returns would pay only $6,892 combined. 
The $763 difference in tax liability is the marriage penalty.
  In fact, the Congressional Budget Office estimates that overall 
almost half of all married couples--22 million--suffered under the 
marriage penalty last year. The average penalty paid by these couples 
was $1,400. Cumulatively, the marriage penalty increases taxes on 
affected couples by $32 billion per year.
  That is 44 million Americans who are paying a total of $32 billion in 
higher taxes each year simply because they took the walk down the 
aisle.
  In my home State of Kentucky alone, there are over 800,000 married 
couples, many of whom are punished by the marriage penalty.
  I can't think of one good reason why they should have to send more of 
their money to the Federal Government for the simple reason that they 
decided to get married. It is about the most unfair and unjust thing I 
have ever heard of.
  This bill provides real relief by making four simple changes to the 
code.
  It increases the standard deduction for married couples to twice the 
standard reduction for single taxpayers.
  It expands 15-percent and 28-percent income tax brackets for married 
couples filing a joint return to twice the size of the corresponding 
brackets for individuals.
  It updates the rule to eliminate the marriage penalty for low-income 
couples who qualify for the earned income credit.
  And it corrects a glaring oversight in the Code whereby couples who 
have to pay the alternative minimum tax are denied the ability to fully 
claim family tax credits, such as the $500 per child tax credit, hope 
and lifetime learning credits, and the dependent care credit.
  The marriage penalty is an outdated relic from the days when families 
primarily relied on one breadwinner.
  The penalty principally occurs because the Tax Code provides a higher 
combined standard deduction for two workers filing as singles than for 
married couples, and the income tax bracket thresholds for married 
couples are less than twice that for single taxpayers.
  As recently as several decades ago when most mothers stayed home and 
fathers trudged off to work at the factory each day, this might have 
made sense.
  Back then it did not matter nearly as much if the Tax Code's standard 
deduction for a married couple wasn't twice as much as for an 
individual, or if the income brackets for couples weren't double that 
for individuals.
  Few families had to account for a second income, and had never heard 
of the marriage penalty.
  But times change, and now in many families both parents do work. And 
I can guarantee you that they know their money is being wrongly taken 
from them by our immoral tax laws.
  Congress and the Tax Code haven't kept pace with the American family. 
It is time to change that and to make sure that our code meets the 
needs of the modern family in the 21st century in America.
  Even worse, the marriage penalty is a cancer that has spread 
throughout the Tax Code, and which goes beyond simply affecting 
standard deductions and income brackets.
  There are at least 65 more provisions in our tax laws where married 
couples are unjustly penalized. Frankly, I think the bill before us 
today should be just the first step toward completely rooting the 
marriage penalty out of our Tax Code.
  The adoption tax credit, the student loan interest deduction, 
retirement savings incentives, and dozens of other parts of the Code 
have all been afflicted by the marriage penalty, and are less available 
to married couples than if they were single earners trying to take 
advantage of this tax relief.
  This means that the marriage penalty not only punishes Americans who 
have to foot the bill, it further undermines the good public policy 
goals that Congress has tried to implement when it passed these changes 
to the Tax Code.
  This isn't the first time Congress has tried to fix the insidious 
marriage penalty. In 1995, Congress tried to increase the standard 
deduction for married couples to offset some of the marriage penalty. 
President Clinton vetoed that bill.
  Again in 1999, Congress passed marriage penalty relief. Again the 
President vetoed it.
  Both times the President said he liked the idea of marriage penalty 
relief, but didn't like other provisions in the legislation. So this 
year the House passed what I call a ``clean'' marriage penalty bill to 
try to answer his concerns. But, of course, he issued a strong 
statement in opposition to that bill.
  However, that did not stop him from recently proposing a little horse 
trading, and telling Congress that he would reconsider and sign 
marriage penalty relief legislation if we would also pass his Medicare 
prescription drug plan.
  If all that does is confuse you, I know it confuses me. But I think 
it means

[[Page 14434]]

the President can't decide what he thinks about ending the marriage 
penalty.
  So I believe that Congress should help clarify his thinking and send 
him a bill soon so he can make up his mind and decide if he really 
wants to help provide tax relief to the 44 million Americans who are 
unfairly punished by the marriage penalty.
  It is time for the Senate to act and to send marriage penalty relief 
to the President. Until we do we are not going to be able to escape the 
fact that the marriage penalty causes a vicious cycle.
  It imposes higher taxes on millions of families, and it unfairly 
takes away billions of dollars of income from married couples. That 
money is then sent to Washington and used to help pay for child care 
and other programs that families might not have needed in the first 
place if they had been able to keep the money that was stolen from them 
by the marriage penalty.
  Mr. President, the marriage penalty is an evil that is eating away at 
our families. The American people want a divorce from the marriage 
penalty, and we can give it to them by passing this bill today.
  I yield the floor and suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. NICKLES. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. NICKLES. Mr. President, for the information of my colleague, I 
will speak on the marriage penalty for a few minutes and then go into 
the wrap-up.
  Mr. President, I compliment my colleagues, several of whom have 
worked very hard to make sure we eliminate the marriage penalty. Kay 
Bailey Hutchison of Texas, Sam Brownback, Senator Ashcroft, and Senator 
Santorum have been pushing and pushing to eliminate one of the most 
unfair penalties in the Tax Code, the marriage penalty. Now we have a 
chance to do that. We are going to vote on that on Monday. We are going 
to pass it--at least I hope we do--and I hope the President will sign 
it.
  The President said in his State of the Union Address that we need to 
eliminate the marriage penalty. He didn't propose it. He had a little 
something in his budget but very little. We have taken that and we are 
now considering a bill to basically eliminate the marriage penalty. A 
lot of people don't know what that is. It says that if people file a 
joint return, they pay more than they would have paid as single 
individuals. Some people say: Wait a minute. The Republican proposal, 
or the proposal we passed out of the Finance Committee, does more than 
that; it has a marriage bonus.
  We say that we should basically double the income tax brackets for 
individuals and for couples. So if they are married and file jointly, 
they end up getting twice the income tax bracket before you step into 
the next bracket as individuals. That is really pretty simple. But it 
is as fair as it can get. It is the right thing to do.
  To give an example, we have several brackets in our Tax Code: 0, 15, 
28, 31, 36, and 39.6. Actually, the maximum rate was 31 percent before 
President Clinton came into office. In 1993, he and Vice President Gore 
passed a tax increase to move the maximum rate up to 39.6. They also 
eliminated deductions and also took off the cap on the Medicare tax, 
which is another 2.9 percent. So they basically raised the maximum rate 
up to 43, 44 percent.
  As you jump into higher tax brackets, each income level, you are 
penalized under the marriage penalty. As an individual, you pay 15 
percent up to $26,000. You would think a couple would go into the next 
bracket until it is double that amount. That would be $52,000. An 
individual pays 15 percent up to $26,000. So for a couple, when they go 
into the next higher bracket at 28 percent, that should be at $52,000. 
That is not the case.
  If you look at the Tax Code, a married couple filing a joint return 
goes into 28 percent not at $52,000 or $50,000 but at $43,000. So what 
that means is that the married couple is paying an additional rate of 
28 percent on all income between $43,000 and $52,000. That is the 
marriage penalty. We would eliminate that. Whether there is one wage 
earner or two wage earners in the married couple, we eliminate that 
penalty. Another way of saying it is, we take the $26,000, on which you 
are paying 15 percent, and we double it. So if it is $26,000 for an 
individual, it is $52,000 for a couple. We do the same thing on the 28 
percent bracket. So we eliminate this penalty.
  Another way of looking at it would be, if you have a principal wage 
earner and, say, he or she makes $40,000, and a spouse makes $20,000, 
under present law, the spouse that makes $20,000 pays the same income 
tax rate as the principal wage earner. That is not right. They should 
not be paying a tax rate of 28 percent. They should be paying at the 
15-percent rate. So we are doubling the tax. The present Tax Code 
almost charges double for the wage earner that is making $20,000 just 
because they happen to be married to a spouse who makes $40,000. That 
is wrong. It needs to be eliminated, and we do eliminate that in this 
proposal.
  I have heard some of my colleagues say they are going to offer a 
Democrat substitute and change that Democrat proposal.
  I compliment my friend and colleague from New York, Senator Moynihan. 
I have the greatest respect for him. He says the way to solve it is to 
make individuals file as if they have individual returns. What does 
that mean?
  If you have an income of $40,000 or $20,000, there would be some tax 
relief. But what if you have a situation where somebody earns $60,000? 
There is no tax relief. Or if you have an income that is $50,000, there 
is no tax relief. You are paying a 28-percent bracket on any income 
between $43,000 and $52,000. So they get penalized. They doesn't solve 
that problem.
  I hope I am not being too confusing. Maybe it is kind of wonkish, but 
we are penalizing couples in the U.S. today for being married to the 
tune of an average $1,200 to $1,400. That is wrong. We have a chance to 
fix it. We should. I believe we will fix it on Monday.
  I am pleased. This week was a good week. We passed a bill to 
eliminate the death tax. That is good news for small business. It is 
good news for farmers and ranchers or anybody who is trying to build a 
business. They would like to know they can build the business and not 
lose half of it when they die.
  The tax rates right now on the death tax range from 37 percent once 
you get past the deductible to 55 percent and in some cases 60 percent. 
If you have a taxable estate of $10 million, you have a marginal rate 
of 60 percent. That is too high. A lot of people do not know that. Some 
press people said to me: I think you misstated it.
  The facts are, if you have a taxable estate of $10 million to $17 
million, you pay a rate of 60 percent. That is way too high. We have 
taken care of that today. The only thing that will stop that from 
becoming law is President Clinton. He can sign it and we can eliminate 
the death tax and replace it with a capital gains tax. That is fair and 
equitable across the board. It is something we ought to do. It is the 
fair and right thing to do.
  Next Monday we can eliminate the marriage penalty. People shouldn't 
have to pay more taxes because they happen to be married. People 
shouldn't be bumped into higher categories because they happen to be 
married. We shouldn't be charging couples for marriage. They shouldn't 
be penalized for being married.
  We basically double the tax schedule for couples. To me, it is the 
fairest thing to do. You don't penalize somebody because they are 
working or not working. We don't penalize married couples. We have a 
chance to eliminate this gross inequity.
  We have taken care of one today on the floor of the Senate by 
eliminating the death penalty. On Monday, we can eliminate the marriage 
penalty.

[[Page 14435]]

  I compliment my colleagues, and especially several of our Democrat 
colleagues who were with us. Nine Democrats voted with us on final 
passage. We passed a bipartisan bill. It was bipartisan in the House 
with an overwhelming vote of a 2-to-1 margin. There was a good margin 
today in the Senate--59-39. Frankly, I hope that number will grow. We 
had several Members absent today, several of whom maybe would join us.
  Again, I compliment Senator Lott, and also Senator Roth, for bringing 
the bill forward this week. Next week, we have the opportunity to 
provide real tax relief for businesses, for families, and for married 
couples. I think that is some of the most positive news for taxpayers 
in a long, long time.
  I am going to proceed to several unanimous consent requests to help 
expedite consideration of these matters before the Senate next week.


                           Amendment No. 3881

  Mr. NICKLES. Mr. President, I send an amendment to the desk to the 
pending bill on behalf of the majority leader.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Senator from Oklahoma (Mr. Nickles), for Mr. Lott, 
     proposes an amendment numbered 3881.

  Mr. NICKLES. Mr. President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

                   (Purpose: To provide a substitute)

       Strike all after the first word and insert:

              1. SHORT TITLE.

       (a) Short Title.--This Act may be cited as the ``Marriage 
     Tax Relief Reconciliation Act of 2000''.
       (b) Section 15 Not To Apply.--No amendment made by this Act 
     shall be treated as a change in a rate of tax for purposes of 
     section 15 of the Internal Revenue Code of 1986.

     SEC. 2. ELIMINATION OF MARRIAGE PENALTY IN STANDARD 
                   DEDUCTION.

       (a) In General.--Paragraph (2) of section 63(c) of the 
     Internal Revenue Code of 1986 (relating to standard 
     deduction) is amended--
       (1) by striking ``$5,000'' in subparagraph (A) and 
     inserting ``200 percent of the dollar amount in effect under 
     subparagraph (C) for the taxable year'';
       (2) by adding ``or'' at the end of subparagraph (B);
       (3) by striking ``in the case of'' and all that follows in 
     subparagraph (C) and inserting ``in any other case.''; and
       (4) by striking subparagraph (D).
       (b) Technical Amendments.--
       (1) Subparagraph (B) of section 1(f )(6) of such Code is 
     amended by striking ``(other than with'' and all that follows 
     through ``shall be applied'' and inserting ``(other than with 
     respect to sections 63(c)(4) and 151(d)(4)(A)) shall be 
     applied''.
       (2) Paragraph (4) of section 63(c) of such Code is amended 
     by adding at the end the following flush sentence:

     ``The preceding sentence shall not apply to the amount 
     referred to in paragraph (2)(A).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 3. PHASEOUT OF MARRIAGE PENALTY IN 15-PERCENT AND 28-
                   PERCENT RATE BRACKETS.

       (a) In General.--Subsection (f ) of section 1 of the 
     Internal Revenue Code of 1986 (relating to adjustments in tax 
     tables so that inflation will not result in tax increases) is 
     amended by adding at the end the following new paragraph:
       ``(8) Phaseout of marriage penalty in 15-percent and 28-
     percent rate brackets.--
       ``(A) In general.--With respect to taxable years beginning 
     after December 31, 2001, in prescribing the tables under 
     paragraph (1)--
       ``(i) the maximum taxable income amount in the 15-percent 
     rate bracket, the minimum and maximum taxable income amounts 
     in the 28-percent rate bracket, and the minimum taxable 
     income amount in the 31-percent rate bracket in the table 
     contained in subsection (a) shall be the applicable 
     percentage of the comparable taxable income amounts in the 
     table contained in subsection (c) (after any other adjustment 
     under this subsection), and
       ``(ii) the comparable taxable income amounts in the table 
     contained in subsection (d) shall be \1/2\ of the amounts 
     determined under clause (i).
       ``(B) Applicable percentage.--For purposes of subparagraph 
     (A), the applicable percentage shall be determined in 
     accordance with the following table:

``For taxable years beginning in calendarThe applicable percentage is--
      2002.......................................................170.3 
      2003.......................................................173.8 
      2004.......................................................180.0 
      2005.......................................................183.2 
      2006.......................................................185.0 
      2007 and thereafter........................................200.0.
       ``(C) Rounding.--If any amount determined under 
     subparagraph (A)(i) is not a multiple of $50, such amount 
     shall be rounded to the next lowest multiple of $50.''.
       (b) Technical Amendments.--
       (1) Subparagraph (A) of section 1(f )(2) of such Code is 
     amended by inserting ``except as provided in paragraph (8),'' 
     before ``by increasing''.
       (2) The heading for subsection (f ) of section 1 of such 
     Code is amended by inserting ``Phaseout of Marriage Penalty 
     in 15-Percent and 28-Percent Rate Brackets;'' before 
     ``Adjustments''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 4. MARRIAGE PENALTY RELIEF FOR EARNED INCOME CREDIT.

       (a) In General.--Paragraph (2) of section 32(b) of the 
     Internal Revenue Code of 1986 (relating to percentages and 
     amounts) is amended--
       (1) by striking ``Amounts.--The earned'' and inserting 
     ``Amounts.--
       ``(A) In general.--Subject to subparagraph (B), the 
     earned''; and
       (2) by adding at the end the following new subparagraph:
       ``(B) Joint returns.--In the case of a joint return, the 
     phaseout amount determined under subparagraph (A) shall be 
     increased by $2,500.''.
       (b) Inflation Adjustment.--Paragraph (1)(B) of section 32( 
     j) of such Code (relating to inflation adjustments) is 
     amended to read as follows:
       ``(B) the cost-of-living adjustment determined under 
     section 1(f )(3) for the calendar year in which the taxable 
     year begins, determined--
       ``(i) in the case of amounts in subsections (b)(2)(A) and 
     (i)(1), by substituting `calendar year 1995' for `calendar 
     year 1992' in subparagraph (B) thereof, and
       ``(ii) in the case of the $2,500 amount in subsection 
     (b)(2)(B), by substituting `calendar year 2000' for `calendar 
     year 1992' in subparagraph (B) of such section 1.''.
       (c) Rounding.--Section 32( j)(2)(A) of such Code (relating 
     to rounding) is amended by striking ``subsection (b)(2)'' and 
     inserting ``subsection (b)(2)(A) (after being increased under 
     subparagraph (B) thereof)''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 5. PRESERVE FAMILY TAX CREDITS FROM THE ALTERNATIVE 
                   MINIMUM TAX.

       (a) In General.--Subsection (a) of section 26 of the 
     Internal Revenue Code of 1986 (relating to limitation based 
     on tax liability; definition of tax liability) is amended to 
     read as follows:
       ``(a) Limitation Based on Amount of Tax.--The aggregate 
     amount of credits allowed by this subpart for the taxable 
     year shall not exceed the sum of--
       ``(1) the taxpayer's regular tax liability for the taxable 
     year reduced by the foreign tax credit allowable under 
     section 27(a), and
       ``(2) the tax imposed for the taxable year by section 
     55(a).''.
       (b) Conforming Amendments.--
       (1) Subsection (d) of section 24 of such Code is amended by 
     striking paragraph (2) and by redesignating paragraph (3) as 
     paragraph (2).
       (2) Section 32 of such Code is amended by striking 
     subsection (h).
       (3) Section 904 of such Code is amended by striking 
     subsection (h) and by redesignating subsections (i), (j), and 
     (k) as subsections (h), (i), and (j), respectively.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 6. COMPLIANCE WITH BUDGET ACT.

       (a) In General.--Except as provided in subsection (b), all 
     amendments made by this Act which are in effect on September 
     30, 2005, shall cease to apply as of the close of September 
     30, 2005.
       (b) Sunset for Certain Provisions Absent Subsequent 
     Legislation.--The amendments made by sections 2, 3, 4, and 5 
     of this Act shall not apply to any taxable year beginning 
     after December 31, 2004.

  Mr. NICKLES. Mr. President, I ask unanimous consent that all time be 
yielded and the amendment be laid aside.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                           Amendment No. 3882

  Mr. NICKLES. Mr. President, I send an amendment to the desk.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Senator from Oklahoma (Mr. Nickles) proposes an 
     amendment numbered 3882.

  Mr. NICKLES. Mr. President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

                   (Purpose: To provide a substitute)

       Strike all after the first word and insert:

[[Page 14436]]



              1. SHORT TITLE.

       (a) Short Title.--This Act may be cited as the ``Marriage 
     Tax Relief Reconciliation Act of 2000''.
       (b) Section 15 Not To Apply.--No amendment made by this Act 
     shall be treated as a change in a rate of tax for purposes of 
     section 15 of the Internal Revenue Code of 1986.

     SEC. 2. ELIMINATION OF MARRIAGE PENALTY IN STANDARD 
                   DEDUCTION.

       (a) In General.--Paragraph (2) of section 63(c) of the 
     Internal Revenue Code of 1986 (relating to standard 
     deduction) is amended--
       (1) by striking ``$5,000'' in subparagraph (A) and 
     inserting ``200 percent of the dollar amount in effect under 
     subparagraph (C) for the taxable year'';
       (2) by adding ``or'' at the end of subparagraph (B);
       (3) by striking ``in the case of'' and all that follows in 
     subparagraph (C) and inserting ``in any other case.''; and
       (4) by striking subparagraph (D).
       (b) Technical Amendments.--
       (1) Subparagraph (B) of section 1(f )(6) of such Code is 
     amended by striking ``(other than with'' and all that follows 
     through ``shall be applied'' and inserting ``(other than with 
     respect to sections 63(c)(4) and 151(d)(4)(A)) shall be 
     applied''.
       (2) Paragraph (4) of section 63(c) of such Code is amended 
     by adding at the end the following flush sentence:
     ``The preceding sentence shall not apply to the amount 
     referred to in paragraph (2)(A).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 3. PHASEOUT OF MARRIAGE PENALTY IN 15-PERCENT AND 28-
                   PERCENT RATE BRACKETS.

       (a) In General.--Subsection (f ) of section 1 of the 
     Internal Revenue Code of 1986 (relating to adjustments in tax 
     tables so that inflation will not result in tax increases) is 
     amended by adding at the end the following new paragraph:
       ``(8) Phaseout of marriage penalty in 15-percent and 28-
     percent rate brackets.--
       ``(A) In general.--With respect to taxable years beginning 
     after December 31, 2001, in prescribing the tables under 
     paragraph (1)--
       ``(i) the maximum taxable income amount in the 15-percent 
     rate bracket, the minimum and maximum taxable income amounts 
     in the 28-percent rate bracket, and the minimum taxable 
     income amount in the 31-percent rate bracket in the table 
     contained in subsection (a) shall be the applicable 
     percentage of the comparable taxable income amounts in the 
     table contained in subsection (c) (after any other adjustment 
     under this subsection), and
       ``(ii) the comparable taxable income amounts in the table 
     contained in subsection (d) shall be \1/2\ of the amounts 
     determined under clause (i).
       ``(B) Applicable percentage.--For purposes of subparagraph 
     (A), the applicable percentage shall be determined in 
     accordance with the following table:

``For taxable years beginning in calendarThe applicable percentage is--
      2002.......................................................170.3 
      2003.......................................................173.8 
      2004.......................................................180.0 
      2005.......................................................183.2 
      2006.......................................................185.0 
      2007 and thereafter........................................200.0.
       ``(C) Rounding.--If any amount determined under 
     subparagraph (A)(i) is not a multiple of $50, such amount 
     shall be rounded to the next lowest multiple of $50.''.
       (b) Technical Amendments.--
       (1) Subparagraph (A) of section 1(f )(2) of such Code is 
     amended by inserting ``except as provided in paragraph (8),'' 
     before ``by increasing''.
       (2) The heading for subsection (f ) of section 1 of such 
     Code is amended by inserting ``Phaseout of Marriage Penalty 
     in 15-Percent and 28-Percent Rate Brackets;'' before 
     ``Adjustments''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 4. PRESERVE FAMILY TAX CREDITS FROM THE ALTERNATIVE 
                   MINIMUM TAX.

       (a) In General.--Subsection (a) of section 26 of the 
     Internal Revenue Code of 1986 (relating to limitation based 
     on tax liability; definition of tax liability) is amended to 
     read as follows:
       ``(a) Limitation Based on Amount of Tax.--The aggregate 
     amount of credits allowed by this subpart for the taxable 
     year shall not exceed the sum of--
       ``(1) the taxpayer's regular tax liability for the taxable 
     year reduced by the foreign tax credit allowable under 
     section 27(a), and
       ``(2) the tax imposed for the taxable year by section 
     55(a).''.
       (b) Conforming Amendments.--
       (1) Subsection (d) of section 24 of such Code is amended by 
     striking paragraph (2) and by redesignating paragraph (3) as 
     paragraph (2).
       (2) Section 32 of such Code is amended by striking 
     subsection (h).
       (3) Section 904 of such Code is amended by striking 
     subsection (h) and by redesignating subsections (i), (j), and 
     (k) as subsections (h), (i), and (j), respectively.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 5. COMPLIANCE WITH BUDGET ACT.

       (a) In General.--Except as provided in subsection (b), all 
     amendments made by this Act which are in effect on September 
     30, 2005, shall cease to apply as of the close of September 
     30, 2005.
       (b) Sunset for Certain Provisions Absent Subsequent 
     Legislation.--The amendments made by sections 2, 3, and 4 of 
     this Act shall not apply to any taxable year beginning after 
     December 31, 2004.

  Mr. NICKLES. Mr. President, I ask unanimous consent that all time be 
yielded and the amendment be laid aside.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                    Amendment No. 3849, As Modified

  Mr. NICKLES. Mr. President, I ask unanimous consent that the 
Brownback amendment numbered 3849 be modified with the text that is now 
at the desk.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment as modified is as follows:

  (Purpose: To provide tax relief for farmers, and for other purposes)

       At the end of the bill, add the following:

                    TITLE VI--TAX RELIEF FOR FARMERS

     SEC. 601. FARM, FISHING, AND RANCH RISK MANAGEMENT ACCOUNTS.

       (a) In General.--Subpart C of part II of subchapter E of 
     chapter 1 (relating to taxable year for which deductions 
     taken) is amended by inserting after section 468B the 
     following:

     ``SEC. 468C. FARM, FISHING, AND RANCH RISK MANAGEMENT 
                   ACCOUNTS.

       ``(a) Deduction Allowed.--In the case of an individual 
     engaged in an eligible farming business or commercial 
     fishing, there shall be allowed as a deduction for any 
     taxable year the amount paid in cash by the taxpayer during 
     the taxable year to a Farm, Fishing, and Ranch Risk 
     Management Account (hereinafter referred to as the `FFARRM 
     Account').
       ``(b) Limitation.--
       ``(1) Contributions.--The amount which a taxpayer may pay 
     into the FFARRM Account for any taxable year shall not exceed 
     20 percent of so much of the taxable income of the taxpayer 
     (determined without regard to this section) which is 
     attributable (determined in the manner applicable under 
     section 1301) to any eligible farming business or commercial 
     fishing.
       ``(2) Distributions.--Distributions from a FFARRM Account 
     may not be used to purchase, lease, or finance any new 
     fishing vessel, add capacity to any fishery, or otherwise 
     contribute to the overcapitalization of any fishery. The 
     Secretary of Commerce shall implement regulations to enforce 
     this paragraph.
       ``(c) Eligible Businesses.--For purposes of this section--
       ``(1) Eligible farming business.--The term `eligible 
     farming business' means any farming business (as defined in 
     section 263A(e)(4)) which is not a passive activity (within 
     the meaning of section 469(c)) of the taxpayer.
       ``(2) Commercial Fishing.--The term `commercial fishing' 
     has the meaning given such term by section (3) of the 
     Magnuson-Stevens Fishery Conservation and Management Act (16 
     U.S.C. 1802) but only if such fishing is not a passive 
     activity (within the meaning of section 469(c)) of the 
     taxpayer.
       ``(d) FFARRM Account.--For purposes of this section--
       ``(1) In general.--The term `FFARRM Account' means a trust 
     created or organized in the United States for the exclusive 
     benefit of the taxpayer, but only if the written governing 
     instrument creating the trust meets the following 
     requirements:
       ``(A) No contribution will be accepted for any taxable year 
     in excess of the amount allowed as a deduction under 
     subsection (a) for such year.
       ``(B) The trustee is a bank (as defined in section 408(n)) 
     or another person who demonstrates to the satisfaction of the 
     Secretary that the manner in which such person will 
     administer the trust will be consistent with the requirements 
     of this section.
       ``(C) The assets of the trust consist entirely of cash or 
     of obligations which have adequate stated interest (as 
     defined in section 1274(c)(2)) and which pay such interest 
     not less often than annually.
       ``(D) All income of the trust is distributed currently to 
     the grantor.
       ``(E) The assets of the trust will not be commingled with 
     other property except in a common trust fund or common 
     investment fund.
       ``(2) Account taxed as grantor trust.--The grantor of a 
     FFARRM Account shall be treated for purposes of this title as 
     the owner of such Account and shall be subject to tax thereon 
     in accordance with subpart E of part I of subchapter J of 
     this chapter (relating to grantors and others treated as 
     substantial owners).
       ``(e) Inclusion of Amounts Distributed.--
       ``(1) In general.--Except as provided in paragraph (2), 
     there shall be includible in the gross income of the taxpayer 
     for any taxable year--

[[Page 14437]]

       ``(A) any amount distributed from a FFARRM Account of the 
     taxpayer during such taxable year, and
       ``(B) any deemed distribution under--
       ``(i) subsection (f )(1) (relating to deposits not 
     distributed within 5 years),
       ``(ii) subsection (f )(2) (relating to cessation in 
     eligible farming business), and
       ``(iii) subparagraph (A) or (B) of subsection (f )(3) 
     (relating to prohibited transactions and pledging account as 
     security).
       ``(2) Exceptions.--Paragraph (1)(A) shall not apply to--
       ``(A) any distribution to the extent attributable to income 
     of the Account, and
       ``(B) the distribution of any contribution paid during a 
     taxable year to a FFARRM Account to the extent that such 
     contribution exceeds the limitation applicable under 
     subsection (b) if requirements similar to the requirements of 
     section 408(d)(4) are met.

     For purposes of subparagraph (A), distributions shall be 
     treated as first attributable to income and then to other 
     amounts.
       ``(f ) Special Rules.--
       ``(1) Tax on deposits in account which are not distributed 
     within 5 years.--
       ``(A) In general.--If, at the close of any taxable year, 
     there is a nonqualified balance in any FFARRM Account--
       ``(i) there shall be deemed distributed from such Account 
     during such taxable year an amount equal to such balance, and
       ``(ii) the taxpayer's tax imposed by this chapter for such 
     taxable year shall be increased by 10 percent of such deemed 
     distribution.

     The preceding sentence shall not apply if an amount equal to 
     such nonqualified balance is distributed from such Account to 
     the taxpayer before the due date (including extensions) for 
     filing the return of tax imposed by this chapter for such 
     year (or, if earlier, the date the taxpayer files such return 
     for such year).
       ``(B) Nonqualified balance.--For purposes of subparagraph 
     (A), the term `nonqualified balance' means any balance in the 
     Account on the last day of the taxable year which is 
     attributable to amounts deposited in such Account before the 
     4th preceding taxable year.
       ``(C) Ordering rule.--For purposes of this paragraph, 
     distributions from a FFARRM Account (other than distributions 
     of current income) shall be treated as made from deposits in 
     the order in which such deposits were made, beginning with 
     the earliest deposits.
       ``(2) Cessation in eligible business.--At the close of the 
     first disqualification period after a period for which the 
     taxpayer was engaged in an eligible farming business or 
     commercial fishing, there shall be deemed distributed from 
     the FFARRM Account of the taxpayer an amount equal to the 
     balance in such Account (if any) at the close of such 
     disqualification period. For purposes of the preceding 
     sentence, the term `disqualification period' means any period 
     of 2 consecutive taxable years for which the taxpayer is not 
     engaged in an eligible farming business or commercial 
     fishing.
       ``(3) Certain rules to apply.--Rules similar to the 
     following rules shall apply for purposes of this section:
       ``(A) Section 220(f )(8) (relating to treatment on death).
       ``(B) Section 408(e)(2) (relating to loss of exemption of 
     account where individual engages in prohibited transaction).
       ``(C) Section 408(e)(4) (relating to effect of pledging 
     account as security).
       ``(D) Section 408(g) (relating to community property laws).
       ``(E) Section 408(h) (relating to custodial accounts).
       ``(4) Time when payments deemed made.--For purposes of this 
     section, a taxpayer shall be deemed to have made a payment to 
     a FFARRM Account on the last day of a taxable year if such 
     payment is made on account of such taxable year and is made 
     on or before the due date (without regard to extensions) for 
     filing the return of tax for such taxable year.
       ``(5) Individual.--For purposes of this section, the term 
     `individual' shall not include an estate or trust.
       ``(6) Deduction not allowed for self-employment tax.--The 
     deduction allowable by reason of subsection (a) shall not be 
     taken into account in determining an individual's net 
     earnings from self-employment (within the meaning of section 
     1402(a)) for purposes of chapter 2.
       ``(g) Reports.--The trustee of a FFARRM Account shall make 
     such reports regarding such Account to the Secretary and to 
     the person for whose benefit the Account is maintained with 
     respect to contributions, distributions, and such other 
     matters as the Secretary may require under regulations. The 
     reports required by this subsection shall be filed at such 
     time and in such manner and furnished to such persons at such 
     time and in such manner as may be required by such 
     regulations.''.
       (b) Tax on Excess Contributions.--
       (1) Subsection (a) of section 4973 (relating to tax on 
     excess contributions to certain tax-favored accounts and 
     annuities) is amended by striking ``or'' at the end of 
     paragraph (3), by redesignating paragraph (4) as paragraph 
     (5), and by inserting after paragraph (3) the following:
       ``(4) a FFARRM Account (within the meaning of section 
     468C(d)), or''.
       (2) Section 4973 is amended by adding at the end the 
     following:
       ``(g) Excess Contributions to FFARRM Accounts.--For 
     purposes of this section, in the case of a FFARRM Account 
     (within the meaning of section 468C(d)), the term `excess 
     contributions' means the amount by which the amount 
     contributed for the taxable year to the Account exceeds the 
     amount which may be contributed to the Account under section 
     468C(b) for such taxable year. For purposes of this 
     subsection, any contribution which is distributed out of the 
     FFARRM Account in a distribution to which section 
     468C(e)(2)(B) applies shall be treated as an amount not 
     contributed.''.
       (3) The section heading for section 4973 is amended to read 
     as follows:

     ``SEC. 4973. EXCESS CONTRIBUTIONS TO CERTAIN ACCOUNTS, 
                   ANNUITIES, ETC.''.

       (4) The table of sections for chapter 43 is amended by 
     striking the item relating to section 4973 and inserting the 
     following:

``Sec. 4973. Excess contributions to certain accounts, annuities, 
              etc.''.

       (c) Tax on Prohibited Transactions.--
       (1) Subsection (c) of section 4975 (relating to tax on 
     prohibited transactions) is amended by adding at the end the 
     following:
       ``(6) Special rule for ffarrm accounts.--A person for whose 
     benefit a FFARRM Account (within the meaning of section 
     468C(d)) is established shall be exempt from the tax imposed 
     by this section with respect to any transaction concerning 
     such account (which would otherwise be taxable under this 
     section) if, with respect to such transaction, the account 
     ceases to be a FFARRM Account by reason of the application of 
     section 468C(f )(3)(A) to such account.''.
       (2) Paragraph (1) of section 4975(e) is amended by 
     redesignating subparagraphs (E) and (F) as subparagraphs (F) 
     and (G), respectively, and by inserting after subparagraph 
     (D) the following:
       ``(E) a FFARRM Account described in section 468C(d),''.
       (d) Failure To Provide Reports on FFARRM Accounts.--
     Paragraph (2) of section 6693(a) (relating to failure to 
     provide reports on certain tax-favored accounts or annuities) 
     is amended by redesignating subparagraphs (C) and (D) as 
     subparagraphs (D) and (E), respectively, and by inserting 
     after subparagraph (B) the following:
       ``(C) section 468C(g) (relating to FFARRM Accounts),''.
       (e) Clerical Amendment.--The table of sections for subpart 
     C of part II of subchapter E of chapter 1 is amended by 
     inserting after the item relating to section 468B the 
     following:

``Sec. 468C. Farm, Fishing and Ranch Risk Management Accounts.''.

       (f ) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 602. WRITTEN AGREEMENT RELATING TO EXCLUSION OF CERTAIN 
                   FARM RENTAL INCOME FROM NET EARNINGS FROM SELF-
                   EMPLOYMENT.

       (a) Internal Revenue Code.--Section 1402(a)(1)(A) (relating 
     to net earnings from self-employment) is amended by striking 
     ``an arrangement'' and inserting ``a lease agreement''.
       (b) Social Security Act.--Section 211(a)(1)(A) of the 
     Social Security Act is amended by striking ``an arrangement'' 
     and inserting ``a lease agreement''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 603. TREATMENT OF CONSERVATION RESERVE PROGRAM PAYMENTS 
                   AS RENTALS FROM REAL ESTATE.

       (a) In General.--Section 1402(a)(1) (defining net earnings 
     from self-employment) is amended by inserting ``and including 
     payments under section 1233(2) of the Food Security Act of 
     1985 (16 U.S.C. 3833(2))'' after ``crop shares''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to payments made before, on, or after the date of 
     the enactment of this Act.

     SEC. 604. EXEMPTION OF AGRICULTURAL BONDS FROM STATE VOLUME 
                   CAP.

       (a) In General.--Section 146(g) (relating to exception for 
     certain bonds) is amended by striking ``and'' at the end of 
     paragraph (3), by striking the period at the end of paragraph 
     (4) and inserting ``, and'', and by inserting after paragraph 
     (4) the following:
       ``(5) any qualified small issue bond described in section 
     144(a)(12)(B)(ii).''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to bonds issued after the date of enactment of 
     this Act.

     SEC. 605. MODIFICATIONS TO SECTION 512(B)(13).

       (a) In General.--Paragraph (13) of section 512(b) is 
     amended by redesignating subparagraph (E) as subparagraph (F) 
     and by inserting after subparagraph (D) the following new 
     paragraph:
       ``(E) Paragraph to apply only to excess payments.--
       ``(i) In general.--Subparagraph (A) shall apply only to the 
     portion of a specified payment received by the controlling 
     organization that exceeds the amount which would have been 
     paid if such payment met the requirements prescribed under 
     section 482.

[[Page 14438]]

       ``(ii) Addition to tax for valuation misstatements.--The 
     tax imposed by this chapter on the controlling organization 
     shall be increased by an amount equal to 20 percent of such 
     excess.''.
       (b) Effective Date.--
       (1) In general.--The amendment made by this section shall 
     apply to payments received or accrued after December 31, 
     2000.
       (2) Payments subject to binding contract transition rule.--
     If the amendments made by section 1041 of the Taxpayer Relief 
     Act of 1997 do not apply to any amount received or accrued 
     after the date of the enactment of this Act under any 
     contract described in subsection (b)(2) of such section, such 
     amendments also shall not apply to amounts received or 
     accrued under such contract before January 1, 2001.

     SEC. 606. CHARITABLE DEDUCTION FOR CONTRIBUTIONS OF FOOD 
                   INVENTORY.

       (a) In General.--Subsection (e) of section 170 (relating to 
     certain contributions of ordinary income and capital gain 
     property) is amended by adding at the end the following new 
     paragraph:
       ``(7) Special rule for contributions of food inventory.--
     For purposes of this section--
       ``(A) Contributions by non-corporate taxpayers.--In the 
     case of a charitable contribution of food, paragraph (3)(A) 
     shall be applied without regard to whether or not the 
     contribution is made by a corporation.
       ``(B) Limit on reduction.--In the case of a charitable 
     contribution of food which is a qualified contribution 
     (within the meaning of paragraph (3)(A), as modified by 
     subparagraph (A) of this paragraph)--
       ``(i) paragraph (3)(B) shall not apply, and
       ``(ii) the reduction under paragraph (1)(A) for such 
     contribution shall be no greater than the amount (if any) by 
     which the amount of such contribution exceeds twice the basis 
     of such food.
       ``(C) Determination of basis.--For purposes of this 
     paragraph, if a taxpayer uses the cash method of accounting, 
     the basis of any qualified contribution of such taxpayer 
     shall be deemed to be 50 percent of the fair market value of 
     such contribution.
       ``(D) Determination of fair market value.--In the case of a 
     charitable contribution of food which is a qualified 
     contribution (within the meaning of paragraph (3), as 
     modified by subparagraphs (A) and (B) of this paragraph) and 
     which, solely by reason of internal standards of the 
     taxpayer, lack of market, or similar circumstances, or which 
     is produced by the taxpayer exclusively for the purposes of 
     transferring the food to an organization described in 
     paragraph (3)(A), cannot or will not be sold, the fair market 
     value of such contribution shall be determined--
       ``(i) without regard to such internal standards, such lack 
     of market, such circumstances, or such exclusive purpose, and
       ``(ii) if applicable, by taking into account the price at 
     which the same or similar food items are sold by the taxpayer 
     at the time of the contribution (or, if not so sold at such 
     time, in the recent past).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 607. INCOME AVERAGING FOR FARMERS AND FISHERMEN NOT TO 
                   INCREASE ALTERNATIVE MINIMUM TAX LIABILITY.

       (a) In General.--Section 55(c) (defining regular tax) is 
     amended by redesignating paragraph (2) as paragraph (3) and 
     by inserting after paragraph (1) the following:
       ``(2) Coordination with income averaging for farmers and 
     fishermen.--Solely for purposes of this section, section 1301 
     (relating to averaging of farm and fishing income) shall not 
     apply in computing the regular tax.''.
       (b) Allowing Income Averaging for Fishermen.--
       (1) In general.--Section 1301(a) is amended by striking 
     ``farming business'' and inserting ``farming business or 
     fishing business,''.
       (2) Definition of elected farm income.--
       (A) In general.--Clause (i) of section 1301(b)(1)(A) is 
     amended by inserting ``or fishing business'' before the 
     semicolon.
       (B) Conforming amendment.--Subparagraph (B) of section 
     1301(b)(1) is amended by inserting ``or fishing business'' 
     after ``farming business'' both places it occurs.
       (3) Definition of fishing business.--Section 1301(b) is 
     amended by adding at the end the following new paragraph:
       ``(4) Fishing business.--The term `fishing business' means 
     the conduct of commercial fishing as defined in section 3 of 
     the Magnuson-Stevens Fishery Conservation and Management Act 
     (16 U.S.C. 1802).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 608. REPEAL OF MODIFICATION OF INSTALLMENT METHOD.

       (a) In General.--Subsection (a) of section 536 of the 
     Ticket to Work and Work Incentives Improvement Act of 1999 
     (relating to modification of installment method and repeal of 
     installment method for accrual method taxpayers) is repealed 
     effective with respect to sales and other dispositions 
     occurring on or after the date of the enactment of such Act.
       (b) Applicability.--The Internal Revenue Code of 1986 shall 
     be applied and administered as if such subsection (and the 
     amendments made by such subsection) had not been enacted.

     SEC. 609. COOPERATIVE MARKETING INCLUDES VALUE-ADDED 
                   PROCESSING THROUGH ANIMALS.

       (a) In General.--Section 1388 (relating to definitions and 
     special rules) is amended by adding at the end the following:
       ``(k) Cooperative Marketing Includes Value-Added Processing 
     Through Animals.--For purposes of section 521 and this 
     subchapter, `marketing the products of members or other 
     producers' includes feeding the products of members or other 
     producers to cattle, hogs, fish, chickens, or other animals 
     and selling the resulting animals or animal products.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

     SEC. 610. DECLARATORY JUDGMENT RELIEF FOR SECTION 521 
                   COOPERATIVES.

       (a) In General.--Section 7428(a)(1) (relating to 
     declaratory judgments of tax exempt organizations) is amended 
     by striking ``or'' at the end of subparagraph (B) and by 
     adding at the end the following:
       ``(D) with respect to the initial qualification or 
     continuing qualification of a cooperative as described in 
     section 521(b) which is exempt from tax under section 521(a), 
     or''.
       (b) Effective Date.--The amendments made by this section 
     shall apply with respect to pleadings filed after the date of 
     the enactment of this Act but only with respect to 
     determinations (or requests for determinations) made after 
     January 1, 2000.

     SEC. 611. SMALL ETHANOL PRODUCER CREDIT.

       (a) Allocation of Alcohol Fuels Credit to Patrons of a 
     Cooperative.--Section 40(g) (relating to alcohol used as 
     fuel) is amended by adding at the end the following:
       ``(6) Allocation of small ethanol producer credit to 
     patrons of cooperative.--
       ``(A) Election to allocate.--
       ``(i) In general.--In the case of a cooperative 
     organization described in section 1381(a), any portion of the 
     credit determined under subsection (a)(3) for the taxable 
     year may, at the election of the organization, be apportioned 
     pro rata among patrons of the organization on the basis of 
     the quantity or value of business done with or for such 
     patrons for the taxable year.
       ``(ii) Form and effect of election.--An election under 
     clause (i) for any taxable year shall be made on a timely 
     filed return for such year. Such election, once made, shall 
     be irrevocable for such taxable year.
       ``(iii) Special rule for 1998 and 1999.--Notwithstanding 
     clause (ii), an election for any taxable year ending prior to 
     the date of the enactment of the Death Tax Elimination Act of 
     2000 may be made at any time before the expiration of the 3-
     year period beginning on the last date prescribed by law for 
     filing the return of the taxpayer for such taxable year 
     (determined without regard to extensions) by filing an 
     amended return for such year.
       ``(B) Treatment of organizations and patrons.--The amount 
     of the credit apportioned to patrons under subparagraph (A)--
       ``(i) shall not be included in the amount determined under 
     subsection (a) with respect to the organization for the 
     taxable year,
       ``(ii) shall be included in the amount determined under 
     subsection (a) for the taxable year of each patron for which 
     the patronage dividends for the taxable year described in 
     subparagraph (A) are included in gross income, and
       ``(iii) shall be included in gross income of such patrons 
     for the taxable year in the manner and to the extent provided 
     in section 87.
       ``(C) Special rules for decrease in credits for taxable 
     year.--If the amount of the credit of a cooperative 
     organization determined under subsection (a)(3) for a taxable 
     year is less than the amount of such credit shown on the 
     return of the cooperative organization for such year, an 
     amount equal to the excess of--
       ``(i) such reduction, over
       ``(ii) the amount not apportioned to such patrons under 
     subparagraph (A) for the taxable year,

     shall be treated as an increase in tax imposed by this 
     chapter on the organization. Such increase shall not be 
     treated as tax imposed by this chapter for purposes of 
     determining the amount of any credit under this subpart or 
     subpart A, B, E, or G.''.
       (b) Improvements to Small Ethanol Producer Credit.--
       (1) Small ethanol producer credit not a passive activity 
     credit.--Clause (i) of section 469(d)(2)(A) is amended by 
     striking ``subpart D'' and inserting ``subpart D, other than 
     section 40(a)(3),''.
       (2) Allowing credit against minimum tax.--
       (A) In general.--Subsection (c) of section 38 (relating to 
     limitation based on amount of tax) is amended by 
     redesignating paragraph (3) as paragraph (4) and by inserting 
     after paragraph (2) the following new paragraph:
       ``(3) Special rules for small ethanol producer credit.--
       ``(A) In general.--In the case of the small ethanol 
     producer credit--
       ``(i) this section and section 39 shall be applied 
     separately with respect to the credit, and

[[Page 14439]]

       ``(ii) in applying paragraph (1) to the credit--

       ``(I) subparagraphs (A) and (B) thereof shall not apply, 
     and
       ``(II) the limitation under paragraph (1) (as modified by 
     subclause (I)) shall be reduced by the credit allowed under 
     subsection (a) for the taxable year (other than the small 
     ethanol producer credit).

       ``(B) Small ethanol producer credit.--For purposes of this 
     subsection, the term `small ethanol producer credit' means 
     the credit allowable under subsection (a) by reason of 
     section 40(a)(3).''.
       (B) Conforming amendment.--Subclause (II) of section 
     38(c)(2)(A)(ii) is amended by inserting ``or the small 
     ethanol producer credit'' after ``employment credit''.
       (3) Small ethanol producer credit not added back to income 
     under section 87.--Section 87 (relating to income inclusion 
     of alcohol fuel credit) is amended to read as follows:

     ``SEC. 87. ALCOHOL FUEL CREDIT.

       ``Gross income includes an amount equal to the sum of--
       ``(1) the amount of the alcohol mixture credit determined 
     with respect to the taxpayer for the taxable year under 
     section 40(a)(1), and
       ``(2) the alcohol credit determined with respect to the 
     taxpayer for the taxable year under section 40(a)(2).''.
       (c) Conforming Amendment.--Section 1388 (relating to 
     definitions and special rules for cooperative organizations) 
     is amended by adding at the end the following:
       ``(k) Cross Reference.--For provisions relating to the 
     apportionment of the alcohol fuels credit between cooperative 
     organizations and their patrons, see section 40(d) (6).''
       (d) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by subsection (b) of this section shall apply 
     to taxable years ending after the date of enactment.
       (2) Provisions affecting cooperatives and their patrons.--
     The amendments made by subsections (a) and (c), and the 
     amendments made by paragraphs (2) and (3) of subsection (b), 
     shall apply to taxable years beginning after December 31, 
     1997.

  Mr. MACK. Mr. President, I urge all of my colleagues to join us to 
reduce the marriage penalties in the tax code. This bill will provide 
married couples the relief that President Clinton denied them last year 
with his veto of the Taxpayer Refund and Relief Act of 1999. President 
Clinton's action last year increased taxes by close to $800 billion and 
imposed a marriage penalty on middle class American families.
  There is no place in the Tax Code for marriage penalties. Marriage 
penalties are caused by tax laws that treat joint filers relatively 
worse than single filers with half the income. It has of late become 
common practice to use the Tax Code for purposes of social engineering, 
discouraging some actions with the stick of tax penalties and 
encouraging others with the carrot of tax preferences. But there is no 
legitimate policy reason for punishing taxpayers with higher taxes just 
because they happen to be married. The marriage penalties in the Tax 
Code undermine the family, the institution that is the foundation of 
our society.
  I view this bill as just a start. Our Tax Code will not truly be 
family-friendly until every single marriage penalty is rooted out and 
eliminated, so that married couples with twice the income of single 
individuals are taxed at the same rates, and are eligible for the same 
tax preferences--including deductions, exemptions, use of IRAs and 
other savings vehicles--as those single filers. This bill is an 
important step toward that ultimate goal.
  The Democrat criticisms of our bill are misplaced. They argue that 
our bill contains complicated phase-ins, in contrast to their simple 
approach. But anyone who reads the bill and their alternative would see 
that this is false. The Finance Committee bill contains percentages in 
it, sure enough. And it phases in the relief, that is true. But the 
percentages and the phase-ins are instructions to the Treasury and the 
IRS, to make adjustments to the tax brackets. The only people who have 
to make any new calculations under the Finance Committee bill are the 
bureaucrats who make up the tax tables, not the taxpayer.
  By contrast, the Democrat alternative, in phasing in its relief, 
requires taxpayers to calculate their taxes as joint filers, then 
calculate their taxes as if they were single--a complicated process 
that requires the allocation of various deductions and credits. Next, 
the taxpayer would have to determine the difference between these two 
calculations and then reduce this by a certain percentage. That is 
supposed to be simple? The Democrat substitute adds to the headaches of 
tax filing and the demand for tax preparers and tax preparation 
software.
  The Democrats also complain that the Finance Committee bill does more 
than address their narrow definition of the marriage penalty. They 
invoke the so-called ``marriage bonus.'' But the ``marriage bonus'' is 
a red herring. What they call a ``marriage bonus'' results from 
adjusting tax brackets for joint filers to reflect the fact that two 
adults are sharing the household income. Under the Democrat approach, 
single taxpayers who marry a non-working or low-earning spouse should 
pay the same amount of taxes as when they were single, even though this 
income must be spread over the needs of two adults.
  This approach is fundamentally flawed. The Democrat approach would 
enshrine in the law a new ``homemaker penalty.'' The Democrats would 
make families with one earner and one stay-at-home spouse pay higher 
taxes than families with the same household income and two earners.
  But why discriminate against one-earner families? Why would we want a 
tax code that penalized families just because one of the spouses 
chooses the hard work of the household over the role of breadwinner? 
The Democrat alternative discourages parents from staying home with 
their infant children, and penalizes a person who works longer hours so 
that a spouse can care for elderly parents. That is just plain wrong.
  The Finance Committee bill reduces the marriage penalty in a 
rational, sensible way, by making the standard deduction for joint 
filers twice what it is for single filers, and by making the ranges at 
which income is taxed at the 15 percent and 28 percent rates twice for 
joint filers what they are for single filers. This recognizes that 
marriage is a partnership in which two adults share the household 
income. Our approach cuts taxes for all American families. The 
Democrats call this a ``bonus.'' We call it common sense.
  Mr. GRAMS. Mr. President, today the Senate begins consideration of 
the first tax reconciliation bill, which would correct the injustice of 
the marriage penalty. As a long-time advocate of repealing the marriage 
penalty, I rise to strongly support this legislation and support 
elimination of the marriage penalty entirely.
  First, I'd like to take this opportunity to commend our leaders for 
bringing up this important legislation. I'd particularly like to 
commend Chairman Roth for his leadership on tax relief. He has 
consistently championed critically needed tax relief that will restore 
fairness for millions of American families.
  This marriage penalty tax relief legislation would increase the 
standard deduction so that married couples filing jointly get the same 
deduction as single taxpayers. It expands the 15 percent and 28 percent 
tax brackets to ensure that 21 million American couples--including 3 
million American seniors--pay the same tax rate as unmarried taxpayers. 
The bill makes Alternative Minimum Tax exemption for family-related tax 
credits permanent, so families won't be pushed into higher tax 
brackets.
  This bill also takes care of low-income married couples by increasing 
the threshold of the Earned Income Credit to allow them to enjoy this 
tax relief. Mr. President, in my view, this is fair, well-balanced 
legislation by any standard.
  There are compelling reasons to eliminate the marriage penalty tax 
and provide immediate tax relief for millions of married couples:
  As I have said many times before in this Chamber, the family has been 
and will continue to be the bedrock of American society. Strong 
families make strong communities; strong communities make for a strong 
America. We all agree that this marriage penalty tax treats married 
couples unfairly. Even President Clinton agrees the marriage penalty is 
unfair.
  But our tax policy reflects just the opposite. It discourages 
marriage, punishes married couples, and damages the

[[Page 14440]]

family--the basic institution of our society.
  The Congressional Budget Office reports that 22 million American 
couples suffered from the marriage penalty in 1999. The average penalty 
paid by these couples was $1,500.
  This wasn't always the case. For over half a century--from 1913, when 
Washington first imposed the federal income tax, to 1969--the federal 
income tax treated married couples as well as, or better than, single 
individuals. Since 1996, however, many married couples every year have 
had to pay a penalty just for saying ``I do.'' At the time they 
exchanged their vows, I'll bet most of those couples didn't realize 
they were also saying ``I do'' to Uncle Sam.
  The tax hike of 1993 further aggravated the problem because it added 
new, higher tax rates. In addition, now that a greater number of 
households are dual income, that means that more couples are subject to 
this penalty.
  Mr. President, the consequence of this unjust penalty is devastating. 
It has put an additional financial burden on already overtaxed American 
families. Here is an example of how this penalty hits the average 
American:
  Alicia Jones from my state of Minnesota and her husband graduated 
from college and had just begun working full-time two years ago, in 
professional careers. They had no children and were renting an 
apartment, saving to buy a house. They had to pay at least an 
additional $1,500 for simply being married. As a result, on top of the 
over $10,000 tax they already paid, they had to take an additional $700 
from their limited savings account to pay for federal taxes--taxes that 
they wouldn't have had to pay if they weren't married.
  She wrote, ``I am frustrated by this, I'm frustrated for the future--
how do we get ahead, when each year we have to take money from our 
savings to pay more for our taxes. I hope that you will remember my 
concern.''
  Millions of married couples similarly suffer because of this penalty. 
This is extremely unfair. This was not the intention of Congress when 
it created the marriage penalty tax in the 1960s by separating tax 
schedules for married and unmarried people. This unjust marriage 
penalty also has an adverse social impact, as more and more people 
delay their wedding just for tax purposes. I have an example of that in 
my own office. Research also shows that the marriage penalty has 
discouraged couples from getting married. It has also encouraged some 
married couples to get friendly divorces. They continue to live 
together, but save on their taxes.
  Clearly, this tax policy has interrupted and distorted the normal 
lives of many Americans. It should not be allowed to continue.
  Repealing the marriage penalty will provide immediate, meaningful tax 
relief to American families and allow them to keep $1,500 or more each 
year of their own money to pay for health insurance, groceries, child 
care, or other family necessities.
  In my state of Minnesota alone, over 550,000 couples will benefit 
from this tax relief and will no longer suffer from this unfair tax.
  However, the biggest beneficiaries of the elimination of the marriage 
penalty tax are working women and low-income families.
  Federal tax policy penalizes working women by taxing their income at 
the highest rate imposed on their husbands' income. Our legislation 
addresses this injustice by allowing married working women to keep 
significantly more of their hard-earned money for family needs.
   The elimination of the marriage penalty will primarily benefit 
minority, and low and middle income families. Government data suggest 
the marriage penalty hits African-Americans and lower-income working 
families hardest. Couples at the bottom end of the income scale who 
incur penalties paid an average of nearly $800 in additional taxes, 
which represented 8 percent of their income. Eight percent, Mr. 
President. Repeal the penalty, and those low-income families will 
immediately have an 8 percent increase in their income, larger than for 
all other income levels.
  Despite these facts, some of our colleagues from the other side of 
aisle still call this a ``tax cut for the rich.'' They seem to have 
gotten into the habit, whenever they hear the phrase ``tax relief,'' of 
jumping up and shouting ``tax cut for the rich!'' That's not fair to 
working Americans who are hit hard by these taxes.
  Mr. President, some also argue that marriage penalty tax relief will 
go to those families who already receive marriage bonuses. The argument 
does not fold true either. While about 51 percent, or 25 million 
couples, receive marriage bonuses, this doesn't justify the federal 
government penalizing another 22 million couples just for being married 
or for choosing to work.
  In addition, most of those who receive marriage bonuses are likely to 
receive this due to family-related tax credits, such as the $500 per-
child credit I passed into law to help a family afford raising 
children. It is contradictory to allow married couples to receive these 
credits and then turn around and require them to pay more income taxes 
for receiving the tax credits. We should give more bonuses to all 
American families whether both spouses or only one of them are working.
  More importantly, the trends show that more couples under age 55 are 
working, and the earnings between husbands and wives are more evenly 
divided since 1969. This means more and more couples have received, and 
will continue to receive, marriage penalties and fewer couples will 
have bonuses.
  Another conventional argument of our Democratic colleagues against 
tax relief is that the tax relief costs too much. This is a typical 
Washington way of thinking. They forget the fact that it is the 
taxpayer's, not Washington's, money in the first place.
  Mr. President, it is hard to justify under any circumstances 
continued punishment of married couples in this country regardless of 
the costs. Moreover, in this era of record budget surpluses, the so 
called ``costs'' associated with the repeal of the marriage penalty are 
just a fraction of the tax overpayments made by working Americans. Over 
the next 10 years, the federal government will collect over $1.9 
trillion in tax overpayments from taxpayers, while the total tax relief 
in the reconciliation instruction adopted under the FY 2001 budget 
resolution is merely $150 billion. This is less than 8 cents of every 
dollar of non-Social Security surpluses collected by the government.
  We have also heard some argue that Washington needs tax overpayments 
to save Social Security and Medicare with an addition of prescription 
drug benefits. President Clinton has also said that he will support the 
marriage penalty repeal if prescription drug benefits are added.
  Mr. President, I support saving and strengthening Social Security and 
Medicare, and I support prescription drug benefits for seniors. I have 
my own plan to do that. I support repealing the marriage penalty tax, 
the death tax, and the tax on seniors' retirement benefits. But I 
believe they all should be passed and signed into law on their own 
merits, and shouldn't be traded against each other.
  As a matter of fact, the Administration has never come up with a 
viable plan to save Social Security. It has blocked bipartisan efforts 
to strengthen Medicare, including prescription drug benefits. Now it 
uses this as a cover to deny working Americans the moderate tax refund 
they deserve.
  Mr. President, this is not acceptable.
  I have repeatedly argued that American families today are overtaxed, 
and the surplus comes directly from taxes paid by the American people. 
It is only fair to return it to the taxpayers. With a huge budget 
surplus, we can reduce working Americans' tax burden, pay down the 
national debt, save Social Security, and provide prescription drug 
benefits for seniors--if the Administration and the Congress have the 
political will to do so.
  In closing, Mr. President, the marriage penalty is simply bad tax 
policy and we must end it once and for all to restore equity and 
fairness for working Americans.
  Mr. ASHCROFT. Mr. President, the current tax code is at war with our 
values--the tax code penalizes the basic

[[Page 14441]]

social institution: marriage. The American people know that this is 
unfair--they know it is not right that the code penalizes marriage. Now 
the Senate is prepared to end this long-standing problem.
  25 million American couples pay an average of approximately $1,400 in 
marriage penalty annually as a result of the marriage penalty. Ending 
this penalty gives couples the freedom to make their own choices with 
their money. Couples could use the $1,400 for: retirement, education, 
home, children's needs.
  This bill will also provide needed tax relief to American families--
39 million American married couples, 830,000 in Missouri. Couples like 
Bruce and Kay Morton, from Camdenton, MO, who suffer from this unfair 
penalty. Mr. Morton wrote me a note so simple that even a Senator could 
understand it: ``Please vote yes for the Marriage Tax relief of 2000.''
  Another Missourian, Travis Harms, of Independence, Missouri, wrote to 
tell me that the marriage penalty hits him and his wife, Laura. Mr. 
Harms graciously offered me his services in ending the marriage 
penalty. ``I would like to thank you for your support and effort 
towards the elimination of the unfair `marriage tax.' If there is any 
way I can support or encourage others to help this dream become a 
reality, I would be honored to help.''
  I am grateful to Travis Harms and Bruce Morton for their support. And 
I want to repay them by making sure we end this unfair penalty on 
marriage.
  The marriage penalty places an undue burden on American families. 
According to the Tax Foundation, an American family spends more of 
their family budget on taxes than on health care, food, clothing, and 
shelter combined. The tax bill should not be the biggest bill families 
like the Morton's and Harms' face.
  And families certainly should not be taxed extra because they are 
married. Couples choosing marriage are making the right choice for 
society. It is in our interest to encourage them to make this choice.
  Unfortunately, the marriage penalty discourages this choice. The 
marriage penalty may actually contribute to one of society's most 
serious and enduring problems. There are now twice as many single 
parent households in America than there were when this penalty was 
first enacted.
  In its policies, the government should uphold the basic values that 
give strength and vitality to our culture. Marriage and family are a 
cornerstone of civilization, but are heavily penalized by the federal 
tax system.
  The marriage penalty is so patently unfair no one will defend it. 
Those on the other side of the aisle are making a stab at addressing 
the marriage penalty, even though they are not willing to provide 
relief to all couples who face this unfair penalty. Their bill 
implements a choose or lose system for some couples who are subject to 
the marriage penalty. Their bill phases out marriage penalty relief, 
and does not cover all of the couples who face this unfair penalty.
  This issue, however, is not about income, it's about fairness. It us 
unfair to tax married couples more than single people, no matter what 
their income. The Finance Committee bill provides tax relief to all 
married couples.
  In addition, the Finance Committee bill makes sure that couples do 
not face the risk of differential treatment. Under the minority bill, 
one family with a husband earning $50,000 and a mother staying home 
with her children will pay more in taxes than a family with a combined 
income of $50,000, with the wife and husband each earning $25,000. This 
system creates a disincentive for parents to stay at home with their 
children. The Republican plan will treat all couples equally.
  While the minority bill is flawed, I am encouraged that they are 
finally acknowledging that the marriage penalty is a problem. I am also 
encouraged that President Clinton has also acknowledged the unfair 
nature of the marriage penalty. But unfortunately, Treasury Secretary 
Larry Summers has announced that he would advise the President to veto 
marriage penalty relief.
  I say to the President and to my colleagues on the other side: being 
against the marriage penalty means that you have to be willing to 
eliminate it. You cannot just say you oppose the penalty, and then 
fight to keep the penalty in law, or to keep part of the penalty in law 
for some people. Join us to vote for the elimination of the penalty, 
and let us bring this important tax relief bill to the American people 
together.
  The marriage penalty has endured for too long and harmed too many 
couples. It is time to abolish the prejudice that charges higher taxes 
for being married. It is time to take the tax out of saying ``I do.''

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