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H.Doc.104-35 H.R. 872 ...
104th Congress, 1st Session - - - - - - - - - - - - - House Document 104-34 PROPOSED LEGISLATION: ``MIDDLE-CLASS BILL OF RIGHTS TAX RELIEF ACT OF 1995'' __________ MESSAGE FROM THE PRESIDENT OF THE UNITED STATES TRANSMITTING A DRAFT OF PROPOSED LEGISLATION ENTITLED, ``MIDDLE-CLASS BILL OF RIGHTS TAX RELIEF ACT OF 1995'' <GRAPHIC NOT AVAILABLE IN TIFF FORMAT> February 13, 1995.--Message and accompanying papers referred to the Committee on Ways and Means and ordered to be printed. To the Congress of the United States: I am pleased to transmit today for your immediate consideration and enactment the ``Middle-Class Bill of Rights Tax Relief Act of 1995.'' I am also sending you an explanation of the revenue proposals of this legislation. This bill is the next step in my Administration's continuing effort to raise living standards for working families and help restore the American Dream for all our people. For 2 years, we have worked hard to strengthen our economy. We worked with the last Congress to enact legislation that will reduce the annual deficits of the 1994-98 by more than $600 billion; we created nearly 6 million new jobs; we cut taxes for 15 million low-income families and gave tax relief to small businesses; we opened export markets through global and regional trade agreements; we invested in human and physical capital to increase productivity; and we reduced the Federal Government by more than 100,000 positions. With that strong foundation in place, I am now proposing a Middle Class Bill of Rights. Despite our progress, too many Americans are still working harder for less. The Middle Class Bill of Rights will enable working Americans to raise their families and get the education and training they need to meet the demands of a new global economy. It will let middle-income families share in our economic prosperity today and help them build our economic prosperity tomorrow. The ``Middle-Class Bill of Right Tax Relief Act of 1995'' includes three of the four elements of my Middle Class Bill of Rights. First, it offers middle-income families a $500 tax credit for each child under 13. Second, it includes a tax deduction of up to $10,000 a year to help middle-income Americans pay for postsecondary education expenses and training expense. Third, it lets more middle-income Americans make tax- deductible contributions to Individual Retirement Accounts and withdraw from the, penalty-free, for the costs of education and training, health care, first-time home-buying, long periods of unemployment, or the care of an ill parent. The fourth element of my Middle Class Bill of Rights--not included in this legislation--is the GI Bill for America's Workers, which consolidates 70 Federal training programs and creates a more effective system for learning new skills and finding better jobs for adults and youth. Legislation for this proposal is being developed in cooperation with the Congress. If enacted, the Middle Class Bill of Rights will help keep the American Dream alive for everyone willing to take responsibility for themselves, their families, and their futures. And it will not burden our children with more debt. In my fiscal 1996 budget, we have found enough savings not only to pay for this tax bill, but also to provide another $81 billion in deficit reduction between 1996 and 2000. This legislation will restore fairness to our tax system, let middle-income families share in our economic prosperity, encourage Americans to prepare for the future, and help ensure that the United States moves into the 21st Century still the strongest Nation in the world. I urge the Congress to take prompt and favorable action on this legislation. William J. Clinton. The White House, February 13, 1995. A BILL To amend the Internal Revenue Code of 1986 to provide tax relief for the middle class Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE. (a) Short Title.--This Act may be cited as the ``Middle- Class Bill of Rights Tax Relief Act of 1995''. (b) Amendment of 1986 Code.--Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986. (c) Table of Contents.-- Sec. 1. Short title; amendment of 1986 Code. TITLE I--MIDDLE CLASS TAX RELIEF Sec. 101. Credit for families with young children. Sec. 102. Deduction for higher education expenses. TITLE II--PROVISIONS RELATING TO INDIVIDUAL RETIREMENT PLANS Subtitle A--Retirement Savings Incentives PART I--IRA DEDUCTION Sec. 201. Increase in income limitations. Sec. 202. Inflation adjustment for deductible amount and income limitations. Sec. 203. Coordination of IRA deduction limit with elective deferral limit. PART II--NONDEDUCTIBLE TAX-FREE IRA'S Sec. 211. Establishment of nondeductible tax-free individual retirement accounts. Subtitle B--Penalty-Free Distributions Sec. 221. Distributions from certain plans may be used without penalty to purchase first homes, to pay higher education or financially devastating medical expenses, or by the unemployed. Sec. 222. Contributions must be held at least 5 years in certain cases. TITLE I--MIDDLE CLASS TAX RELIEF SEC. 101. CREDIT FOR FAMILIES WITH YOUNG CHILDREN. (a) In General.--Subpart A of part IV of subchapter A of chapter 1 (relating to nonrefundable personal credits) is amended by inserting after section 22 the following new section: ``SEC. 23. FAMILIES WITH YOUNG CHILDREN. ``(a) Allowance of credit.-- ``(1) In General.--In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to $300 multiplied by the number of eligible children of the taxpayer for the taxable year. ``(2) Increase in credit.--In the case of taxable years beginning after December 31, 1998, paragraph (1) shall be applied by substituting `$500' for `$300'. ``(b) Limitations.-- ``(1) Phase-out of credit.-- ``(A) In general.--The amount of the credit allowed under subsection (a) shall be reduced (but not below zero) by the amount determined under subparagraph (B). ``(B) Amount of reduction.--The amount determined under this subparagraph equals the amount which bears the same ratio to the credit (determined without regard to this subsection) as-- ``(i) the excess of-- ``(I) the taxpayer's adjusted gross income for such taxable year, over ``(II) $60,000, bears to ``(ii) $15,000. Any amount determined under this subparagraph which is not a multiple of $10 shall be rounded to the next lowest $10. ``(C) Adjusted gross income.--For purposes of this paragraph, adjusted gross income of any taxpayer shall be increased by any amount excluded from gross income under section 911, 931, or 933. ``(2) Limitation based on amount of tax.--The credit allowed by subsection (a) for the taxable year (after the application of paragraph (1)) shall not exceed the excess (if any) of-- ``(A) the taxpayer's regular tax liability for the taxable year reduced by the credits allowable against such tax under this subpart (other than this section) determined without regard to section 26, over ``(B) the sum of-- ``(i) the taxpayer's tentative minimum tax for such taxable year, plus ``(ii) the credit allowed for the taxable year under section 32. ``(c) Eligible Child.--For purposes of this section, the term `eligible child' means any child (as defined in section 151(c)(3)) of the taxpayer-- ``(1) who has not attained age 13 as of the close of the calendar year in which the taxable year of the taxpayer begins, ``(2) who is a dependent of the taxpayer with respect to whom the taxpayer is allowed a deduction under section 151 for such taxable year, and ``(3) whose TIN is included on the taxpayer's return for such taxable year. ``(d) Inflation Adjustments.--In the case of a taxable year beginning in a calendar year after 1999-- ``(1) In general.--The $500 and $60,000 amounts contained in subsections (a)(2) and (b)(2) shall each be increased by an amount equal to-- ``(A) such dollar amount, multiplied by ``(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting `calendar year 1998' for `calendar year 1992' in subparagraph (B) thereof. ``(2) Increase in phaseout range.--If the amount applicable under subsection (a) for any taxable year exceeds $500, subsection (b)(2)(B) shall be applied by substituting an amount equal to 30 times such applicable amount for `$15,000'. ``(3) Rounding.--If any amount as adjusted under paragraph (1) is not a multiple of $100, such amount shall be rounded to the next lowest multiple of $100. ``(e) Special Rules.-- ``(1) Amount of credit may be determined under tables.--The amount of the credit allowed by this section may be determined under tables prescribed by the Secretary. ``(2) Certain other rules apply.--Rules similar to the rules of subsections (c)(1) (E) and (F), (d), and (e) of section 32 shall apply for purposes of this section.'' (b) Clerical Amendment.--The table of sections for subpart A of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 22 the following new item: ``Sec. 23. Families with young children.'' (c) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 1995. SEC. 102. DEDUCTION FOR HIGHER EDUCATION EXPENSES. (a) Deduction Allowed.--Part VII of subchapter B of chapter 1 (relating to additional itemized deductions for individuals) is amended by redesignating section 220 as section 221 and by inserting after section 219 the following new section: ``SEC. 220. HIGHER EDUCATION TUITION AND FEES. ``(a) Allowance of Deduction.--In the case of an individual, there shall be allowed as a deduction the amount of qualified higher education expenses paid by the taxpayer during the taxable year. ``(b) Limitations.-- ``(1) Dollar limitation.-- ``(A) In general.--The amount allowed as a deduction under subparagraph (a) for any taxable year shall not exceed $10,000. ``(B) Phase-in.--In the case of taxable years beginning in 1996, 1997, or 1998, `$5,000' shall be substituted for `$10,000' in subparagraph (A). ``(2) Limitation based on modified adjusted gross income.-- ``(A) In general.--The amount which would (but for this paragraph) be taken into account under paragraph (1) shall be reduced (but not below zero) by the amount determined under subparagraph (B). ``(B) Amount of reduction.--The amount determined under this subparagraph equals the amount which bears the same ratio to the amount which would be so taken into account as-- ``(i) the excess of-- ``(I) the taxpayer's modified adjusted gross income for such taxable year, over ``(II) $70,000 ($100,000 in the case of a joint return), bears to ``(ii) $20,000. ``(C) Modified adjusted gross income.--The term `modified adjusted gross income' means the adjusted gross income of the taxpayer for the taxable year determined-- ``(i) without regard to this section and sections 911, 931, and 933, and ``(ii) after the application of sections 86, 135, 219 and 469. For purposes of sections 86, 135, 219, and 469,
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