article: SECTION 1. SHORT TITLE. This Act may be cited as the ``Budget Surplus Dividend Act of 1998''. SEC. 2. 33\1/3\ PERCENT OF FEDERAL BUDGET SURPLUS TO REIMBURSE EMPLOYERS AND EMPLOYEES FOR A PORTION OF THEIR SOCIAL SECURITY TAXES. (a) In General.--Subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to refundable credits) is amended by redesignating section 35 as section 36 and by inserting after section 34 the following new section: ``SEC. 35. CREDIT FOR PORTION OF SOCIAL SECURITY TAXES. ``(a) Allowance of Credit.--In the case of a taxable year to which this section applies, there shall be allowed as a credit against the tax imposed by this subtitle for the taxable year an amount equal to the applicable percentage of the taxpayer's social security taxes for the taxable year. ``(b) Taxable Years to Which Section Applies.-- ``(1) In general.--Except as provided by paragraph (2), this section shall apply to any taxable year beginning in the first calendar year beginning after a fiscal year if there is a Federal budget surplus for such fiscal year of more than $1,000,000,000. ``(2) Social security trust funds required to be solvent before credit allowed.--This section shall not apply to any taxable year beginning before the date on which the Board of Trustees of the Federal Old Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund makes the solvency determination described in section 5 of the Budget Surplus Dividend Act of 1998. ``(c) Applicable Percentage.--For purposes of this section-- ``(1) In general.--The term `applicable percentage' means-- ``(A) the base percentage with respect to so much of the taxpayer's social security taxes as does not exceed $3,000, and ``(B) the phasedown percentage with respect to so much of the taxpayer's social security taxes as exceeds $3,000. ``(2) Base percentage.--The term `base percentage' means, for taxable years beginning in a calendar year, the percentage which the Secretary estimates will result in a reduction of revenues to the Treasury by reason of this section for such taxable year equal to 33\1/3\ percent of the Federal budget surplus for the most recent fiscal year ending before such calendar year. Proper adjustments shall be made in the percentage determined under the preceding sentence with respect to any subsequent fiscal year to the extent that prior estimates were in excess of or less than the proper percentage. ``(3) Phasedown percentage.--The term `phasedown percentage' means the base percentage reduced (but not below zero) by the number of percentage points which bears the same ratio to the base percentage as-- ``(A) the excess of the taxpayer's social security taxes over $3,000 bears to ``(B) the excess of the maximum social security taxes over $3,000. ``(4) Maximum social security taxes.--The term `maximum social security taxes' means the amount which would be the social security taxes of the taxpayer if the amount on which such taxes are determined were equal to the maximum amount of remuneration which may be taken into account under section 3101(a). ``(5) Special rules.-- ``(A) Dollar limitations on per employee basis.-- The dollar limitations in paragraphs (1) and (3) shall be applied on a per employee basis. ``(B) Self-employed individuals.--Paragraphs (1) and (3) shall be applied by substituting `$6,000' for `$3,000' each place it appears in the case of the taxes referred to in subparagraph (C) or (D) of subsection (d)(1). ``(d) Social Security Taxes.--For purposes of this section-- ``(1) In general.--The term `social security taxes' means, with respect to any taxpayer for any taxable year-- ``(A) the taxes imposed by sections 3101 and 3201(a) (relating to taxes on employees) on amounts received by the taxpayer during the calendar year in which the taxable year begins, ``(B) the taxes imposed by sections 3111 and 3221(a) (relating to taxes on employers) on amounts paid by the taxpayer during the calendar year in which the taxable year begins, ``(C) the taxes imposed by section 1401 on the self-employment income of the taxpayer for the taxable year, and ``(D) the taxes imposed by section 3211(a)(1) on amounts received by the taxpayer during the calendar year in which the taxable year begins. ``(2) Coordination with special refund of social security taxes.--The term `social security taxes' shall not include any taxes to the extent the taxpayer is entitled to a special refund of such taxes under section 6413(c). ``(3) Special rule.--Any amounts paid pursuant to an agreement under section 3121(l) (relating to agreements entered into by American employers with respect to foreign affiliates) which are equivalent to the taxes referred to in paragraph (1)(A) shall be treated as taxes referred to in such paragraph.'' (b) Clerical Amendment.--The table of sections for subpart C of part IV of subchapter A of chapter 1 of such Code is amended by striking the item relating to section 35 and inserting the following: ``Sec. 35. Credit for portion of social security taxes. ``Sec. 36. Overpayments of tax.'' SEC. 3. APPROPRIATION TO USE 33\1/3\ PERCENT OF FEDERAL BUDGET SURPLUS TO REDUCE OUTSTANDING PUBLIC DEBT. There is hereby appropriated for the first fiscal year following each fiscal year (beginning after this Act takes effect) for which there is a Federal budget surplus an amount equal to 33\1/3\ percent of such surplus for purpose of paying at maturity, or to redeem or buy before maturity, obligations of the Government included in the public debt. An obligation of the Government that is paid, redeemed, or bought with funds appropriated by the preceding sentence shall be canceled and retired and may not be reissued. SEC. 4. USE 33\1/3\ PERCENT OF FEDERAL BUDGET SURPLUS TO INCREASE NONDEFENSE DISCRETIONARY SPENDING LIMITS. For the first fiscal year following each fiscal year (beginning after this Act takes effect) for which there is a Federal budget surplus, the Director of the Office of Management and Budget shall increase (on a pro rata basis between the applicable nondefense categories for that fiscal year) the discretionary spending limit for new budget authority under section 251(c) of the Balanced Budget and Emergency Deficit Control Act of 1985 by an amount equal to 33\1/3\ percent of such surplus and shall adjust the outlays flowing from that budget authority accordingly. SEC. 5. EFFECTIVE DATE BASED ON SOLVENCY OF SOCIAL SECURITY TRUST FUNDS. This Act and the amendments made by this Act shall take effect on the date on which the Board of Trustees of the Federal Old Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund determines (using intermediate assumptions) that both the Federal Old Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund are in close actuarial balance through the year 2070. Such determination shall be included in the first annual report of such Board made after such determination is made.
summary: Budget Surplus Dividend Act of 1998 - Amends the Internal Revenue Code to allow, upon a specified determination of budgetary surplus, a credit equal to a certain percentage of a taxpayer's annual social security taxes. Provides for the use of budgetary surplus to reduce public debt and increase nondefense discretionary spending.