H. Rept. 106-780 - 106th Congress (1999-2000)
July 24, 2000, As Reported by the Ways and Means Committee

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House Report 106-780 - SOCIAL SECURITY BENEFITS TAX RELIEF ACT OF 2000




[House Report 106-780]
[From the U.S. Government Printing Office]



106th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     106-780

======================================================================



 
            SOCIAL SECURITY BENEFITS TAX RELIEF ACT OF 2000

                                _______
                                

 July 24, 2000.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

    Mr. Archer, from the Committee on Ways and Means, submitted the 
                               following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 4865]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Ways and Means, to whom was referred the 
bill (H.R. 4865) to amend the Internal Revenue Code of 1986 to 
repeal the 1993 income tax increase on Social Security 
benefits, having considered the same, report favorably thereon 
with an amendment and recommend that the bill as amended do 
pass.

                                CONTENTS

                                                                   Page
  I. Summary and Background...........................................3
          A. Purpose and Summary.................................     3
          B. Background and Need for Legislation.................     3
          C. Legislative History.................................     3
 II. Explanation of the Bill..........................................4
          A. Repeal of Second-Tier Tax on 85 Percent of Social 
              Security Benefits..................................     4
III. Votes of the Committee...........................................6
 IV. Budget Effects of the Bill.......................................6
          A. Committee Estimates of Budgetary Effects............     6
          B. Budget Authority and Tax Expenditures...............     8
          C. Cost Estimate Prepared by the Congressional Budget 
              Office.............................................     8
  V. Other Matters To Be Discussed Under the Rules of the House.......9
          A. Committee Oversight Findings and Recommendations....     9
          B. Summary of Findings and Recommendations of the 
              Committee on Government Reform and Oversight.......    10
          C. Constitutional Authority Statement..................    10
          D. Information Relating to Unfunded Mandates...........    10
          E. Applicability of House Rule XXI5(b).................    10
          F. Tax Complexity Analysis.............................    10
 VI. Changes in Existing Law Made by the Bill as Reported............11
VII. Dissenting Views................................................15

    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Social Security Benefits Tax Relief 
Act of 2000''.

SEC. 2. REPEAL OF 1993 INCOME TAX INCREASE ON SOCIAL SECURITY BENEFITS.

    (a) Restoration of Prior Law Formula.--Subsection (a) of section 86 
of the Internal Revenue Code of 1986 is amended to read as follows:
    ``(a) In General.--Gross income for the taxable year of any 
taxpayer described in subsection (b) (notwithstanding section 207 of 
the Social Security Act) includes social security benefits in an amount 
equal to the lesser of--
          ``(1) one-half of the social security benefits received 
        during the taxable year, or
          ``(2) one-half of the excess described in subsection 
        (b)(1).''
    (b) Repeal of Adjusted Base Amount.--Subsection (c) of section 86 
of such Code is amended to read as follows:
    ``(c) Base Amount.--For purposes of this section, the term `base 
amount' means--
          ``(1) except as otherwise provided in this subsection, 
        $25,000,
          ``(2) $32,000 in the case of a joint return, and
          ``(3) zero in the case of a taxpayer who--
                  ``(A) is married as of the close of the taxable year 
                (within the meaning of section 7703) but does not file 
                a joint return for such year, and
                  ``(B) does not live apart from his spouse at all 
                times during the taxable year.''
    (c) Conforming Amendments.--
          (1) Subparagraph (A) of section 871(a)(3) of such Code is 
        amended by striking ``85 percent'' and inserting ``50 
        percent''.
          (2)(A) Subparagraph (A) of section 121(e)(1) of the Social 
        Security Amendments of 1983 (Public Law 98-21) is amended--
                  (i) by striking ``(A) There'' and inserting 
                ``There'';
                  (ii) by striking ``(i)'' immediately following 
                ``amounts equivalent to''; and
                  (iii) by striking ``, less (ii)'' and all that 
                follows and inserting a period.
          (B) Paragraph (1) of section 121(e) of such Act is amended by 
        striking subparagraph (B).
          (C) Paragraph (3) of section 121(e) of such Act is amended by 
        striking subparagraph (B) and by redesignating subparagraph (C) 
        as subparagraph (B).
          (D) Paragraph (2) of section 121(e) of such Act is amended in 
        the first sentence by striking ``paragraph (1)(A)'' and 
        inserting ``paragraph (1)''.
    (d) Effective Date.--
          (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        taxable years beginning after December 31, 2000.
          (2) Subsection (c)(1).--The amendment made by subsection 
        (c)(1) shall apply to benefits paid after December 31, 2000.
          (3) Subsection (c)(2).--The amendments made by subsection 
        (c)(2) shall apply to tax liabilities for taxable years 
        beginning after December 31, 2000.

SEC. 3. MAINTENANCE OF TRANSFERS TO HOSPITAL INSURANCE TRUST FUND.

    (a) In General.--There are hereby appropriated to the Hospital 
Insurance Trust Fund established under section 1817 of the Social 
Security Act amounts equal to the reduction in revenues to the Treasury 
by reason of the enactment of this Act. Amounts appropriated by the 
preceding sentence shall be transferred from the general fund at such 
times and in such manner as to replicate to the extent possible the 
transfers which would have occurred to such Trust Fund had this Act not 
been enacted.
    (b) Reports.--The Secretary of the Treasury or the Secretary's 
delegate shall annually report to the Committee on Ways and Means of 
the House of Representatives and the Committee on Finance of the Senate 
the amounts and timing of the transfers under this section.

                       I. SUMMARY AND BACKGROUND


                         A. Purpose and Summary


                                Purpose

    The bill, H.R. 4865, the ``Social Security Benefits Tax 
Relief Act of 2000,'' as amended, provides much needed tax 
relief to recipients of Social Security benefits, while 
maintaining the fiscal integrity of the Medicare Hospital 
Insurance (``HI'') Trust Fund.

                                Summary

    Reduction of tax.--The bill repeals the second-tier tax on 
up to 85 percent of Social Security benefits.1 Thus, 
as under the law in effect prior to the enactment of the 
Revenue Reconciliation Act of 1993 (the ``1993 Act''), no more 
than 50 percent of Social Security benefits are includible in 
gross income. Similarly, in the case of a nonresident 
individual who is not a U.S. citizen, 50 percent of Social 
Security benefits are includible in gross income and subject to 
the applicable withholding tax.
---------------------------------------------------------------------------
    \1\ This provision of the bill also applies to the taxation of 
railroad retirement tier 1 benefits, which are equivalent to Social 
Security benefits.
---------------------------------------------------------------------------
    Trust funds.--An amount equal to the revenues from the 
income taxation of Social Security benefits which would have 
been credited to the HI Trust Fund under the 1993 Act (but for 
this bill) is to be transferred to the HI Trust Fund from the 
general fund in the Treasury at such times and in such manner 
as to replicate the present-law transfers.

                 B. Background and Need for Legislation

    The bill approved by the Committee reflects the need for 
tax relief for recipients of Social Security benefits. The bill 
also maintains the same balance in the HI Trust Fund that would 
have occurred under present law.

                         C. Legislative History


Committee action

    The Committee on Ways and Means marked up the provisions of 
the bill on July 19, 2000, and approved the provisions, as 
amended, on July 19, 2000, by a rollcall vote of 22 yeas and 15 
nays, with a quorum present.

Committee hearings

    The following Committee and Subcommittee hearings related 
to provisions in the bill were held during the 106th Congress.
            Full committee hearings
    Tax-related hearings were held by the full Committee as 
follows:
    
 Reducing the tax burden: Providing tax relief to 
strengthen the family and sustain a strong economy (June 23, 
1999).
            Subcommittee hearings
    The Oversight Subcommittee held tax-related hearings as 
follows:
    
 Impact of complexity in the Tax Code on individual 
taxpayers and small businesses (May 25, 1999).

                      II. EXPLANATION OF THE BILL


A. Repeal of Second-Tier Tax on 85 Percent of Social Security Benefits 
      (Secs. 2 and 3 of the Bill and Secs. 86 and 871 of the Code)


                              Present Law

In general

    Under present law, the amount of Social Security benefits 
that is taxable depends on the taxpayer's income.2 
Social Security benefits are not taxable in the case of a 
married taxpayer filing a joint return with income less than or 
equal to $32,000 ($25,000 in the case of a single taxpayer). Up 
to 50 percent of Social Security benefits are taxable in the 
case of a married taxpayer filing a joint return with income 
over $32,000 but not more than $44,000 (over $25,000 but not 
more than $34,000 for single taxpayers). Up to 85 percent of 
Social Security benefits are taxable in the case of a married 
taxpayer filing a joint return with income over $44,000 (over 
$34,000 in the case of a single taxpayer).3 The tax 
on 85 percent of Social Security benefits (second-tier tax) was 
added by the Revenue Reconciliation Act of 1993 (the ``1993 
Act''), effective for taxable years beginning after December 
31, 1993.
---------------------------------------------------------------------------
    \2\ Similar rules apply to the taxation of railroad retirement tier 
1 benefits.
    \3\ The threshold amount is zero in the case of a taxpayer who is 
married at the end of the year, who files a separate return, and who 
does not live apart from his or her spouse for the entire taxable year.
---------------------------------------------------------------------------
    If a taxpayer's income exceeds the lower threshold but does 
not exceed the second-tier threshold, then the amount of 
taxable Social Security benefits is the lesser of (1) 50 
percent of the taxpayer's Social Security benefits, or (2) 50 
percent of the excess of the taxpayer's income over the lower 
threshold.
    If a taxpayer's income exceeds the second-tier threshold, 
then the amount of taxable Social Security benefits is the 
lesser of: (1) 85 percent of the taxpayer's Social Security 
benefits or (2) the sum of: (a) 85 percent of the excess of the 
taxpayer's income over the second-tier threshold, plus (b) the 
smaller of (i) the amount of benefits that would have been 
included if the 50-percent inclusion rule were applied, or (ii) 
one-half of the difference between the taxpayer's second-tier 
threshold and lower threshold.
    In determining whether a taxpayer's income exceeds the 
threshold amounts described above, income includes adjusted 
gross income (``AGI''), plus one-half of Social Security 
benefits, plus the following nontaxable items: (1) tax-exempt 
interest; (2) interest on education savings bonds; (3) 
employer-provided adoption assistance; (4) deductible student 
loan interest; (5)foreign earned income; and (6) income earned 
in Puerto Rico, Guam, American Samoa, or the Northern Mariana Islands.
    Special rules apply to a nonresident who is not a U.S. 
citizen. In general, such individuals are subject to a 30-
percent withholding tax on income from sources within the 
United States. For purposes of taxing the income of nonresident 
individuals who are not U.S. citizens, the income thresholds 
for including Social Security benefits do not apply. Instead, 
85 percent of Social Security benefits are included in gross 
income and subject to the 30-percent withholding tax. Prior to 
1995, 50 percent of Social Security benefits were subject to 
the withholding tax.4
---------------------------------------------------------------------------
    \4\ The implementing legislation for the General Agreement on 
Tariffs and Trade (P.L. 103-465) increased from 50 percent to 85 
percent the amount of Social Security benefits included in the gross 
income of a nonresident alien individual, effective for benefits paid 
after December 31, 1994, in taxable years ending after such date.
---------------------------------------------------------------------------

Trust funds

    Revenues from the second-tier tax on Social Security 
benefits are credited quarterly to the Medicare Hospital 
Insurance (``HI'') Trust Fund.5
---------------------------------------------------------------------------
    \5\ The remainder of the proceeds from the income taxation of 
Social Security benefits are credited quarterly to the Old-Age and 
Survivors Insurance Trust Fund or the Disability Insurance Trust Fund, 
as appropriate.
---------------------------------------------------------------------------

                           Reasons for Change

    The Committee believes that the provision in the 1993 Act 
that increased the amount of Social Security benefits subject 
to tax resulted in complex and burdensome taxation of certain 
senior citizens. The rationale of the 1993 Act provision was to 
more closely conform the income tax treatment of Social 
Security benefits and private pension benefits. The Committee 
believes this rationale is flawed and does not merit 
continuation of the second-tier tax because Social Security is 
a social insurance program, not a retirement benefit. 
Furthermore, the Committee believes that the second-tier tax on 
Social Security benefits is a disincentive to earnings, 
savings, and investment by certain Social Security recipients. 
Finally, the Committee believes that budget surpluses eliminate 
the need for the provision in the 1993 Act which was enacted to 
reduce the federal budget deficit. For these reasons, the 
Committee believes that repeal of the 1993 Act provision is 
necessary to restore equity.

                        Explanation of Provision

Reduction of tax

    The bill repeals the second-tier tax on up to 85 percent of 
Social Security benefits.6 Thus, as under the law in 
effect prior to the 1993 Act, no more than 50 percent of Social 
Security benefits are includible in gross income. Similarly, in 
the case of a nonresident individual who is not a U.S. citizen, 
50 percent of Social Security benefits are includible in gross 
income and subject to the withholding tax.
---------------------------------------------------------------------------
    \6\ This provision of the bill also applies to the taxation of 
railroad retirement tier 1 benefits.
---------------------------------------------------------------------------

Trust funds

    An amount equal to the revenues from the second-tier tax on 
Social Security benefits which would have been credited to the 
HI Trust Fund under the 1993 Act (but for this bill) is 
transferred to the HI Trust Fund from the general fund in the 
Treasury at such times and in such manner as to replicate the 
present-law transfers. The Secretary of the Treasury or his 
delegate is also required to make an annual report to the House 
Committee on Ways and Means and the Senate Committee on Finance 
regarding the amount and timing of such transfers.

                             Effective Date

    The bill is generally effective for taxable years beginning 
after December 31, 2000. The reduction in the taxation of 
Social Security benefits and the amount of such benefits 
applicable to nonresident individuals who are not U.S. citizens 
is effective for benefits paid after December 31, 2000.

                      III. VOTES OF THE COMMITTEE

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the following statements are made 
concerning the votes of the Committee on Ways and Means in its 
consideration of the bill, H.R. 4865.

                       motion to report the bill

    The bill, H.R. 4865, as amended, was ordered favorably 
reported by a rollcall vote of 22 yeas to 15 nays (with a 
quorum being present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
        Representatives             Yea       Nay     Present    Representatives      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Archer.....................        X   ........  .........  Mr. Rangel.......  ........        X   .........
Mr. Crane......................        X   ........  .........  Mr. Stark........  ........        X   .........
Mr. Thomas.....................        X   ........  .........  Mr. Matsui.......  ........        X   .........
Mr. Shaw.......................        X   ........  .........  Mr. Coyne........  ........        X   .........
Mrs. Johnson...................        X   ........  .........  Mr. Levin........  ........        X   .........
Mr. Houghton...................        X   ........  .........  Mr. Cardin.......  ........        X   .........
Mr. Herger.....................  ........  ........  .........  Mr. McDermott....  ........        X   .........
Mr. McCrery....................        X   ........  .........  Mr. Kleczka......        X   ........  .........
Mr. Camp.......................        X   ........  .........  Mr. Lewis (GA)...  ........        X   .........
Mr. Ramstad....................        X   ........  .........  Mr. Neal.........  ........        X   .........
Mr. Nussle.....................        X   ........  .........  Mr. McNulty......  ........        X   .........
Mr. Johnson....................        X   ........  .........  Mr. Jefferson....  ........        X   .........
Ms. Dunn.......................        X   ........  .........  Mr. Tanner.......  ........        X   .........
Mr. Collins....................        X   ........  .........  Mr. Becerra......  ........        X   .........
Mr. Portman....................  ........  ........  .........  Mrs. Thurman.....  ........        X   .........
Mr. English....................        X   ........  .........  Mr. Doggett......  ........        X   .........
Mr. Watkins....................        X   ........  .........  .................
Mr. Hayworth...................        X   ........  .........
Mr. Weller.....................        X   ........  .........
Mr. Hulshof....................        X   ........  .........
Mr. McInnis....................        X   ........  .........
Mr. Lewis (KY).................        X   ........  .........
Mr. Foley......................        X   ........  .........  .................
----------------------------------------------------------------------------------------------------------------

                     IV. BUDGET EFFECTS OF THE BILL


               A. Committee Estimate of Budgetary Effects

    In compliance with clause 3(d)(2) of rule XIII of the Rules 
of the House of Representatives, the following statement is 
made concerning the effects on the budget of the revenue 
provisions of the bill, H. R. 4865, as reported.
    The bill is estimated to have the following effects on 
budget receipts for fiscal years 2001-2005:

     ESTIMATED BUDGET EFFECTS OF H.R. 4865, THE ``SOCIAL SECURITY BENEFITS TAX RELIEF ACT OF 2000,'' AS REPORTED BY THE COMMITTEE ON WAYS AND MEANS
                                                    [Fiscal years 2001-2005, in millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                    Provision                                    Effective                   2001      2002      2003       2004       2005     2001-05
--------------------------------------------------------------------------------------------------------------------------------------------------------
Repeal the 85% Second Tier Taxation of Social     tyba 12/31/00..........................    -3,584    -9,149     9,816    -10,609    -11,499    -44,657
 Security and Railroad Retirement Benefits.\1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ The bill provides for appropriations from the general fund to the Hospital Insurance (``HI'') Trust Fund to replace lost revenues.

Legend for ``Effective'' column: tyba=taxable years beginning after.

Note.--Details may not add to totals due to rounding.
Source: Joint Committee on Taxation.

    B. Statement Regarding New Budget Authority and Tax Expenditures


Budget authority

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
bill involves no new or increased budget authority.

Tax expenditures

    In compliance with clause 2(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
revenue-reducing income tax provisions involve increased tax 
expenditures. (See amounts in table in Part IV.A., above.)

      C. Cost Estimate Prepared by the Congressional Budget Office

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, requiring a cost estimate 
prepared by the Congressional Budget Office (``CBO''), the 
following statement by CBO is provided.

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 21, 2000.
Hon. Bill Archer,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 4865, the Social 
Security Benefits Tax Relief Act of 2000.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Hester 
Grippando and Erin Whitaker.
            Sincerely,
                                           Steven Lieberman
                                    (For Dan L. Crippen, Director).
    Enclosure.

H.R. 4865--Social Security Benefits Tax Relief Act of 2000

    Summary: Under current law, up to 50 percent of Social 
Security and Railroad Retirement benefits are subject to 
taxation in the case of married taxpayers filing a joint return 
with certain income above $32,000 (or $25,000 for single 
taxpayers). Up to 85 percent of benefits received by married 
taxpayers filing a joint return with certain income exceeding 
$44,000 (or $34,000 for single taxpayers) are subject to 
taxation. H.R. 4865 would repeal the 85-percent (second tier) 
taxation of Social Security and Railroad Retirement benefits, 
thereby reducing the proportion of benefits subject to taxation 
at all incomes above $32,000 for married taxpayers filing a 
joint return and above $25,000 for single taxpayers. In 
addition, the bill provides appropriations from the general 
fund to the Hospital Insurance Trust Fund to replace lost 
revenues. The bill would take effect in the first taxable year 
after December 31, 2000.
    The Joint Committee on Taxation (JCT) estimates that this 
bill would reduce governmental receipts (revenues) from 
personal income taxes by $4 billion in fiscal year 2001, $45 
billion over the 2001-2005 period, and $117 billion over the 
2001-2010 period. Because the bill would affect governmental 
receipts, pay-as-you-go procedures would apply.
    H.R. 4865 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA).
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 4865 is shown in the following table.

----------------------------------------------------------------------------------------------------------------
                                                                  By fiscal year, in millions of dollars--
                                                          ------------------------------------------------------
                                                              2001       2002       2003       2004       2005
----------------------------------------------------------------------------------------------------------------
                                               CHANGES IN REVENUES

Estimated Revenues.......................................     -3,584     -9,149     -9,816    -10,609    -11,499
----------------------------------------------------------------------------------------------------------------

    Basis of estimate: All estimates were provided by JCT. 
Under current law, the revenues affected by the bill are 
credited to Medicare's Hospital Insurance Trust Fund. The bill 
would maintain those intragovernmental transfers, which would 
have no net effect on the budget.
    Pay-as-you-go considerations: The Balanced Budget and 
Emergency Deficit Control Act sets up pay-as-you-go procedures 
for legislation affecting direct spending or receipts. The net 
changes in outlays and governmental receipts that are subject 
to pay-as-you-go procedures are shown in the following table. 
For the purposes of enforcing pay-as-you-go procedures, only 
the effects in the current year, the budget year, and the 
succeeding four years are counted.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         By fiscal year, in millions of dollars--
                                 -----------------------------------------------------------------------------------------------------------------------
                                   2000     2001       2002       2003       2004       2005       2006       2007       2008        2009        2010
--------------------------------------------------------------------------------------------------------------------------------------------------------
Changes in outlays..............                                                       not applicable
Changes in receipts.............      0     -3,584     -9,149     -9,816    -10,609    -11,499    -12,433    -13,397     -14,445     -15,590     -16,286
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Intergovernmental and private-sector impact: JCT has 
determined that H.R. 4865 contains no intergovernmental or 
private-sector mandates as defined in UMRA.
    Estimate prepared by: Hester Grippando and Erin Whitaker.
    Estimate approved by: G. Thomas Woodward, Assistant 
Director for Tax Analysis. Robert A. Sunshine, Assistant 
Director for Budget Analysis.

     V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE


          A. Committee Oversight Findings and Recommendations

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives (relating to oversight findings), 
the Committee advises that it was a result of the Committee's 
oversight review concerning the tax burden on individual 
taxpayers that the Committee concluded that it is appropriate 
and timely to enact the revenue provisions included in the bill 
as reported.

    B. Summary of Findings and Recommendations of the Committee on 
                           Government Reform

    With respect to clause 3(c)(4) of rule XII of the Rules of 
the House of Representatives, the Committee advises that no 
oversight findings or recommendations have been submitted to 
this Committee by the Committee on Government Reform with 
respect to the provisions contained in the bill.

                 C. Constitutional Authority Statement

    With respect to clause 3(d)(1) of rule XIII of the Rules of 
the House of Representatives (relating to Constitutional 
Authority), the Committee states that the Committee's action in 
reporting this bill is derived from Article I of the 
Constitution, Section 8 (``The Congress shall have Power To lay 
and collect Taxes, Duties, Imposts and Excises * * *''), and 
from the 16th Amendment to the Constitution.

              D. Information Relating to Unfunded Mandates

    This information is provided in accordance with section 423 
of the Unfunded Mandates Act of 1995 (P.L. 104-4).
    The Committee has determined that the bill does not contain 
Federal mandates on the private sector. The Committee has 
determined that the bill does not impose a Federal 
intergovernmental mandate on State, local, or tribal 
governments.

                 E. Applicability of House Rule XXI5(b)

    Rule XXI5(b) of the Rules of the House of Representatives 
provides, in part, that ``No bill or joint resolution, 
amendment, or conference report carrying a Federal income tax 
rate increase shall be considered as passed or agreed to unless 
determined by a vote of not less than three-fifths of the 
Members.'' The Committee has carefully reviewed the provisions 
of the bill, and states that the provisions of the bill do not 
involve any Federal income tax rate increase within the meaning 
of the rule.

                       F. Tax Complexity Analysis

    Section 4022(b) of the Internal Revenue Service Reform and 
Restructuring Act of 1998 (the ``IRS Reform Act'') requires the 
Joint Committee on Taxation (in consultation with the Internal 
Revenue Service and the Department of the Treasury) to provide 
a tax complexity analysis. The complexity analysis is required 
for all legislation reported by the House Committee on Ways and 
Means, the Senate Committee on Finance, or any committee of 
conference if the legislation includes a provision that 
directly or indirectly amends the Internal Revenue Code and has 
widespread applicability to individuals or small businesses.
    The staff of the Joint Committee on Taxation has determined 
that a complexity analysis is not required under section 
4022(b) of the IRS Reform Act because the bill contains no 
provisions that amend the Internal Revenue Code and that have 
``widespread applicability'' to individuals or small 
businesses.

       VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                     INTERNAL REVENUE CODE OF 1986

Subtitle A--Income Taxes

           *       *       *       *       *       *       *


CHAPTER 1--NORMAL TAXES AND SURTAXES

           *       *       *       *       *       *       *


Subchapter B--Computation of Taxable Income

           *       *       *       *       *       *       *


PART II--ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME

           *       *       *       *       *       *       *


SEC. 86. SOCIAL SECURITY AND TIER 1 RAILROAD RETIREMENT BENEFITS.

  [(a) In General.--
          [(1) In general.--Except as provided in paragraph 
        (2), gross income for the taxable year of any taxpayer 
        described in subsection (b) (notwithstanding section 
        207 of the Social Security Act) includes social 
        security benefits in an amount equal to the lesser of--
                  [(A) one-half of the social security benefits 
                received during the taxable year, or
                  [(B) one-half of the excess described in 
                subsection (b)(1).
          [(2) Additional amount.--In the case of a taxpayer 
        with respect to whom the amount determined under 
        subsection (b)(1)(A) exceeds the adjusted base amount, 
        the amount included in gross income under this section 
        shall be equal to the lesser of--
                  [(A) the sum of--
                          [(i) 85 percent of such excess, plus
                          [(ii) the lesser of the amount 
                        determined under paragraph (1) or an 
                        amount equal to one-half of the 
                        difference between the adjusted base 
                        amount and the base amount of the 
                        taxpayer, or
                  [(B) 85 percent of the social security 
                benefits received during the taxable year.]
  (a) In General.--Gross income for the taxable year of any 
taxpayer described in subsection (b) (notwithstanding section 
207 of the Social Security Act) includes social security 
benefits in an amount equal to the lesser of--
          (1) one-half of the social security benefits received 
        during the taxable year, or
          (2) one-half of the excess described in subsection 
        (b)(1).

           *       *       *       *       *       *       *

  [(c) Base Amount and Adjusted Base amount.--For purposes of 
this section--
          [(1) Base amount.--
  The term ``base amount'' means--
                  [(A) except as otherwise provided in this 
                paragraph, $25,000,
                  [(B) $32,000 in the case of a joint return, 
                and
                  [(C) zero in the case of a taxpayer who--
                          [(i) is married as of the close of 
                        the taxable year (within the meaning of 
                        section 7703) but does not file a joint 
                        return for such year, and
                          [(ii) does not live apart from his 
                        spouse at all times during the taxable 
                        year.
          [(2) Adjusted base amount.--The term ``adjusted base 
        amount'' means--
                  [(A) except as otherwise provided in this 
                paragraph, $34,000,
                  [(B) $44,000 in the case of a joint return, 
                and
                  [(C) zero in the case of a taxpayer described 
                in paragraph (1)(C).]
  (c) Base Amount.--For purposes of this section, the term 
``base amount'' means--
          (1) except as otherwise provided in this subsection, 
        $25,000,
          (2) $32,000 in the case of a joint return, and
          (3) zero in the case of a taxpayer who--
                  (A) is married as of the close of the taxable 
                year (within the meaning of section 7703) but 
                does not file a joint return for such year, and
                  (B) does not live apart from his spouse at 
                all times during the taxable year.

           *       *       *       *       *       *       *


 Subchapter N--Tax Based on Income From Sources Within or Without the 
United States

           *       *       *       *       *       *       *


PART II--NONRESIDENT ALIENS AND FOREIGN CORPORATIONS

           *       *       *       *       *       *       *


Subpart A--Nonresident Alien Individuals

           *       *       *       *       *       *       *


SEC. 871. TAX ON NONRESIDENT ALIEN INDIVIDUALS

  (a) Income not connected with United States business--30 
percent tax
          (1) * * *

           *       *       *       *       *       *       *

          (3) Taxation of social security benefits.--For 
        purposes of this section and section 1441--
                  (A) [85] 50 percent of any social security 
                benefit (as defined in section 86(d) shall be 
                included in gross income (notwithstanding 
                section 207 of the Social Security Act), and

           *       *       *       *       *       *       *

                              ----------                              


         SECTION 121 OF THE SOCIAL SECURITY AMENDMENTS OF 1983

SEC. 121. TAXATION OF SOCIAL SECURITY AND TIER 1 RAILROAD RETIREMENT 
                    BENEFITS.

  (a)  * * *

           *       *       *       *       *       *       *

  (e) Transfers to Trust Funds.--
          (1) In general.--
                  [(A) There] There are hereby appropriated to 
                each payor fund amounts equivalent to [(i)] the 
                aggregate increase in tax liabilities under 
                chapter 1 of the Internal Revenue Code of 1986 
                which is attributable to the applications of 
                sections 86 and 871(a)(3) of such Code (as 
                added by this section) to payments from such 
                payor fund[, less (ii) the amounts equivalent 
                to the aggregate increase in tax liabilities 
                under chapter 1 of the Internal Revenue Code of 
                1986 which is attributable to the amendments to 
                section 86 of such Code made by section 13215 
                of the Revenue Reconciliation Act of 1993].
                  [(B) There are hereby appropriated to the 
                hospital insurance trust fund amounts equal to 
                the increase in tax liabilities described in 
                subparagraph (A)(ii). Such appropriated amounts 
                shall be transferred from the general fund of 
                the Treasury on the basis of estimates of such 
                tax liabilities made by the Secretary of the 
                Treasury. Transfers shall be made pursuant to a 
                schedule made by the Secretary of the Treasury 
                that takes into account estimated timing of 
                collection of such liabilities.]
          (2) Transfers.--The amounts appropriated by paragraph 
        (1)[(A)] to any payor fund shall be transferred from 
        time to time (but not less frequently than quarterly) 
        from the general fund of the Treasury on the basis of 
        estimates made by the Secretary of the Treasury of the 
        amounts referred to in such paragraph. Any such 
        quarterly payment shall be made on the first day of 
        such quarter and shall take into account social 
        security benefits estimated to be received during such 
        quarter. Proper adjustments shall be made in the 
        amounts subsequently transferred to the extent prior 
        estimates were in excess of or less than the amounts 
        required to be transferred.
          (3) Definitions.--For purposes of this subsection--
                  (A) Payor fund.--The term ``payor fund'' 
                means any trust fund or account from which 
                payments of social security benefits are made.
                  [(B) Hospital insurance trust fund.--The term 
                ``hospital insurance trust fund'' means the 
                fund established pursuant to section 1817 of 
                the Social Security Act.]
                  [(C)] (B) Social security benefits.--The term 
                ``social security benefits'' has the meaning 
                given such term by section 86(d)(1) of the 
                Internal Revenue Code of 1954.

           *       *       *       *       *       *       *


                         VII. DISSENTING VIEWS

    We, the undersigned members oppose the bill, H.R. 4865, as 
reported by the Committee on Ways and Means on May 19, 2000, 
and respectfully submit these dissenting views.
    We believe H.R. 4865 is part of the Republican strategy to 
enact, in pieces, their vetoed $792 billion tax bill. That 
strategy is designed to hide the overall cost of the Republican 
tax program and to divert attention from this Congress' failure 
to address the priorities of the American public--saving Social 
Security and Medicare, paying down the national debt, and 
providing a Medicare prescription drug benefit.
    Like all of the other tax cuts they have passed this year, 
this tax cut is being pushed through without any consideration 
of the overall budgetary consequences. The fact is that, based 
on actual legislation, the Republican tax agenda so far adds up 
to more than $900 billion over 10 years (including debt 
service). This amount does not include candidate Bush's 
additional proposed tax cuts or the Archer-Shaw Social Security 
plan which would reduce surpluses by more than a trillion 
dollars. Republicans also say that they are for Social Security 
and Medicare lock boxes that reserve these trust fund 
surpluses. Simultaneously, their appropriations spending has 
gone up at 5.9 percent per year for the last two years. And 
they say they are for a prescription drug benefit.
    The projected budget surpluses may seem large but they are 
more than used up by all of these Republican promises. 
Furthermore, these surpluses are based on projections that are 
more and more uncertain as they extend for 10 years into the 
unpredictable future. Under the circumstances, the Republican 
tax agenda is irresponsible because it forces indefinite 
postponement of so many other pressing priorities. Now, the 
Republicans want America to take a particular big risk by 
shutting off guaranteed Medicare funding without an overall 
plan to strengthen Social Security and Medicare and pay down 
the debt.
    The bill as reported would repeal the provision enacted in 
1993 that increased the portion of Social Security benefits 
included in income from 50 percent to 85 percent for upper-
income retired individuals. The 85 percent inclusion rule is 
approximately the same amount that would be included in income 
if the Social Security benefit were a private employer 
retirement benefit and if the employee made contributions for 
the benefit equal to the employee's share of the payroll tax. 
Approximately 20 percent of elderly individuals are subject to 
the 85 percent inclusion rule.
    At first glance, H.R. 4865 may appear to be a 
straightforward tax cut for some Social Security beneficiaries. 
However, after a full examination including extensive 
questioning of experts from both the Administration and the 
Joint Committee on Taxation, we have serious concerns about the 
effects of the bill on Medicare financing. Specifically, H.R. 
4865 would threaten the Medicare Trust Fund by eliminating a 
dedicated tax source and replacing it with a promise to make 
payments to Medicare from the General Fund.
    The size of the promise is enormous, totaling $13.7 
trillion over the 75-year period used to measure long-term 
Medicare solvency. If all of the Republicans tax cuts already 
passed were to be signed into law, there would be insufficient 
General Fund resources available to fund those promises. 
Furthermore, since the Republican leadership already has backed 
a budget that breaks the so-called Medicare lock-box, we are 
compelled to approach these promises with intense skepticism.
    By depriving Medicare of this dedicated tax, H.R. 4865 
would create a massive unfunded promise estimated (by the 
Medicare actuaries) at roughly $13.7 trillion over the next 75 
years. Five years would be stripped off the life of the trust 
fund immediately with no guarantee that Congress will find the 
funds needed to make up the shortfall by cutting elsewhere in 
the budget or curtailing other tax cuts.
    Ironically, when Democrats proposed strengthening Social 
Security by supplementing automatic payroll tax transfers with 
some of the money saved, due to lower interest payments on the 
debt, the Republicans criticized such ``general revenue 
transfers.'' Now, the sponsors of H.R. 4865 are asking the 
American people to accept a scheme where they replace a vital 
source of Medicare financing with a promise that they will 
support future general revenue transfers to Medicare.
    Some wrongly have stated that the fiscal crisis which 
resulted in the 1993 legislation has fully passed. We do affirm 
that the Congress and the President acted responsibly in 1993 
to reduce deficits and turn them into the large budget 
surpluses we have today. However, the revenue lost in H.R. 4865 
does not reduce General Fund deficits or increase General Fund 
surpluses; it is devoted specifically to the Medicare Hospital 
Insurance Trust Fund. Enacting H.R. 4865 would remove this 
dedicated revenue stream.
    Although Medicare financing is secure in the short run, its 
long-term financing must be strengthened. Congress should be 
acting to increase the strength of the Medicare Trust Fund, not 
weaken it and put the future of Medicare in doubt. Yet, H.R. 
4865 would gamble with Medicare's finances at the worst time, 
when the imminent retirement of the baby-boom generation will 
cause the number of people using Medicare to double, from 40 
million to 80 million, between now and 2030.
    Only the top-earning one-fifth of Social Security 
beneficiaries would get any benefit from this bill. This 
regressive distribution of the benefits from the Chairman's 
bill is consistent with the generous treatment of wealthy 
taxpayers in the other Republican tax bills. According to the 
Treasury Department, approximately 50 percent of the tax 
benefits passed by the House this year would go to the 
wealthiest 5 percent of households. The other 95 percent of 
household would share the other 50 percent.
    We are not blind to the election-year politics surrounding 
H.R. 4865. By presenting members with a tax cut for some senior 
citizens, the Republican leadership intentionally may be 
placing members in the awkward situation of choosing whether to 
be perceived as opposing a tax cut for some seniors or risking 
the financing of Medicare for seniors. We strongly support tax 
cuts that are fiscally responsible and are targeted to help 
lower- and middle-income families, and not mainly the very 
wealthy.
    Moreover, this Congress must pass a true Medicare 
prescription drug benefit to make vital medications more 
affordable for all senors. H.R. 4865 is an attempt to distract 
seniors from the House Republican leadership's unwillingness to 
enact a bipartisan Medicare prescription drug plan or pass 
legislation to strengthen Social Security and Medicare.
    Like a kind of Trojan Horse, the bill may appear as a gift 
for seniors, but it is far more dangerous for all seniors than 
it is beneficial to some. If it is possible to replace the 
revenue stream cut off by H.R. 4865, then legislation should be 
possible that builds up the life of Medicare and improves 
Medicare benefits. We believe Congress's priority should be to 
develop such legislation benefitting all seniors. H.R. 4865 
cuts taxes for some while refusing to provide all elderly 
individuals with a true Medicare prescription drug benefit. The 
Republican bill uses $100 billion over 10 years that could be 
used to extend Medicare solvency or offset Medicare reductions 
made in 1997.
    While we might be assured by our Republican colleagues on 
the Committee on Ways and means that they intend to make 
Medicare whole after the loss of this dedicated revenue stream, 
we also must not forget the history of Republican attitudes 
toward Medicare. Former Senate Majority Leader and Republican 
nominee for President Robert Dole admitted, ``I was there, 
fighting the fight, one of twelve, voting against Medicare in 
1965 because we knew it wouldn't work.'' Former Speaker Newt 
Gingrich once pledged the would let Medicare ``wither on the 
vine.'' Majority Leader Richard Armey once called Medicare, ``a 
program I would have no part of in a free world.''
    With statements like these from Republican leaders, we must 
be skeptical of Republican pledges. We believe that as Members 
of Congress, it is our duty to strengthen and secure the 
Medicare and Social Security programs that have been entrusted 
to us, for current beneficiaries and for future beneficiaries. 
We therefore oppose the Committee action to report H.R. 4865.

                                   Sander M. Levin.
                                   Ben Cardin.
                                   William J. Coyne.
                                   Xavier Becerra.
                                   Jim McDermott.
                                   Karen L. Thurman.
                                   John S. Tanner.
                                   Charles B. Rangel.
                                   Robert T. Matsui.
                                   Pete Stark.
                                   John Lewis.
                                   Richard E. Neal.
                                   William J. Jefferson.
                                   Lloyd Doggett.