text: 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.
target: 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.
feat_title: Budget Surplus Dividend Act of 1998