producing such income and by reasonable allowance for the decrease in property used in connection with the income. It covers all income that would otherwise be tax exempt, like interest on State and local bonds, accelerated cost recovery system depreciation deductions, and deductions for oil depletion and intangible drilling costs, but only if the income above the exemption amount makes use of such deductions.

The exemption covers $40,000 for joint returns, $30,000 for unmarried individuals, $20,000 for married individuals, and $10,000 for corporations. Only incomes over these amounts would be covered by the 10-percent tax.

Without unfairly raising anyone's taxes, H.R. 18 would bring in substantial amounts of revenue. Over the next 5 years, from fiscal year 1986 to fiscal year 1990, I am advised that this bill could bring in over $125 billion in the course of 5 years. This would be an important contribution to reducing the Federal deficit while maintaining a healthy national economy and achieving greater fairness in the Tax Code.

H.R. 18 is the kind of tax reform we need. It will eliminate exploitation of loopholes and put fairness back in the Tax Code. It does not attempt the politically impossible task of ending all deductions, but only requires that the person or company pay at least a 10-percent tax on income above the generous level set by the statute. This bill will bring much needed revenue into the Treasury without placing an undue burden on any taxpayer.

Maybe more extensive reforms that H.R. 18 can be passed in this Congress, but the President's proposal as now drafted is not fair and will also add significantly to the deficit. It is slanted to shift the tax burden from the rich to the middle income brackets which already provide most of our taxes. Maybe it can be amended to improve it; but, in any event, I urge you to pass H.R. 18 as a separate bill.

It should not be defeated because of its attachment to an unfair tax reform bill.

H.R. 18 is fair. It will bring in substantial income. It can be enacted. None of these things can be said with any certainty about the administration's bill as now drafted. I urge you to approve H.R. 18 and send it to the House for passage.

[The bill H.R. 18 follows:]

To amend the Internal Revenue Code of 1954 to impose a minimum tax on individuals and corporations.

I

IN THE HOUSE OF REPRESENTATIVES

JANUARY 3, 1985

Mr. BENNETT (for himself, Mr. WEAVER, Mr. FOGLIETTA, Mr. OWENS, and Mr. FLORIO) introduced the following bill; which was referred to the Committee on Ways and Means

APRIL 22, 1985

Additional sponsors: Mr. ROBINSON and Mr. KANJORSKI

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A BILL

To amend the Internal Revenue Code of 1954 to impose a minimum tax on individuals and corporations.

Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 3 That part I of subchapter A of chapter 1 of the Internal 4 Revenue Code of 1954 (relating to tax on individuals) is 5 amended by inserting after section 3 the following new 6 section:

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1 "SEC. 4. MINIMUM TAX ON ECONOMIC INCOME.

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"(a) TAX IMPOSED.-in the case of an individual, there

is hereby imposed for each taxable year a tax of 10 percent of

4 the amount (if any) by which the taxpayer's economic income

5 for the taxable year exceeds the exemption amount.

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"(b) ECONOMIC INCOME.-For purposes of this section,

7 the term 'economic income' means

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"(1) the total amount of the income received or accrued during the taxable year (including tax-exempt interest), reduced by

"(2) the sun of—

"(A) the ordinary and necessary expenses paid or incurred during the taxable year in connection with the production of such income, plus "(B) a reasonable allowance for the diminution in the value of property used in connection with the production of such income.

"(c) EXEMPTION AMOUNT.-For purposes of this sec

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"(1) $40,000 in the case of a joint return or a surviving spouse (as defined in section 2(a)),

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HR 18 SC

"(2) $30,000 in the case of an individual who is

not married (as defined in section 143) and is not a surviving spouse, and

"(3) $20,000 in the case of a married individual

who files a separate return.

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"(d) REDUCTION IN MINIMUM TAX FOR OTHER 2 INCOME TAX LIABILITY.-The amount of tax imposed by 3 subsection (a) shall be reduced (but not below 0) by the tax4 payer's liability for tax under other sections of this chapter." 5 SEC. 2. Part VI of subchapter A of chapter 1 of the 6 Internal Revenue Code of 1954 is amended by redesignating 7 sections 57 and 58 as sections 58 and 59, respectively, and 8 by inserting after section 56 the following new section:

9 "SEC. 57. ALTERNATIVE MINIMUM TAX FOR CORPORATIONS. 10 "(a) TAX IMPOSED.-In the case of a corporation, 11 there is hereby imposed for each taxable year a tax (to be 12 calculated separately from all other taxes imposed by this 13 chapter) equal to 10 percent of so much of the net income of 14 such corporation for the taxable year as exceeds $10,000. 15 "(b) NET INCOME.-For purposes of this section, the 16 term 'net income' means the taxpayer's net income before tax

17 expense as defined by generally accepted accounting

18 principles.

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"(c) SPECIAL RULES.

"(1) REDUCTION FOR OTHER INCOME TAX LIABILITY.-The amount of the tax imposed by this section shall be reduced (but not below zero) by an amount equal to the taxes imposed by other sections of

this chapter for the taxable year reduced by any credits

allowable against such tax.

HR 18 SC

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"(2) NO CREDITS ALLOWED.-No credit shall be

allowable against the tax imposed by this section."

SEC. 3. (a)(1) The table of sections for part I of sub

4 chapter A of chapter 1 of such Code is amended by inserting

5 after the item relating to section 3 the following new item:

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"Sec. 4. Minimum tax on economic income."

(2) Subsection (b) of section 26 of such Code is amended 7 by redesignating subparagraphs (A) through (H) as subpara8 graphs (B) through (I), respectively, and by inserting before 9 subparagraph (B) (as so redesignated) the following new 10 subparagraph:

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"(A) section 4 (relating to minimum tax on net income),".

(b) The table of sections for part VI of subchapter A of

14 chapter 1 of such Code is amended by striking out the item 15 relating to sections 57 and 58 and inserting in lieu thereof

16 the following:

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"Sec. 57. Alternative minimum tax for corporations.

"Sec. 58. Items of tax preference.

"Sec. 59. Rules for application of this part."

SEC. 4. The amendments made by this Act shall apply

18 to taxable years ending after the date of the enactment of this

19 Act.

HR 18 SC