Sec. 1001. Reduction and simplification of individual income tax rates
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Section 1 is amended by striking subsection
(i)and by striking all that precedes subsection
(h)and inserting the following: There is hereby imposed on the income of every individual a tax equal to the sum of— 12 percent of so much of the taxable income as does not exceed the 25-percent bracket threshold amount, 25 percent of so much of the taxable income as exceeds the 25-percent bracket threshold amount but does not exceed the 35-percent bracket threshold amount, plus 35 percent of so much of taxable income as exceeds the 35-percent bracket threshold amount but does not exceed the 39.6 percent bracket threshold amount. 39.6 percent of so much of taxable income as exceeds the 39.6-percent bracket threshold amount. For purposes of this section— The term 25-percent bracket threshold amount means— in the case of a joint return or surviving spouse, $90,000, in the case of an individual who is the head of a household (as defined in section 2(b)), $67,500, in the case of any other individual (other than an estate or trust), an amount equal to ½ of the amount in effect for the taxable year under subparagraph (A), and in the case of an estate or trust, $2,550. The term 35-percent bracket threshold amount means— in the case of a joint return or surviving spouse, $260,000, in the case of a married individual filing a separate return, an amount equal to ½ of the amount in effect for the taxable year under subparagraph (A), and in the case of any other individual (other than an estate or trust), $200,000, and in the case of an estate or trust, $9,150. The term 39.6-percent bracket threshold amount means— in the case of a joint return or surviving spouse, $1,000,000, in the case of any other individual (other than an estate or trust), an amount equal to ½ of the amount in effect for the taxable year under subparagraph (A), and in the case of an estate or trust, $12,500. In the case of any taxable year beginning after 2018, each dollar amount in subsections
(b)and (e)(3) (other than any amount determined by reference to such a dollar amount) shall be increased by an amount equal to— such dollar amount, multiplied by the cost-of-living adjustment determined under this subsection for the calendar year in which the taxable year begins by substituting 2017 for 2016 in paragraph (2)(A)(ii). If any increase determined under the preceding sentence is not a multiple of $100, such increase shall be rounded to the next lowest multiple of $100. For purposes of this subsection— The cost-of-living adjustment for any calendar year is the percentage (if any) by which— the C-CPI-U for the preceding calendar year, exceeds the normalized CPI for calendar year 2016. For purposes of any provision which provides for the substitution of a year after 2016 for 2016 in subparagraph (A)(ii), subparagraph
(A)shall be applied by substituting C-CPI-U for normalized CPI in clause (ii). For purposes of this subsection, the normalized CPI for any calendar year is the product of— the CPI for such calendar year, multiplied by the C-CPI-U transition multiple. For purposes of this subsection, the term C-CPI-U transition multiple means the amount obtained by dividing— the C-CPI-U for calendar year 2016, by the CPI for calendar year 2016. For purposes of this subsection— The term C-CPI-U means the Chained Consumer Price Index for All Urban Consumers (as published by the Bureau of Labor Statistics of the Department of Labor). The values of the Chained Consumer Price Index for All Urban Consumers taken into account for purposes of determining the cost-of-living adjustment for any calendar year under this subsection shall be the latest values so published as of the date on which such Bureau publishes the initial value of the Chained Consumer Price Index for All Urban Consumers for the month of August for the preceding calendar year. The C-CPI-U for any calendar year is the average of the C-CPI-U as of the close of the 12-month period ending on August 31 of such calendar year. For purposes of this subsection— The term Consumer Price Index means the last Consumer Price Index for All Urban Consumers published by the Department of Labor. For purposes of the preceding sentence, the revision of the Consumer Price Index which is most consistent with the Consumer Price Index for calendar year 1986 shall be used. The CPI for any calendar year is the average of the Consumer Price Index as of the close of the 12-month period ending on August 31 of such calendar year. In the case of any child to whom this subsection applies for any taxable year— the 25-percent bracket threshold amount shall not be more than the taxable income of such child for the taxable year reduced by the net unearned income of such child, and the 35-percent bracket threshold amount shall not be more than the sum of— the taxable income of such child for the taxable year reduced by the net unearned income of such child, plus the dollar amount in effect under subsection (b)(2)(D) for the taxable year. the 39.6-percent bracket threshold amount shall not be more than the sum of— the taxable income of such child for the taxable year reduced by the net unearned income of such child, plus the dollar amount in effect under subsection (b)(3)(C). This subsection shall apply to any child for any taxable year if— such child— has not attained age 18 before the close of the taxable year, or has attained age 18 before the close of the taxable year and is described in paragraph (3), either parent of such child is alive at the close of the taxable year, and such child does not file a joint return for the taxable year. A child is described in this paragraph if— such child— has not attained age 19 before the close of the taxable year, or is a student (within the meaning of section 7706(f)(2)) who has not attained age 24 before the close of the taxable year, and such child’s earned income (as defined in section 911(d)(2)) for such taxable year does not exceed one-half of the amount of the individual’s support (within the meaning of section 7706(c)(1)(D) after the application of section 7706(f)(5) (without regard to subparagraph
(A)thereof)) for such taxable year. For purposes of this subsection— The term net unearned income means the excess of— the portion of the adjusted gross income for the taxable year which is not attributable to earned income (as defined in section 911(d)(2)), over the sum of— the amount in effect for the taxable year under section 63(c)(2)(A) (relating to limitation on standard deduction in the case of certain dependents), plus The greater of the amount described in subclause
(I)or, if the child itemizes his deductions for the taxable year, the amount of the itemized deductions allowed by this chapter for the taxable year which are directly connected with the production of the portion of adjusted gross income referred to in clause (i). The amount of the net unearned income for any taxable year shall not exceed the individual’s taxable income for such taxable year. The amount of tax imposed by this section (determined without regard to this subsection) shall be increased by 6 percent of the excess (if any) of— adjusted gross income, over the applicable dollar amount. The increase determined under paragraph
(1)with respect to any taxpayer for any taxable year shall not exceed 27.6 percent of the lesser of— the taxpayer’s taxable income for such taxable year, or the 25-percent bracket threshold amount in effect with respect to the taxpayer for such taxable year. For purposes of this subsection, the term applicable dollar amount means— in the case of a joint return or a surviving spouse, $1,200,000, in the case of a married individual filing a separate return, an amount equal to 1/2 of the amount in effect for the taxable year under subparagraph (A), and in the case of any other individual, $1,000,000. Paragraph
(1)shall not apply in the case of an estate or trust. . 0 -percent capital gains bracket Section 1(h)(1) is amended by striking which would (without regard to this paragraph) be taxed at a rate below 25 percent in subparagraph (B)(i) and inserting below the 15-percent rate threshold . 15 -percent capital gains bracket Section 1(h)(1)(C)(ii)(I) is amended by striking which would (without regard to this paragraph) be taxed at a rate below 39.6 percent and inserting below the 20-percent rate threshold . Section 1(h) is amended by adding at the end the following new paragraph: For purposes of this subsection— 15 -percent rate threshold The 15-percent rate threshold shall be— in the case of a joint return or surviving spouse, $77,200 ( ½ such amount in the case of a married individual filing a separate return), in the case of an individual who is the head of a household (as defined in section 2(b)), $51,700, in the case of any other individual (other than an estate or trust), an amount equal to ½ of the amount in effect for the taxable year under clause (i), and in the case of an estate or trust, $2,600. 20 -percent rate threshold The 20-percent rate threshold shall be— in the case of a joint return or surviving spouse, $479,000 ( ½ such amount in the case of a married individual filing a separate return), in the case of an individual who is the head of a household (as defined in section 2(b)), $452,400, in the case of any other individual (other than an estate or trust), $425,800, and in the case of an estate or trust, $12,700. In the case of any taxable year beginning after 2018, each of the dollar amounts in subparagraphs
(A)and
(B)shall be increased by an amount equal to— such dollar amount, multiplied by the cost-of-living adjustment determined under subsection (c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting calendar year 2017 for calendar year 2016 in clause
(ii)thereof. . 15 Subsection
(a)of section 15 is amended by striking by this chapter and inserting by section 11 (or by reference to any such rates) . Section 15 is amended by striking subsections
(d)and
(f)and by redesignating subsection
(e)as subsection (d). Section 15(d), as redesignated by subparagraph (A), is amended by striking section 1 or 11(b) and inserting section 11(b) . Section 6013(c) is amended by striking sections 15, 443, and 7851(a)(1)(A) and inserting sections 443 and 7851(a)(1)(A) . Section 15 of the Internal Revenue Code of 1986 shall not apply to any change in a rate of tax imposed by chapter 1 of such Code which occurs by reason of any amendment made by this Act (other than the amendments made by section 3001). The amendments made by this section shall apply to taxable years beginning after December 31, 2017.
(c)The amendments made by subsection
(c)shall take effect on the date of the enactment of this Act.