MAXIMUM TAX.

SEC. 302. MAXIMUM TAX. (a) In General.— Section 1348 (relating to 50-percent maximum rate on earned income) is amended to read as follows: “SEC. 1348. 50-PERCENT MAXIMUM RATE ON PERSONAL SERVICE INCOME. “(a) General Rule.— If for any taxable year an individual has personal service taxable income which exceeds the amount of taxable income specified in paragraph (1), the tax imposed by section 1 for such year shall, unless the taxpayer chooses the benefits of part I (relating to income averaging), be the sum of— “(1) the tax imposed by section 1 on the highest amount of taxable income on which the rate of tax does not exceed 50 percent, “(2) 50 percent of the amount by which his personal service taxable income exceeds the amount of taxable income specified in paragraph (1) of this subsection, and “(3) the excess of the tax computed under section 1 without regard to this section over the tax so computed with reference solely to his personal service taxable income. “(b) Definitions.— For purposes of this section— “(1) Personal service income.— “(A) In general.— The term ‘personal service income’ means any income which is earned income within the meaning of section 401(c)(2)(C) or section 911(b) or which is an amount received as a pension or annuity. “(B) Exceptions.— The term ‘personal service income’ does not include any amount— “(i) to which section 72(m)(5), 402(a)(2), 402(e), 403(a)(2), 408(e)(2), 408(e)(3), 408(e)(4), 408(c)(5), 108(f), or 409(c) applies; or “(ii) which is includible in gross income under section 409(b) because of the redemption of a bond which was not tendered before the close of the taxable year in which the registered owner attained age 70. “(2) Personal service taxable income.— The personal service taxable income of an individual is the excess of— “(A) the amount which bears the same ratio (but not in excess of 100 percent) to his taxable income as his personal service net income bears to his adjusted gross income, over “(B) the sum of the items of tax preference (as defined in section 57) for the taxable year. For purposes of subparagraph (A), the term ‘personal service net income’ means personal service income reduced by any deductions allowable under section 62 which are properly allocable to or chargeable against such earned income. “(c) Married Individuals.— This section shall apply to a married individual only if such individual and his spouse make a single return jointly for the taxable year.” 90 STAT. 1555 (b) Clerical Amendment.— The table of sections for part VI of subchapter Q of chapter 1 is amended by striking out the item relating to section 1348 and inserting in lieu thereof the following: “Sec. 1348. 50-percent maximum rate on personal service income.” (c) Conforming Amendments.— Section 1304(b)(5) is amended by striking out “earned” and inserting in lieu thereof “personal service”. (d) Effective Date.— The amendments made by this section apply to taxable years beginning after December 31, 1976.