Family Fairness and Opportunity Tax Reform

If there is any single group of people in the entire country whose equal opportunity to pursue happiness we should make sure to protect, it is our ultimate entrepreneurial and investor class: America’s moms and dads.  The family has emerged as perhaps the most important institution in our economy.  It is an incubator of economic opportunity, an indicator of economic success, and grows more economically important every day.

The current tax code singles out parents of young children for unfair and extremely expensive discrimination. It is what I call the "parent tax penalty," a glitch in the federal tax code that forces parents to contribute to senior entitlement programs not once, but twice.  The Family Fairness and Opportunity Tax Reform Act levels the playing field to treat all taxpayers more equally. For a middle-class family, this is an immediate, potentially life-changing reform.

Under this plan, a married couple with two children making the median national income of $51,000 would see a tax cut of approximately $5,000 per year.

In short, the Family Fairness and Opportunity Tax Reform Act would restore opportunities to working parents and their children to pursue happiness that right now federal policy unfairly denies them.

Pro-Growth, Pro-Family Tax Reform

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What do you think?

Since I came to the Senate, I have tried to put that insight into practice. I have tried to apply conservative principles to the myriad problems presented by America’s opportunity deficit.

So as I began looking at tax reform, I took the same approach. I asked myself what are the artificial, unfair obstacles standing between the American people and their pursuit of happiness today? How does the federal tax code create or contribute to those obstacles? And how can we change those parts of the tax code in a way that makes the system more fair and more free for everyone?

I believe the plan I have introduced with Senator Marco Rubio addresses these concerns. As we hoped and expected, our plan has sparked a lively – and highly constructive – debate among conservatives about what a pro-growth, pro-family tax code ought to look like in the 21st century. I want to hear your feedback on this plan, and you can share it below:
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Human Validation

FAQs for the Family Fairness and Opportunity Tax Reform Act

What is the “Parent Tax Penalty”?

The parent tax penalty is a glitch in the federal tax code that forces parents to contribute to senior entitlement programs not once, but twice.

First, when they pay their taxes – just like everyone else. And then again, by incurring the costs of raising their children – who of course grow up to become the next generation of taxpayers.

Right now the tax code does not account for parents’ investment in their children, and thus imposes an unfair “parent tax penalty.”

My plan would help level the playing field for working families with an additional, $2,500-per-child tax credit.

For example, two couples, - one with children, one without – who earn identical incomes will pay the same amount in payroll taxes.  But the couple with kids will also spend $300,000 per child raising their children who will eventually pay for to the retirement benefits of both couples.  Since both couples receive identical benefits, there is unequal treatment of parents who made the investment to raise the future taxpayers that keep the system solvent.  Hence, the parent tax penalty. My legislation would be a step forward in eliminating this discrimination.  

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But don’t childless people already pay taxes for things that benefit children, like schools? Isn’t the “parent tax penalty” really a myth?

No. Schools are primarily a local responsibility paid for by local taxes. I’m strictly focusing on the way federal policy unfairly overburdens parents. And federal child benefits are available to all children, and all children eventually grow up and pay for them. The parent tax penalty doesn’t even out that way.

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Why do you keep the top marginal tax rate at 35%?

This plan cuts the top rate to its level before the recent increases. I support lowering all rates even further, but not at the expense of ignoring or exacerbating the parent tax penalty.

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Who will pay higher taxes under your plan?

I certainly didn’t design the plan to raise anyone’s taxes. But by eliminating the state-and-local deduction, lowering the threshold on the top rate, and changing the deductions, a single individual in a high-tax city and state making a million dollars a year who buys a ten million dollar home and gives nothing to charity will probably see his taxes go up a lot.

The largest percentage tax cuts will be realized by middle class parents with several young children.

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Does this plan encourage people to have more children?

Not at all. My plan levels the playing field for all parents to pursue happiness at work and at home in the way that works best for them.

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Has this bill been scored? How will this plan deal with the deficit impact of the bill?

The bill has not yet received a score.  Our estimate and intent is this bill will provide a moderately sized tax cut, but will retain revenues as a percentage of GDP within the historic norms for the post-World War II period.  I have sponsored numerous proposals, including a budget and a balanced budget amendment that would outline the necessary cuts to achieve balance under this type of a tax regime.  However, the purpose of this bill is to be a tax reform proposal, not an overall budget.

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How is this better than the flat tax or a consumption tax? Isn’t trying to fix discrepancies like this through the tax code exactly how we ended up with a tax code that is a total mess?

This plan attempts to offset the Parent Tax Penalty, which unfairly punishes parents by forcing them to contribute twice to the old-age entitlement system without receiving commensurate benefits.  Offsetting this penalty is a key change that a flat tax or consumption tax fails to make.  I am open to resolving this issue through entitlement reform or other legislation; this is merely an attempt to deal with this issue while simplifying the code elsewhere.

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