Family Fairness and Opportunity Tax Reform Act

September 17, 2013

The “Family Fairness and Opportunity Tax Reform Act” replaces today’s complex tax system with a new, simple structure that provides solutions for America’s ongoing opportunity crisis.  The plan incentivizes social mobility, promotes middle-class economic security, and improves opportunity for all Americans. 

How it Works

  • Establishes two individual income tax rates: 15% on all income up to $87,850 – and twice that amount for married couples - and 35% on all income above that;
  • Offsets the parent tax penalty by providing an additional $2,500-per child tax credit, available to all parents of dependent children and applicable to payroll taxes as well as income taxes;
  • A $2,000 personal credit to offset the removal of the 10% bracket and the personal exemption;
  • A new charitable deduction that would be available to all taxpayers, not just current itemizers;
  • A new mortgage interest deduction, also available to all home-owners, but capped at $300,000 worth of principal;
  • Eliminates special interest loopholes
  • Repeals Obamacare taxes and the AMT
  • Eliminates the state and local deduction
  • Revenue expected to be 16-20% of GDP

What it Does

  • Simplifies the tax code and lowers the top marginal rate
  • Eliminates an unfair and dysfunctional double standard
  • Vastly improves the economic security of middle-class Americans
  • Equalizes a system that is rigged in favor of the wealthy and well-connected
  • Provides substantial tax relief for most Americans
  • Creates pro-growth incentives to encourage new jobs and investment
  • Focuses deductions on the families and communities who need it most
  • Responds to the inequality crisis facing the country today
  • Consistent with conservative reform principles

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.  

Click here to read a speech Senator Lee delivered at the American Enterprise Institute to introduce this plan: