Family Fairness and Opportunity Tax Reform Act

Bill: 113-s-1616
Sponsor: full_name: Sen. Lee, Mike [R-UT]
Introduced: 2013-10-30
Policy area: Taxation
Subjects: Capital gains tax

Charitable contributions

Employment taxes

Housing finance and home ownership

Income tax credits

Income tax deductions

Income tax rates

Inflation and prices

Interest, dividends, interest rates

Medicare

Social work, volunteer service, charitable organizations

Tax reform and tax simplification

Tax treatment of families
Latest action: action_date: 2013-10-30
text: Read twice and referred to the Committee on Finance.

Summaries:
action_date: 2013-10-30
action_desc: Introduced in Senate
text: <p>Family Fairness and Opportunity Tax Reform Act - Amends the Internal Revenue Code, with respect to the taxation of individual and married taxpayers, to: </p> <ul> <li>reduce to two the number of individual income tax brackets, imposing a 15% tax rate on income up to $87,850 ($175,700 for married couples filing a joint return and surviving spouses) and a 35% rate on income above such level; </li> <li>eliminate or reduce the capital gains tax rate based on taxable income levels;</li> <li>repeal after 2013 the alternative minimum tax (AMT) for individual and corporate taxpayers; </li> <li>increase from $1,000 to $2,500 the child tax credit and make a portion of such credit refundable; </li> <li>allow a new personal income tax credit of $2,000 for individual taxpayers ($4,000 for married couples filing a joint return and surviving spouses) in lieu of the standard tax deduction, the personal tax exemption, and certain itemized deductions, other than the deductions for mortgage interest and charitable contributions; </li> <li>provide annual inflation adjustments after 2013 to income levels and credit amounts in this Act; </li> <li>make mortgage interest and charitable contributions deductible from gross income (above-the-line deductions); </li> <li>limit to $300,000 the deductible amount of acquisition indebtedness for principal residences (currently, $1 million); </li> <li>repeal the additional hospital insurance tax on individual taxpayers earning over $200,000 ($250,000 for married couples filing joint tax returns); and </li> <li>repeal the 3.8% Medicare tax on certain unearned income (e.g., income from rents, royalties, stocks, bonds, and other investments). </li> </ul>

tv_txt: II 113th CONGRESS 1st Session S. 1616 IN THE SENATE OF THE UNITED STATES October 30, 2013 Mr. Lee introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend the Internal Revenue Code of 1986 to provide for simplification, to reduce the number of tax brackets, and for other purposes.

1. Short title This Act may be cited as the Family Fairness and Opportunity Tax Reform Act . 2. Consolidation of tax brackets and modifications to tax rates (a) In general Section 1 of the Internal Revenue Code of 1986 is amended by striking subsections (a) through (d) and inserting the following: (a) In general There is hereby imposed on the taxable income of every individual a tax determined in accordance with the following table: If taxable income is: The tax is: Not over the first bracket dollar limit 15% of taxable income. Over the first bracket dollar limit An amount equal to 15% of the first bracket dollar limit, plus 35% of the excess over such first bracket dollar limit. (b) First bracket dollar limit For purposes of this section, the first bracket dollar limit is— (1) in the case of— (A) a married individual (as defined in section 7703) who makes a single return jointly with the individual's spouse under section 6013, or (B) a surviving spouse (as defined in section 2(a)), 200 percent of the amount determined under paragraph (2), and (2) in the case of any other individual, $87,850. (c) Inflation adjustment for rates applicable to individuals (1) In general In the case of any taxable year beginning in a calendar year after 2013, the dollar amount in subsection (b)(2) shall be increased by an amount equal to— (A) such dollar amount, multiplied by (B) the cost-of-living adjustment determined under subsection (f)(3) for the calendar year in which the taxable year begins, by substituting calendar year 2012 for calendar year 1992 in subparagraph (B) thereof. (2) Rounding If any increase determined under paragraph (1) is not a multiple of $50, such amount shall be rounded to the next lowest multiple of $50. . (b) Treatment of capital gains rate (1) Zero percent rate Clause (i) of section 1(h)(1)(B) of the Internal Revenue Code of 1986 is amended to read as follows: (i) $36,250 (200 percent of such amount in the case of a joint return or a surviving spouse (as defined in section 2(a))), over . (2) 20 percent rate Subclause (I) of section 1(h)(1)(C)(ii) of such Code is amended to read as follows: (I) $400,000 ($450,000 in the case of a joint return or a surviving spouse (as defined in section 2(a))), over . (3) Inflation adjustment Subsection (h) of section 1 of such Code is amended by adding at the end the following new paragraph: (12) Inflation adjustment (A) In general In the case of any taxable year beginning in a calendar year after 2013, each of the dollar amounts in subparagraphs (B)(i) and (C)(ii)(I) of paragraph (1) shall be increased by an amount equal to— (i) such dollar amount, multiplied by (ii) the cost-of-living adjustment determined under subsection (f)(3) for the calendar year in which the taxable year begins, by substituting calendar year 2012 for calendar year 1992 in subparagraph (B) thereof. (B) Rounding If any increase determined under paragraph (1) is not a multiple of $50, such amount shall be rounded to the next lowest multiple of $50. . (c) Conforming amendments (1) Subsection (f) of section 1 of such Code is amended— (A) by striking the heading and inserting Inflation adjustments for estates and trusts , (B) in paragraph (1), by striking subsections (a), (b), (c), (d), and (e) and inserting subsection (e) , (C) in paragraph (2)— (i) by striking subsection (a), (b), (c), (d), and (e), as the case may be, and inserting subsection (e) , and (ii) by striking except as provided in paragraph (8), , and (D) by striking paragraphs (6), (7), and (8) and inserting the following: (6) Rounding If any increase determined under paragraph (2)(A) is not a multiple of $50, such increase shall be rounded to the next lowest multiple of $50. . (2) Section 1 of such Code is amended by striking subsection (i). (3) Section 2 of such Code is amended by striking subsection (b). (4) Paragraph (2) of section 25B(b) of the Internal Revenue Code of 1986 is amended to read as follows: (2) Other returns In the case of any taxpayer not described in paragraph (1), the applicable percentage shall be determined under paragraph (1) except that such paragraph shall be applied by substituting for each dollar amount therein (as adjusted under paragraph (3)) a dollar amount equal to 50 percent of such dollar amount. . (d) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2013. 3. Repeal of alternative minimum tax (a) In general Subsection (a) of section 55 of the Internal Revenue Code of 1986 is amended by adding at the end the following new flush sentence: No tax shall be imposed by this section for any taxable year beginning after December 31, 2013, and the tentative minimum tax of any taxpayer for any such taxable year shall be zero for purposes of this title. . (b) Effective date The amendment made by this section shall apply to taxable years beginning after December 31, 2013. 4. Additional child tax credit (a) In general Section 24 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection: (g) Additional refundable credit (1) In general In addition to the amount allowed under subsection (a), there shall be allowed as a credit against tax imposed by this chapter for the taxable year with respect to each qualifying child of the taxpayer an amount equal to $2,500. (2) Inflation adjustment (A) In general In the case of any taxable year beginning in a calendar year after 2013, the dollar amount in paragraph (1) shall be the greater of the amount in effect under such paragraph for the preceding taxable year or the amount determined under subparagraph (B). (B) Adjustment (i) In general Not later than November 1 of 2013, and each subsequent calendar year, the Secretary shall make and publish the determination under this subparagraph for the succeeding calendar year. (ii) Amount determined The amount determined under this subparagraph for any calendar year is an amount equal to— (I) $2,500, multiplied by (II) the ratio of the national average wage index (as defined in section 209(k)(1) of the Social Security Act) for the calendar year before the calendar year in which the determination under this subparagraph is made to the national average wage index (as so defined) for 2012. (iii) Rounding If any increase determined under clause (i) is not a multiple of $50, such amount shall be rounded to the next lowest multiple of $50. (3) Portion of additional credit refundable (A) In general The aggregate credits allowed to a taxpayer under subpart C shall be increased by the lesser of— (i) the credit which would be allowed under this section without regard to this subsection and the limitation under section 26(a), or (ii) the amount by which the aggregate amount of credits allowed by this subpart (determined without regard to this subsection) would increase if the limitation imposed by section 26(a) were increased by the excess (if any) of— (I) the taxpayer's social security taxes for the taxable year, over (II) the credit allowed under section 32 for the taxable year. The amount of the credit allowed under this paragraph shall not be treated as a credit allowed under this subpart and shall reduce the amount of credit otherwise allowable under paragraph (1) without regard to section 26(a). (B) Social security taxes For purposes of subparagraph (A), the term social security taxes has the meaning given such term under subsection (d)(2), except that— (i) such term shall include the amount of taxes imposed by section 3111 and 3221(a) on amounts paid with respect to such taxpayer during the calendar year in which the taxable year begins, and (ii) in applying clauses (ii) and (iii) of subparagraph (A) thereof, 100 percent shall be substituted for 50 percent each place it appears. (C) Coordination with subsection (a) For purposes of this title, the amount of any refundable credit allowed by reason of subsection (d) shall be taken into account before the application of this paragraph. . (b) Conforming amendments (1) Subsection (a) of section 24 of the Internal Revenue Code of 1986 is amended by striking for which the taxpayer is allowed a deduction under section 151 . (2) Subparagraph (A) of section 24(d)(1) of such Code is amended by striking section and inserting subsection (a) . (c) Effective date The amendment made by this section shall apply to taxable years beginning after December 31, 2013. 5. Personal credit (a) In general (1) Allowance of credit Subpart A of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 25D the following new section: 25E. Personal credit (a) Allowance of credit In the case of an individual, there shall be allowed a credit against the tax imposed by this chapter for the taxable year an amount equal to— (1) in the case of an individual who does not file a joint return, $2,000, and (2) in the case of an individual who files a joint return or a surviving spouse (as defined in section 2(a)), 200 percent of the amount in effect under paragraph (1). (b) Limitation No credit shall be allowed under subsection (a) to any individual who is a qualifying child (as defined in section 24(c)) with respect to whom a credit is allowed under section 24 to another taxpayer for any taxable year beginning in the same calendar year as such taxable year. (c) Inflation adjustment (1) In general In the case of any taxable year beginning in a calendar year after 2013, the dollar amount under subsection (a)(1) shall be increased by an amount equal to— (A) such dollar amount, multiplied by (B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting calendar year 2012 for calendar year 1992 in subparagraph (B) thereof. (2) Rounding If any increase determined under paragraph (1) is not a multiple of $50, such amount shall be rounded to the next lowest multiple of $50. . (2) Conforming amendment The table of sections for subpart A of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 25D the following new item: Sec. 25E. Personal credit. . (b) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2013. 6. Repeal of standard deduction, certain personal exemptions, and itemized deductions other than the mortgage interest deduction and charitable contribution deduction (a) Repeal of standard deduction and itemized deductions (1) In general Section 63 of the Internal Revenue Code of 1986 is amended by striking subsections (b) through (g) and inserting the following: (b) Itemized deductions not allowed for individuals (1) In general In the case of an individual, no deduction shall be allowed for any itemized deduction. (2) Itemized deductions For purposes of this subtitle, the term itemized deductions means the deductions allowable under this chapter other than— (A) the deduction for qualified residence interest (as defined in section 163(h)(3)), (B) the deduction allowed under section 170, and (C) any other deductions allowable in arriving at adjusted gross income. . (2) Conforming amendment Subsection (a) of section 63 is amended by striking (other than the standard deduction) . (b) Repeal of personal exemptions for taxpayer and spouse Section 151 of such Code is amended by striking subsection (b). (c) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2013. 7. Modifications to mortgage interest deduction (a) In general Clause (ii) of section 163(h)(3)(B) of the Internal Revenue Code of 1986 is amended— (1) by striking $1,000,000 ($500,000 in the case of a married individual filing a separate return and inserting $300,000 , and (2) by striking $1,000,000 in the heading and inserting $300,000 . (b) Effective date The amendments made by this section shall apply to indebtedness incurred in taxable years beginning after December 31, 2013. 8. Repeal of additional health taxes (a) Repeal of additional hospital insurance tax on high-Income taxpayers (1) FICA (A) In general Section 3101(b) of the Internal Revenue Code of 1986 is amended to read as follows: (b) Hospital insurance In addition to the tax imposed by the preceding subsection, there is hereby imposed on the income of every individual a tax equal to 1.45 percent of the wages (as defined in section 3121(a)) received by him with respect to employment (as defined in section 3121(b)). . (B) Conforming amendments (i) Section 3102 of such Code is amended by striking subsection (f). (ii) Section 6654 of the Internal Revenue Code of 1986 is amended by striking subsection (m) and by redesignating subsections (n) as subsection (m). (2) SECA (A) In general Section 1401(b) of the Internal Revenue Code of 1986 is amended to read as follows: (b) Hospital insurance In addition to the tax imposed by the preceding subsection, there is hereby imposed for each taxable year, on the self-employment income of every individual, a tax equal to 2.90 percent of the amount of the self-employment income for such taxable year. . (B) Conforming amendments (i) Section 164(f) of such Code is amended by striking (other than the taxes imposed by section 1402(b)(2)) . (ii) Section 1402(a)(12)(B) of such Code is amended by striking (determined without regard to the rate imposed under paragraph (2) of section 1401(b)) . (3) Effective date The amendments made by this subsection shall apply with respect to remuneration received, and taxable years beginning after, December 31, 2013. (b) Repeal of unearned income medicare contribution (1) In general Subtitle A of the Internal Revenue Code of 1986 is amended by striking chapter 2A. (2) Conforming amendments (A) Section 6654 of the Internal Revenue Code of 1986 is amended— (i) in subsection (a), by striking the tax under chapter 2, and the tax under chapter 2A and inserting and the tax imposed under chapter 2 , and (ii) in subsection (f)— (I) by striking paragraph (3) and redesignating paragraph (4) as paragraph (3), and (II) by striking plus at the end of paragraph (2) and inserting minus . (B) The table of chapters for subchapter A of chapter 1 of such Code is amended by striking the item relating to chapter 2A. (3) Effective date The amendments made by this subsection shall apply to taxable years beginning after December 31, 2013. 9. Technical and conforming amendments The Secretary of the Treasury or the Secretary’s delegate shall, not later than 90 days after the date of the enactment of this Act, submit to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate a draft of any technical and conforming changes in the Internal Revenue Code of 1986 which are necessary to reflect throughout such Code the purposes of the provisions of, and amendments made by, this Act.