The American Dream Restoration Act 
 
Summary: 
 
The American Dream Restoration Act (ADRA) provides a tax credit for 
families, reforms the so-called "marriage penalty" and establishes a new 
and improved Individual Retirement Account.  Today, the average family 
spends more on taxes than it spends on food, clothing and shelter 
combined.  Many families now need a second earner not to support the 
household, but to support the government.  Middle income families are 
forced to buy their first homes later in life and must scramble to send 
their children to college.  ADRA is designed to deliver relief from the 
heavy burden of government and let families keep more of their hard-
earned dollars to pursue their own version of the American Dream. 

$500 Family Tax Credit 

Effective in 1996, the bill provides a $500 per child tax credit for 
families with annual incomes up to $200,000.  (A child is defined as an 
individual under 18 years of age.)  The tax credit will benefit 
approximately 50 million families, 90 percent of which earn less than 
$75,000 per year. 
 
Reform of the Marriage Penalty 
 
The 1993 tax increases and expanded Earned Income Tax Credit resulted in 
many married couples across the income spectrum paying higher taxes than 
they would by filing as two singles.  The bill provides up to $2 billion 
annually of marriage penalty relief.  Each family currently subject to 
the marriage penalty would be entitled to a credit to an amount 
determined by the Secretary of Treasury. 
 
Tax Deductible Individual Retirement Accounts (IRAs) 
 
The bill allows individuals to contribute up to $2,000 a year into an 
American Dream Savings Account (ADSA).  Non-employed spouses may also 
participate. The ADSA is "back-ended", meaning the individual pays 
income taxes on the amount deposited, but not on the amount withdrawn if 
used for (1) retirement income; (2) purchase of a first-owner occupied 
home; (3) education expenses at a post-secondary institution (college or 
training institution) for self, spouse or dependent child; or (4) 
medical costs, including purchase of insurance for long-term care.

Within two years of enactment of ADRA, current IRA participants can cash 
out their current IRA and pay the tax due on it without having to pay 
any penalty provided the money is transferred to an ADSA.