You are going to require W2s to report overtime and regular time separately, adding another bookkeeping expense. Employees will still need to pay state tax, unless the states match the policy. The federal income tax is fairly low (12%, less huge standard deduction) until you get to about $45k, which is less than most hourly workers make. You are making overtime wages more desirable than straight time (they already get paid 1.5x for overtime, and 2x for double overtime), potentially reducing the total number of jobs available and incentivizing parents to spend less time with their family members and more time at work.
Also, are you exempting overtime from the 15.3% FICA tax, or just income tax? If you are taking it out of FICA, you are going to further threaten the solvency of social security.