We have frequently noted that, for all the rancor of the primary season, Republicans are increasingly united behind a conservative program. Almost all Republican members of Congress and presidential candidates support a free-market reform of Medicare, favor the appointment of originalist judges, and wish to lower corporate tax rates. We are seeing signs of a growing consensus in one other area, too: An increasing number of Republicans have come out for pro-family tax reform. The remaining holdout from this consensus is Mitt Romney. We hope that does not stay true for long.
Rick Santorum and Newt Gingrich each have plans to triple the dependent exemption and thus lower the tax bill for parents based on the number of minor children they are raising. Former candidate Rick Perry included the same proposal in his tax reform. The Republican Study Committee, the large assembly of conservatives in the House, also backs the idea.
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The current tax code features two provisions that lighten the tax burden on families: the dependent exemption and the child tax credit, currently set at $1,000 per child. There are several rationales for these provisions. One is that much of the cost of raising children, including income forgone, represents an investment in human capital. Another, related one is that parents’ economic sacrifice represents a contribution to the future of our large entitlement programs. (To put it another way, people who have no children are free-riding on that sacrifice.) The failure of the tax code to adequately recognize this contribution has almost certainly depressed family size.
The best way to address the problem — and to move toward a government policy that is neutral with respect to family size — is to expand the child credit to, say, $5,000. The credit delivers more relief to middle-class families per dollar of revenue the federal government gives up than the exemption does. Parents should be able to apply the expanded credit against their federal tax liability, including payroll taxes.
While all the available evidence suggests that most conservatives, and most voters generally, favor an expanded child credit, some of our friends in the media and in think tanks raise three reservations. They say that increasing the child credit (or raising the dependent exemption) is “social engineering,” a complaint that ignores how the status quo engineers society in an anti-family direction. They calculate that leaving the tax burden on parents unchanged makes it easier to lower taxes on investment in stocks and factories. But that is both an intellectual and a political mistake. Tax reduction should focus on the aspects of tax policy that impose the greatest distortions, regardless of whether those distortions affect the Dow; and a pro-growth tax plan is more likely to be enacted if it has some direct, tangible benefit to offer middle-class families.
Finally, these conservatives worry that wiping out people’s tax liabilities will bias them toward big government. But the Contract with America’s introduction of the child credit appears to have had no such effect. Perhaps most parents have the wit to see that the child credit can take them off the rolls only temporarily.
In 1980, 1994, and 2000, Republicans were successful in part because they offered tax cuts for the middle class. In the latter two cases, those tax cuts took the form of the creation and then expansion of the child credit. Romney appears at least dimly to grasp this point, which is why he is offering the middle class a tax cut for capital gains. But most people in the middle of the income spectrum invest more in their kids than they do in stocks. As he devises a tax-reform plan, Romney should remember that as a matter of both etymology and experience, economics begins at home.
A credit here, a credit there, a credit everywhere.... What does that get you? More people paying little or no taxes (ie the 47% that pay little or none will become the majority) and long term job security for tax prepares and software makers.
How about real tax reform such as throwing out the volumes of the current code and starting over from scratch?
We keep hearing that 47 percent pay no federal income tax under the current system. Raising the child credit, especially by such a large amount, would doubtless increase the percentage of those who owe the IRS nothing. Besides, a majority of Americans now live in households that are not the traditional husband/wife/kids type. That's why school districts have such a hard time raising funds for improvements via referendums. Unless the new credits were offset in some other way, such as by imposing a surcharge on incomes over $1 million, this proposal would have no chance.
Just what the country needs.
more social policy through the tax code
so government can subsidize the cost of large families for the middle class while the less privileged are allowed to wallow in the poverty of a failed safety net.
Social conservatives aren't all enamored by large families; some have small families; some have no kids at all, because that's what they chose.
It is as intrusive of government to tell folks to have more kids as it is for government to tell folks to have fewer kids.
Maybe you could change, increase, the value of a dependent exemption on the taxes. No increase for the value of the tax _credit_. Especially, do not increase the "refundable" value of the child tax credit.
Romney has emphasized his position that the middle class have been the hardest hit. The editors' suggestions make sense. I hope Mr. Romney will have a chance to respond and that his response is published.
I remember when Gary Bauer on a National Review cruise made the same suggestion and was put down by the conservative panel because we are not the party of redistribution or social engineering through particularized tax cuts.
What is happening when our side is now a proponent of this?
We should be emphasizing cutting government spending, privatizing entitlements, reducing welfare dependency and lowering taxes wherever possible for everyone instead of separating and choosing ways to be good to one sector over another.
I do see that it is better demographically for taxpaying Americans to have more children. But it seems to me our language should be more in keeping with conservative approaches than with having the government be the one who rewards or punishes certain personal choices.
This was exactly the point I was going to make, but you made it faster and more eloquently. We are supposed to be against using the tax code for preferred social engineering. If we truly want to promote fairness in the tax code, we need to start reducing the number of credits and deductions, not increasing them.
"We are supposed to be against using the tax code for preferred social engineering."
Really? Social engineering is part and parcel with most tax code, just as particular morality is prescribed in most law. The issue isn't 'social engineering -- yes or no?' it's what do we want to engineer. And what I want to engineer is a stronger family-centric society that enables parents to perform the #1 task of every society: raising and preparing the next generation of citizens.
I love how NR gives credit to the Contract with America. A sound piece of conservative legislation put forward and passed through the efforts of none other than the bete noire of the Republican establishment and NR, yep Newt Gingrich. Now isn't that rich. Careful NR or you might actually help Newt out vis a vis the grand mushy one.
Between ethanol and gasoline, between Soylndra and natural gas, between a chevy volt and a chevy suburban, I agree. Between no children and children, I'm ok with picking children.
The "editors" have lost their way. Conservatives should be for eliminating income tax entirely. You have fallen into the social engineering trap. The road to hell is paved with good intentions. This site complans endlessly against the evils of Government choosing winners and losers. The main vehicle for Gov. control is the tax code. I am just about done with NR. You have become progressive "lite".
Are we in favor of expanding the proportion of Americans who pay no federal income taxes what-so-ever? The tax code as it is already redistributes considerable wealth to families with children. Should we encourage such dependency upon government to grow? As one whose family benefits greatly from the annual tax-season windfall created by earned income credit and additional child tax credit, I am still very uncomfortable with the government giving me money while mortgaging my children's future. I'd much rather wean families like mine from the expectation of government hand-outs and simultaneously have a government which actually pays down its debt.
Here is a very simple and fair tax code without any loopholes:
All income (regardless what is the source because work should not be discouraged in favor of wall street gambling) is taxed at the same low marginal rates - 4 marginal rates:
0-$100K: 15%
$100K-$1M: 20%
$1M-$10M: 25%
$10M++++: 30%
$10K - personal exemption (this is child-supporting because the more children you have - the more exemptions you can claim)
No deductions whatsoever is the simplest and the best (even for charity).
Business tax - flat something between 20 and 25% with no tax preferences and incentives for anyone.
First of all, investing is not "Wall Street gambling." That's poor-man's ideology.
There should be no taxation whatsoever on capital gains. Why? Two reasons. First, from a moral standpoint, it is double-taxation. Secondly, it tamps down overall investment and harms the marketplace in general.
Also, there should be no corporate income tax at all. Again, this is double and triple taxation. If everything was taxed only at the personal level, then all income would be taxed once - as it should be.
Finally, why not tax all income at the same rate, no matter what the income level? Stop punishing people out of envy! And let's all finally buy in to the conservative principal of equal treatment under the law!
