The Corner

Politics & Policy

Middle-Class Families and Tax Reform

When the Republicans’ “framework” for tax reform came out, I raised two related concerns about it. Here I’ll consider them separately.

The first problem is that the framework is compatible with tax increases on a lot of middle-class families. The expansion of the standard deduction and the child credit will unequivocally lower tax bills, but the abolition of the personal exemptions unequivocally raises them and the new rate structure’s effects depend on where the threshold for each tax bracket ends up being set.

At Forbes, Ryan Ellis plugs in some reasonable assumptions about what the Republican bill will look like—he includes a $500 expansion of the child credit, for example—and then runs through a few examples of households that would get a net tax cut. He calculates that a married couple with two children, making $87,000 a year, would get a $1,223 tax cut.

It’s fair to say that under these assumptions, a lot of middle-class families would get a tax cut. But other families wouldn’t be that lucky. Some would receive next-to-nothing, and others would face tax increases.

So that’s problem number one. If they want to avoid raising taxes on a lot of middle-class families while sticking with their framework, Republicans are going to have to plug in the remaining numbers very carefully—and probably going to have to expand the child credit by more than $500 per child.

Problem number two is a little subtler. Assume that the Republicans go with the $500 per child expansion, as Ellis assumes. Because they also get rid of the personal exemption, that means that they have designed a tax cut that rewards people for not having children. Take Ellis’s couple making $87,000 a year. If they had three children, they would get $100 less in tax relief than if they had two. And another $100 less if they had four. For couples with higher incomes, the tax cut would get $500 smaller per child.

If U.S. policy was wildly pro-natalist, unfairly subsidizing large families at the expense of small ones and parents at the expense of non-parents, that might be a reasonable policy. But that’s not our policy regime at all. The combination of ending the dependent exemption and raising the child credit by $500 increases the parent penalty already embedded in federal law.

(The tax-calculation examples have been edited to correct mistakes–RP.)

Ramesh Ponnuru — Ramesh Ponnuru is a senior editor for National Review, a columnist for Bloomberg Opinion, a visiting fellow at the American Enterprise Institute, and a senior fellow at the National Review Institute.

Most Popular

Politics & Policy

Demagoguery Is Not Leadership

The government of Prime Minister Jacinda Ardern in New Zealand has, with the support of the opposition, decided to enact fundamental changes in the nation’s firearms laws less than a week after the massacre at two Christchurch mosques. This is the opposite of leadership. It is also an example of why ... Read More
White House

The Media’s Disgrace

There will soon enough be an effort to memory-hole it, but the media coverage of the Russia investigation was abysmal and self-discrediting — obsessive and hysterical, often suggesting that the smoking gun was right around the corner, sometimes supporting its hoped-for result with erroneous, too-good-to-check ... Read More
Politics & Policy

What Was Trump So Annoyed About?

One of the stranger arguments that I heard throughout the Mueller saga -- and am hearing today, now that it's turned out to be a dud -- is that Donald Trump's irritation with the process was unreasonable and counterproductive. This tweet, from CNN's Chris Cilizza, is a nice illustration of the genre: Donald ... Read More
White House

Our Long National Hysteria 

Our long national hysteria may not be over, but at least it should — by rights — be diminished. Robert Mueller delivered his long-awaited report on Friday, and Attorney General William Barr just released his summary of the findings. They completely vindicate President Trump regarding the allegation that ... Read More