For the first time in years, conservatives are having a big debate that isn’t mostly about Donald Trump.
Mitt Romney, the Republican senator from Utah, set it off when he proposed a sweeping set of changes in federal tax and spending programs to aid parents of minor children. Its fans on the right say it would slash child poverty, strengthen marriage, promote work, and make conservatism more popular. Its opponents say it would undo the success of welfare reform, undermine work and family, and advance the idea of a universal basic income, which most conservatives oppose.
The debate isn’t entirely new. Differences of opinion among conservatives and libertarians about aiding families have flared up every once in a while for decades. The editors of the Wall Street Journal opposed the tax credit for children when the Republicans of the Newt Gingrich era put it into federal law, and they opposed it again in recent years when Senators Marco Rubio (R., Fla.) and Mike Lee (R., Utah) fought to expand it. For the Journal, using the tax code to help parents is a bit of special-interest favoritism, and the country would be better off cutting tax rates for parents and non-parents alike.
Robert Stein, an economist who served in the Treasury Department during the George W. Bush administration, first outlined the thinking behind Rubio and Lee’s advocacy of a large tax credit for children. Medicare and Social Security, he argues, act as a large implicit tax on parents. The couple who raise three kids and the couple who raise none on the same income will pay the same taxes to the programs and receive the same benefits from them. Yet the first couple has done more to support the programs. Having children used to be a crucial protection from the ravages of age, but the modern welfare state has socialized part of the benefit.
A credit worth, at minimum, $3,500 per child was necessary to set parents and non-parents back on a level playing field. It would also, not coincidentally, make it easier for people to afford to raise a family, helping to shrink the gap that surveys have found for decades between the number of children Americans say they want and the number they end up having. Rubio and Lee thought that parents should be able to apply the credit against any liabilities they face under the income and payroll tax. It should apply, as well, against the payroll taxes that the government nominally asks employers to pay for their employees, since those taxes amount to wages forgone.
The Senate duo won part of their battle in the Republican tax reform of 2017. Tax benefits per child were increased from around $1,600 for middle-class households to $2,000, and were allowed to offset more payroll taxes than they previously had.
Romney would get rid of the tax credit and create something new: a monthly “child allowance” worth $4,200 a year for children up to age five and $3,000 a year up to age 17. The plan has been designed not to add to the deficit. It makes room in the budget for the allowance in four ways. It ends the existing child credit. It eliminates other tax benefits for kids, such as the child-care credit and the portion of the earned-income tax credit meant to help parents. It ends Temporary Assistance for Needy Families (TANF), the main program known as “welfare.” And it abolishes the federal deduction for state and local tax payments.
Lee and Rubio issued a statement opposing Romney’s idea. Because low-income parents would get more money from the federal government than they paid in taxes, they said, the plan expanded welfare rather than granting tax relief. In truth, it’s a bit of both. The child allowance would exceed federal tax payments for a lot of low-income parents. A lot of middle-income and high-income parents, though, would see their net contribution to the federal government move closer to what Lee and Rubio want. They would just get there via payments from the Social Security Administration instead of, say, tax refunds from the Internal Revenue Service.
It’s also worth noting that Stein’s point about fairness establishes a floor for the treatment of parents, not a ceiling. It shows that government, rather than being neutral toward parents, is biased against them: that parents are overtaxed relative to non-parents, and parents of large families are overtaxed relative to parents of small families. It does not establish that it would be wrong to depart from neutrality in the other direction, by providing help to parents.
Other critics of the child allowance have raised different objections. Instead of suggesting that it is wrong in principle to increase government assistance to large groups of households, they have asked whether the plan would diminish incentives to work and get married. Policy analysts at the American Enterprise Institute, where I am a fellow, have been active on both sides of that debate.
The critics observe that the allowance would not require that beneficiaries work. TANF includes work requirements thanks to decades of political effort by conservatives, but those requirements would disappear along with the program itself under Romney’s proposal. By creating an economic cushion, it would diminish the pressure on a parent to earn money, or to marry someone who does.
The proponents don’t deny those points so much as consider them less important than others. The child allowance would not create a “poverty trap” by phasing out sharply as households earn more income — it would start phasing out for single filers making more than $200,000 and for joint filers making more than $400,000. For supporters of the Romney plan, the great advance of welfare reform in 1996 was not TANF’s work requirement but the end of the trap created by the earlier version of the program. The program’s caseload has also dropped dramatically — it reached 5 million households before the reform and now covers fewer than a million — making its work requirements less important.
The proponents also say that the earned-income tax credit’s current design penalizes beneficiaries for getting married, and Romney’s changes would greatly reduce this marriage penalty. Finally, the supporters think that the child allowance, while enough to reduce child poverty quite a lot, would not be so large that households could rely entirely on it. Thus they do not fear that it would create dependence. They also welcome a reduced incentive to earn money in some instances. The allowance would enable some two-earner families to become one-earner families — or one-and-a-half-earner families, with one spouse, generally the mother, working part-time. That’s a feature, not a bug. It is, indeed, one mechanism by which the allowance might shrink the gap between desired and actual birth rates.
To the extent this debate can be settled, it is going to take some more number-crunching and perhaps some compromise. (Perhaps a work requirement could be added to the allowance, for example.) It is not, as noted at the outset, about Trump; but it is not unaffected by him. His success among Republicans demonstrated that the party’s voters were less wedded to certain free-market orthodoxies than they sometimes appeared to be. We now have a three-sided debate among proponents of the child credit, supporters of a child allowance, and those who would prefer we had neither. That last group seems to be the smallest, and to be getting smaller every day.
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