Many current tax policies are anti-family. The pro-family dependence deduction was badly eroded by inflation until indexing began in the mid-1980s. Child care credits provide incentives to turn children over to strangers. A marriage tax imposes a higher tax burden on married couples.
The modern American state, in short, bears much blame for the precarious economic condition of traditional families.
What to do? Recently, some congressmen have supported a modest child tax credit. While well-intentioned, this approach fails to recognize a fundamental reality: some childbearing is morally and even economically better than others. Moreover, a modest flat-rate credit doesnt address the growing birth dearth in younger families.
From 1970 to 1993, the number of babies born to married mothers under the age of 30 fell by 40 percent, while teen-age illegitimate births rose 84 percent and the number of babies born to those over 30 almost doubled.
The quality of family life had declined as illegitimate births have risen. If the birth of illegitimate children to teen-agers is undesirable, but birth to a 25-year-old married mother is desirable, why do we treat both births the same for tax purposes? We should change tax laws to encourage childbearing within marriage.
For example, classify each child into one of three categories for tax purposes. A child born out of wedlock is in category A, for which no dependence allowance is provided. Category B is for children born to a married woman over the age of 30 or under the age of 20 for which a dependency allowance (say $2,000) is provided. For children in category C, born to married mothers between the age of 20 and 29, a double dependency allowance ($4,000) is provided, encouraging early births within marriage.
The above proposals would be attacked by many political forces. Supply-side conservatives would not like the high marginal tax rate necessary to fund the dependency allowances. Tax professionals would say those allowances would add excessive complexity to the tax code.
Social liberals and some free-market conservatives would say this is social engineering, favoring childbearing at a particular age, and discriminating against accepted lifestyles.
A true flat-rate income tax would be far more family-friendly than existing law, although less so than the plan above. This alternative would win the support of free-market conservatives.
A flat tax is broadly consistent with the concept of the family wage a wage high enough to sustain a family in modestly comfortable circumstances. For a married couple with four children, $45,000 or so would be tax-free.
Traditional families of moderate means with kids cared for by Mom would benefit, and most would pay no federal tax even with elimination of the mortgage deduction.
The flat tax appeals to a broad public as being fair and user-friendly. It may be the most politically feasible option. But in either case, taxes matter, in family as well as economic affairs.