The Real Parent "Penalty"

If you put aside the silliness of the Reformocon Parent Tax Penalty idea (which Elizabeth Stoker Bruenig has a great critique on recently), there is actually something very important to say about the unique burdens parents shoulder. These burdens don't have anything to do with secretly contributing multiple times to Social Security and Medicare (which they don't really do). These burdens are not the making of any particular fiscal policy either. Instead, people who dedicate resources to raising children take on unique burdens because they sacrifice resources in order to reproduce society and make retirement possible in the first place.

The Personal Finance of Childless Retirement

Apparently, one of the things childless adults are commonly asked is: who will take care of you in old age? I say this is apparent because if you trawl around the internet, you find lots of childless couples that are very defensive about this question.

As annoying as this question appears to be to the childless, it's actually very easily answered. According to the USDA, raising a child costs an average of $12,000 per year. And that's not even counting common post-childhood wealth transfers such as the parental payment of college tuition. Under this USDA estimate, a typical two-child family will spend over $430,000 raising their children. If a childless couple socks that $24,000 per year into a retirement index fund, they would have, with a 5% real return, over $700,000 in the fund after 18 years. If you assume they work another 12 years before they retire, it will have grown to over $1.2 million.

This $1.2 million is more than enough to retire on and it only represents the amount of extra retirement money they have from not raising kids. With this money and their normal retirement fund, a childless couple would be able to buy whatever care they needed and fund all of their other consumption needs as well.

The Deception of Childless Retirement

Although childless couples have an easy path to retirement as a personal finance matter, this neat financial story obscures the deeper reality. When old people are retired, they live off of the production of the generations coming up behind them. Personal retirement accounts hide this fact because it seems as if you are simply spending your own money that you have built up over time. But money is not goods and services. And if there are no younger workers coming up behind you to make those goods and services, that money is not going to buy you anything.

Childless couples therefore engage in a kind of freeriding. By not contributing resources to the reproduction of society, they are able to massively increase their own consumption or build huge retirement funds. But the realization of that extra consumption is only made possible by the social reproduction undertaken by others, i.e. those who create and raise subsequent generations.

Child Benefit

In a less reactionary environment that doesn't require the invention of truly absurd rationales about parental double payroll taxation, this would be one of the main stories you tell about the importance of a child benefit. On balance, people who undertake the high costs of bringing up the next generation should be given social income to do so. The net transfer from the childless to the child-having that this entails is able to be easily justified on these social reproduction freeriding grounds.

Normally, I'd tell you that the reason conservatives don't go for this more typical narrative is because they are angling to find a way to justify a child benefit regime that deprives the poor. However, although the Reformocon Child Tax Credit accomplishes the conservative goal of starving the poor, oddly enough, even their own weird Parent Tax Penalty rationale requires universal child benefits. So the best I can do for piecing it all together is to simply say: the Reformocon plan has nothing to do with children or parent tax penalties and everything to do with vote-buying the middle class in a way that they can pretend is related to rolling back government tax penalties (even as they are actually just creating a new welfare program).

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