Give Parents Free Money
Reihan Salam has a piece at Slate in which he advocates creating a tax system in which people with children pay lower rates than people without children. This would be in addition to keeping the existing child-related tax credits and personal exemptions, as well as adding a brand new $2500 child tax credit. He fashions his dual-track taxing system as a way of making Republican Mike Lee's plan to increase tax benefits to parents deficit neutral.
I don't have any particularly strong objections to the ideas of Salam or Lee on this matter per se. However, it deserves pointing out that the mechanisms by which they seek to funnel money to parents are quickly approaching peak submerged state absurdity.
If you take a step back and clear your mind of the confusion conservatives have in understanding what taxes are, the goal of Salam and Lee is pretty clear. They recognize that parenting children takes a great deal of money, time, and effort. It is important work that has to be done and it benefits society more generally. It is also the case that families with children have higher poverty rates than single adults or childless couples. For these and other reasons, they think we should allocate more of our national income to parents than we currently do.
So far, so good. But now ask yourself: what is the easiest and cleanest way to do that? If you want to make sure people taking care of children get more income, how would you do that? I am quite sure that an alien who came to this world would not say: create three different child-related tax carve outs and then also two different sets of tax rates for parents and non-parents. An alien who came to this world would say: figure out how much money you want to give to parents for each child they are raising and then cut them a check each month.
The policy where you give parents a monthly check is usually called a Family Allowance or Child Allowance, and a number of countries utilize it, e.g. France. Shawn Fremstad at CEPR had a paper in 2009 about implementing such a child allowance in the U.S.
The benefits of using a straightforward child allowance are immense. It produces a monthly benefit check that can be relied upon no matter what, instead of the annual lump sums you tend to get with tax credits. People can receive it whether they file their taxes or not (those with low or no income may not file taxes). It also provides flat benefits for all children, whereas the tax code approaches tend to provide greater income boosts to parents with middle and upper-middle incomes than they do to poor parents. Salam's dual tax rate structure would be especially problematic in this last regard.
On the merits, there is no reason to prefer weird tax code mangling over the child allowance. Both policies aim at the exact same goals, but child allowances are way better at achieving them. The only reason conservatives like Salam and Lee opt for the inferior tax code approach is because it sufficiently obscures the welfare program they are clumsily putting together. Whereas the welfare handout nature of the child allowance is right up in your face, the welfare handout nature of the more goofy tax code thing is harder for people to wrap their heads around.
Ultimately, the necessity of tricking Americans into thinking welfare money is not welfare money creates extremely sub-optimal policy designs. In the case of welfare money for parents, these sub-optimal policy designs ultimately hurt children, poor children especially. But this kind of policy inefficiency is the price conservatives are willing to pay for the psychic good-feels that come from successfully submerging a welfare program so as to limit people's comprehension of it as such.
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