Reformocons Argue For Universal Benefits But Then Propose Penalizing Traditional, Large, and Poor Families

In yesterday's post, I pointed out that the Reformocon tax proposal provides less benefits to traditional families with stay-at-home parents than dual-earner families. Not mentioned in yesterday's post is that the proposal also provides less benefits to larger families and poorer families more generally. In that sense, it's really quite a bad proposal.

Funny enough, the argument the Reformocons provide for their tax proposal (via Robert Stein) does not advocate penalizing larger, traditional, and poor families even though the specifics of their proposal end up doing that. In fact, the rationale for the Reformocon plan clearly requires universal child benefits like those I advocated for in yesterday's post.

Parent Tax Penalty

According to the Reformocon literature, the reason we need to introduce more robust child benefits is because parents pay something they call the Parent Tax Penalty. The Parent Tax Penalty refers to the amount of payroll taxes children of parents end up paying when they grow up and go to work. The theory here is that, unlike people who don't have childen, parents end up effectively paying taxes twice, once for themselves and then again via their children's payroll tax contributions.

According to Robert Stein, the way to eliminate this Parent Tax Penalty is to provide benefits to parents that essentially reimburse them for some or all of the future payroll taxes of their children. Crucially, this rationale means that every child should come with the same amount of child benefits. This is because every child grows up to pay payroll taxes regardless of whether they come from traditional families, large families, or poor families (the families the Reformocon tax credit proposal penalizes).

Under the Parent Tax Penalty rationale, it's quite clear that a family that has six children should receive six times the child benefits as a family that has one child. This follows straightforwardly from the fact that the six children in the large family go on to pay six times (on average) the amount of payroll taxes as the one child in the small family. Yet, the Reformocon tax proposal often will not give the six-child family six times the benefits as the one-child family.

If the one-child family and the six-child family have identical market incomes such that their income tax liability is $3500, then each family will receive $3500 from the Reformocon Child Tax Credit (for their first child) and nothing more. When the six-child family has their second, third, fourth, fifth, and sixth child, they won't get any extra child benefits. The Parent Tax Penalty they "pay" for those children will not be refunded to them.

The same basic dynamics hold for traditional and poorer families as well. Because their market incomes are lower than dual-earner and richer families, they are more likely to receive less of the value (if any) of the Child Tax Credit than those families. As with penalizing large families, this is in direct contradiction to the Parent Tax Penalty rationale. The children of traditional, poor, and large families go on to pay payroll taxes just the same as children in other families. If the point is to reimburse some or all of those payroll taxes back to their parents, then universal per-child benefits is the only way to do so.

Dealing With This Contradiction

Going forward, one of the interesting things to watch for me is how Reformocons will deal with the Parent Tax Penalty rationale given that it is deeply at odds with the Reformocon tax proposal. I see three possibilities.

First, they will just falsely claim that the Reformocon tax proposal does not penalize traditional and large families. W. Bradford Wilcox took to the pages of the Wall Street Journal this week and suggested this (though I doubt he did so with any deceptive intent). Pascal-Emmanuel Gobry made the exact same argument at The Week, writing in quite a direct and false manner that the Reformocon plan "wouldn't privilege one kind of family over another." Simply denying that the Reformocon plan penalizes large, traditional, and poor families, while clearly wrong, is certainly a possible strategy going forward to avoid dealing with the problem caused by the Parent Tax Penalty rationale.

Second, they'll just drop the Parent Tax Penalty rationale. Should they ever be made to explain how on earth that rationale can support anything but universal per-child benefits (and me hectoring in this blog alone won't do that, so others have to get involved), they will just abandon the rationale and keep their policy proposal. I think this is a likely outcome because I suspect the primary goal of the proposal is to increase the disposal incomes of the 40th to 90th percentiles at the expense of the top 10% and that this child stuff is just a non-motivating game of smoke and mirrors to hide their "redistributive" intention. Giving people money is a solid vote-buying strategy after all and so it makes good electoral sense. They've also put so much effort into pushing the proposal that path dependency and face-saving would make it very difficult to radically alter it now.

Third, nothing will really change because none of these arguments matter. They'll reference the Parent Tax Penalty even though it's deeply at odds with their actual child tax benefit proposal. Nobody will point out the contradiction or, if they do, they'll just kind of get brushed off and never responded to. The Parent Tax Penalty idea will then just perpetuate in a rhetorical froth, more of a gesture and performance than an actual rationale. Politics is, after all, not about facts and even less so about coherent policy rationales.