The U.S. government unjustly favors those without children through its system of entitlements and taxation, Sen. Mike Lee (R-Utah) argued in a speech introducing his tax reform bill.
"Americans across the political spectrum – from the Tea Party to the Occupy movement – believe our system has become rigged," Lee said in a Tuesday speech at the American Enterprise Institute in Washington, D.C. "Rigged for big government, big business, and big special interests. And rigged against the ordinary citizens and forgotten families who work hard, play by the rules, and live within their means. More and more every day, the system is rigged. The market can't do that. Only government can. And it does."
The problem of income inequality, Lee says, is really an issue of equality of opportunity, because government is "redistributing opportunity from the poor and middle class to government itself and its clients and cronies."
Lee encourages his Republican Party to adopt a new agenda that would seek to restore equal opportunity. His Party's problem, Lee said, is that it is "too often seen as out of touch, aligned with the rich, indifferent to the less fortunate, and uninterested in solving the problems of working families."
One way Republicans can have an equal opportunity agenda, Lee believes, is to get rid of the government's "unfair and extremely expensive discrimination" against parents of young children. The family, he argued, is the most important institution for the economy, because it is "an incubator of economic opportunity, and an indicator of economic success."
The government discriminates against parents, in Lee's view, in the way it funds Social Security and Medicare. Both programs are pay-as-you-go programs. This means that current workers pay into the system for current beneficiaries. When those workers reach retirement, they will become beneficiaries as a younger generation pays into the system for them.
Social Security and Medicare, therefore, depend upon procreation. Without new workers to pay into the system for future beneficiaries, the system will collapse. In this way, the childless are, in a sense, free-riders. They do not put in the time and expense of raising children to pay into the system when they retire. Instead, they "free-ride," or rely upon others to raise children on their behalf. Lee calls this the "parent tax penalty."
Lee has introduced a bill, the "Family Fairness and Opportunity Tax Reform Act," that he says will alleviate that inequity.
Here are the basic outlines of the bill:
- Two individual income tax brackets: 15 percent up to $87,850 (or twice that for married couples), 35 percent on all income after that.
- Most deductions and credits would be eliminated.
- A $2,000 personal credit, instead of the personal exemption and standard deduction.
- A charitable tax deduction for all taxpayers.
- A mortgage interest deduction capped at $300,000.
- A $2,500 per child tax credit for all parents of minors.
- The tax credits would also apply to payroll taxes, which are used to fund Medicare and Social Security.
The expanded child tax credit is the primary vehicle that Lee proposes to address the parent tax penalty. He estimates that a married couple with two children making $51,000 would get a $5,000 tax cut.
In Lee's view, his plan is not tilting the playing field in favor of parents, but leveling a playing field that is already tilted against parents.
The bill "challenges the Republican Party to recognize that most Americans' most important investments mature much more slowly than bonds," Lee said, then jokingly added, "especially the boys."
Lee's speech can be viewed at the AEI website.