Scholar: Expand Pro-Child Tax Policies, Tax the Childless Rich

WASHINGTON – Public policy should favor child bearing and rearing, panelists argued Friday at a Washington, D.C., symposium called "Demography and Public Policy: Can the Right Policy Mix Reverse Family Breakdown?"

Allan Carlson, president of The Howard Center for Family, Religion & Society, argued that in the current debate over the "fiscal cliff" he would favor expanding the child tax credit for the wealthy in exchange for higher tax rates on the wealthy.

Carlson suggests increasing the child tax credit to $1,250 per child. (It is currently $1,000 per child, but will return to $500 per child if no agreement is reached on the fiscal cliff.) The credit is phased out for couples earning more than $110,000. Carlson favors increasing that cap and paying for it with higher tax rates on the wealthy, thus benefiting the wealthy who bear and raise children while increasing taxes on the childless wealthy.

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"I would happily trade an increase in the top bracket to, say, 38 percent for an extension of the child credit to high earners as well," Carlson said. "Or, put more bluntly, stick the full tax increase solely on the childless rich and call it the 'Mr. Potter tax,' a reference to the iconic, child-indifferent plutocrat in 'It's a Wonderful Life.'"

Carlson's message was delivered as Pew Research Center recently reported that the nation's birth rate is at a record low and the number of Americans choosing to marry continues to decline.

In the 1930s and 1940s, Carlson said, there were bipartisan agreements on policies that encouraged child bearing and family formation. Carlson believes that these policies encouraged the marriage boom and baby boom in the 1950s, which, in turn, contributed to the economic success of the United States in that era.

In particular, Carlson mentioned changes made to Social Security in 1939 that created a homemaker's pension based upon a husband's salary and survivor benefits, and tax code changes in 1948 that increased the tax exemption for children to make it equal with adults and "income splitting," which placed most married couples in lower tax brackets.

Since that time, though, the U.S. government engaged in policies that had the opposite effect. In some cases, the government ended the previous pro-natalist policies. In other cases, the government enacted new policies that contributed to the "baby bust" in the 1970s.

Carlson cited a study demonstrating that a modest pension system encourages the bearing and raising of children, but a more generous system, as Social Security became in the 1960s, has the opposite effect. One of the incentives for having children (so they can take care of you when you are elderly) is taken away and everyone benefits regardless of how many children they have, the argument goes. Stated another way -- why have children to take care of you when you are old when someone else's children can take care of you when you are old?

Besides expanding the child tax credit, Carlson had three additional policy proposals intended to reverse the decline in child bearing and marriage.

First, Social Security beneficiaries should get a bonus for the number of children they raised who reach the age of 19 without a criminal record and with a high school diploma.

"Short of abolishing Social Security," Carlson said, "this is the best way to recognize the dependence of the whole system on a reasonably high fertility and compensate for the system's anti-natalism."

Second, the tax credit for the costs of dependent care should also go to parents who provide full time care for their own children at home.

"Such families tend to record higher completed fertility," Carlson explained. "Beyond that, it's simple fairness."

And third, the government should forgive 25 percent (up to $5,000) of the federal student loan debt for every child born to or adopted by parents, because, "this is the best way to undo the human damage created by the system."

Conservative New York Times columnist David Brooks was a discussant on the panel. In his remarks, Brooks said that he supports Carlson's agenda but has limited expectations about how much these policies could reverse the declines in birth and marriage. It was changes in culture, not government policy, which had the greatest influence on changing birth and marriage rates, Brooks believes.

Nonetheless, Brooks argued that government policy can contribute to "subtle shifts in culture." The best way to do that, Brooks said, is to "flood the zone," meaning enact a lot of policies aimed at the problem all at once.

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