'Unlucky Parents' and the Child Tax Credit

'Unlucky Parents' and the Child Tax Credit
AP Photo/Ted S. Warren, File
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This Christmas holiday, Republicans are celebrating a major victory in tax reform, but a week before it was signed into law by President Trump, the legislation hit a roadblock dear to every parent’s heart. Sen. Marco Rubio threatened to vote no unless the legislation included a major increase in the child tax credit, amounting to $300 per child for many poorer families. Rubio wasn’t bluffing, so the final draft of the bill included the larger child credit. It’s a shame Rubio didn’t also fight for a wider scope to cover pregnancies.

A tax credit for children was first discussed in the early 1990s and enacted into law in 1997, expressly to help families defray the cost of raising children. Another potential benefit is to counter declining population. Life is always a good investment. Indeed, countries that have neglected declining birthrates in the modern era are actually facing serious population shortages. Japan and Italy have such low birthrates that their net populations are projected to decline by millions of people every decade.

The federal child tax credit supports a family’s extra child-care expenses, including food, diapers, prenatal visits, and a crib, not to mention soccer balls and braces for the teen years. In one way, such kindness can be cruel. What about the mothers who want to give birth but cannot?  What about parents that miscarry in the third trimester? Who helps them pay for the crib that is built and left waiting?

Just a few days ago, close friends of ours celebrated the birth of a second son. It had been a risky pregnancy, but their baby proved to be healthy and happy.  Fortunately for our friends, the bambino was born before the end of the year, which means they will qualify for the child credit on 2017’s income tax return. If you’re old enough to think about such things, you’ve chuckled along when a friend lamented that his wife gave birth just after midnight on New Year’s Eve. They just missed the baby bonus that Uncle Sam would have given them, and will have to wait another year for support.

When I heard Rubio was fighting for the child tax credit, I hoped it was to join Sen. Steve Daines who had earlier in the Senate debate proposed an amendment that would expand the tax credit in scope to cover pregnant women as well as those “unlucky” wintertime birth parents. A baby credit should be available to women who give their child up for adoption rather than abort it, too.

Imagine the pain of a young couple filling out their income tax forms this coming April, six months after their baby girl was stillborn. Their tax prep software asks: “Do you have any children and/or have you given birth in the past year?” Under the law, they must check “No” despite the fresh memory of the burial. Despite the little gravestone they paid for and visit every Sunday.

An ideal tax code would not tax any income earned below the poverty line, but treat all income above the poverty line the same. One rate, with few or no deductions of any kind. Instead, Congress has allowed the tax code to bloat with a confusing rate structure and complexity, some of it good, some bad, though it is frankly way too confusing for most anyone but high-priced tax lawyers to figure out. And the lawyers like it that way.

The complexity of the federal income tax code is mind-numbing, as Washington has used it to do everything from define marriage to define parenthood. Deductions or credits or exemptions? The fact is that a majority of Americans will pay less thanks to the Trump tax reform, with the exception of high-income earners in high-tax states like New York and California. The economic effects are going to be positive almost immediately by boosting economic growth and helping companies create jobs. But the promise of simplicity proved elusive.

Ideally, the federal government wouldn’t be in the social engineering business. Since it is, why not do it fairly? With a credit for children already woven into the code’s complexity, we can applaud Marco Rubio’s success, but pregnant parents are still left without support. It’s a shame that the federal government isn’t willing to support all kinds of parents.

Tim Kane, the JP Conte Fellow in Immigration Studies at the Hoover Institution, is co-author of "Balance: The Economics of Great Powers From Ancient Rome to Modern America." He and his wife are the parents of four very taxing children.

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