Other Pages On

politics, economy, tax

Last updated: May 24th, 2011

Taxes and Children:

Child tax credits, dependent deductions, and other tax effects:

In the current tax code in the United States, children are one of the largest factors influencing the total tax a person pays. A person or family supporting children can claim exemptions, reducing their taxable income by thousands of dollars for each child, and, especially for low-income taxpayers, children qualify for a variety of different tax credits, including the Earned Income Credit (EIC), the child tax credit, and the additional child tax credit. There are also additional credits and deductions available, as well as tax credits whose rates are affected by whether or not a person claims children as dependents on their tax return.

Arguments for and against these credits:

Arguments for child tax credits:

The arguments in support of child tax credits are relatively straightforward, and hinge both on the concept of fairness, as well as on social effects and the welfare of children involved. Children require considerable financial resources to support. Financial difficulties can place huge stresses on children and family, and can have negative impacts on the children's health and success later in life, and thus, can influence the prosperity of society as a whole.

Deductions and exemptions serve two purposes. One is as a sort of emergency or stop-gap measure, a lot like a welfare program, to help the poorest taxpayers, people who are raising families and struggling to make ends meet. However, there is a second purpose, from which even relatively wealthy taxpayers also benefit, which is the ideal of fairness: because people raising children have much less disposable income to enjoy a similar standard of living as those without children, it is seen as "fair" that they pay less tax. This argument is subjective, as, for wealthier people with many economic choices, one could see child-rearing as a luxury, a choice that they make.

Arguments against child tax credits:

My stance:

I understand the arguments of fairness, and I recognize that many people raising children face severe financial hardship. However, I see the downsides of the tax credits as too great. I would rather eliminate all of these credits and seek a different way of alleviating the social pressures of parenting. Rather than reducing taxes or making cash payments to parents, I would rather find ways to reduce the financial costs of parenting.

When I imagine an ideal legal, governmental, and tax system, I imagine a world in which children would have no effect on taxes paid. That is, there would be no special tax credits, nor any tax penalties, for having or supporting children. However, in the short-term, I do not necessarily support for the immediate elimination of these credits and deductions--the credits and deductions exist because of financial hardships, often severe, faced by people raising children. Removing all the credits too quickly, without implementing other changes, could have catastrophic effects on the lives of many of the poorest children and parents, and could even have damaging effects on the middle class, as our society has become strongly shaped around and dependent on the tax credits and deductions associated with children.

Keep in mind that many of these points are actually moot in my ideal world; my tax plan outlines the elimination of all income tax as an ideal to be worked towards. However, given that we currently tax income, I would like to see us work towards eliminating tax credits and deductions associated with raising children, and instead find other ways to alleviate the social problems associated with the struggles poor people have with raising children.

References and Further Reading:

Comments are moderated. Follow Cazort.net's comment policy for your comment to be approved.

blog comments powered by Disqus