| October 9, 2012
Tax policy should reward families
Writing in the public policy journal The Family in America (“The Economic Boost of Childbearing"), Bryce J. Christensen and Robert W. Patterson recently reminded us that “when American parents take on the burden of bearing and rearing a child, they deliver a huge dividend to society.”
So concludes a team of economists from Berkeley and Syracuse universities intent on assessing “the net fiscal externality to being a parent.” … [Their] complex calculations yield the researchers’ “central finding”—namely, that each child parents raise constitutes a net benefit to society amounting to $217,000 in 2009 dollars. In the rather opaque language of economics, “the net fiscal externality of becoming a parent is [thus] positive and substantial. … Becoming a parent is tantamount to providing society with a non-depreciating capital asset that generates an annual flow of revenues, in perpetuity, such that the present value of the asset (at an interest rate of 3 percent) is $217,000.”
Obviously, then, federal tax policy should reward families, not punish them. Unfortunately, as analysts at The Heritage Foundation and elsewhere have pointed out, a looming “Taxmageddon” is set to punish families on January 1, 2013. Heritage estimates that the average federal tax increase next year for Oklahomans will be $2,688 per tax return.
At the state level, too, family-friendly tax policy is essential. And as OCPA economists Scott Moody and Wendy Warcholik wrote earlier this year, perhaps no reform would be more family-friendly than the OCPA-Laffer plan to phase out the individual income tax. Short of that, Moody and Warcholik, mindful of “the individual income tax’s ill effects on the family,” have recommended several other reforms. Among them: purge the marriage penalty altogether, and expand and increase Oklahoma’s trailblazing child tax credit for households with a stay-at-home spouse.
Whatever the case, we must resist any tax reform that actually increases taxes on Oklahoma families. After all, children are wealth. Parents who produce and maintain human capital should be encouraged and rewarded, not punished.