Why do childless US taxpayers have to support other people's kids?

Great Debates
1

I don’t get it.

If I have a child in the US, I receive tax credit. For each qualifying child under 17, I can subtract up to $500 from my income tax. If I have 3 or more children, I can subtract even more per child.

If I pay for childcare, I receive another tax credit, partially reimbursing me for what I pay in childcare.

So as near as I can tell, by having more children, which place more of a burden on schools, healthcare, and infrastructure, I pay fewer taxes.

WTF?

Doesn’t this mean that those without children are effectively subsidising other people’s children?

Now, I understand that education is important. I think any rational person will agree that an educated society is to everyone’s benefit. So I tend to dismiss as foolish the argument from the childless that they shoudln’t have to support education. But it’s going beyond that. Instead of merely subsidising the education of others’ kids, the childless are paying more than their share of taxes, merely because they don’t get the tax credits that parents enjoy.

Can someone please explain this to me? Why is this system in place? Why do we continue to give special privileges to people with children?

2

Well, you could look at it as an investment in future income tax payers. A 30 year-old with no children may be paying taxes now, but 40 years from now they probably won’t be. Whereas a couple who produces three well educated children are likely to leave replacements who will earn more, and thus pay more in taxes than they saved their parents from paying.

3

You might as well ask why non-car-driving citizens subsidize road repair and support activities, or why non-farmers are subsidizing farmers (often for not growing crops), or any of the other thousand-and-one “I don’t get any benefit” uses of your tax dollars.

4

tourbot:

I’m paying extra tax money now so there will be more people paying taxes in the future?

Granted. But are those three well-educated children going to pay enough in taxes to offset all the money saved raising kids who don’t become highly productive members of society?.

rj:

I might, but I’m not. I’m asking specifically why the childless are penalized for not having kids.

5

Childless people are not penalized. You just don’t get a specialized tax break that I do get.

You might, however, recieve some other tax break which I do not.

Does this mean we are being victimized? Nope. Just the way the world works, sometimes you get and sometimes you give.

6

Andros, want to get your panties in a bunch? - check out the Hope for Children Act. That one should excite you to no end.

http://www.jcics.org/hope.html

7

Thanks for the link, Dangerosa. I can’t say I agree with a $10,000 tax credit for non-special needs adoptions, but I’m all down with credit for special needs adoptions.

EJsGirl:

Parents receiving tax credits for their children place an additional burden on all other taxpayers. Those without children pay more in taxes while placing less strain on resources. This is not a penalty?

Not that I know of. Although I might suggest that a tax break specifically for the childless would not be extreme.

I don’t have any evidence that the amount given and gotten is equitable.

Regardless, I still want to know why we are encouraging people to have children. If it’s simply to encourage a continued influx of future tax payers, I can certainly argue with it. But I have to think there’s another reason for this.

Is it simply because the childless have been so in the majority for so long?

8

Yup, more taxpayers with children than without. I would also question why we would want to encourage anybody to have children. There certainly isn’t any population crisis in the United States right now. Contrary to what some people seem to think, a society can survive without population growth. As for the argument about future taxpayers, I dont buy it. I think that eventually, we’ll have to raise retirement age somewhat or reduce the amount of social security paid out regardless of how many children are being born. Social Security and Medicare will continue to eat up larger portions of the government budget no matter how many children there are, because of medical advances. The solution is that we need to do more to prepare for our own retirement, not create children to pay taxes for us when we retire.

9

People have tried to come up with systems where everyone pays for what they get, and nothing more.

There are at least two problems:

First, the pay-as-you-go system can be very inefficient.
Will you put a toll-booth on every corner? Have an admissions booth at every public park? It can be very difficult (and expensive) to measure with any precision how much benefits are realized by different people.

Second, there is arguably some value in redistributing wealth. Granted, redistribution is often done in an unfair manner, but imagine the poverty and utter destitution that would exist in a country without some amount of welfare etc.

10

I like the special needs part myself - seems to make sense to me. But despite being a tax and spend liberal, I just can’t see a $10,000 tax credit so a yuppie couple can adopt a healthy infant.

11

Just want to point out two things about the child care credit - First, it isn’t just a child care credit- it’s for dependents of any age who need care. In other words, if my mother needs to pay for care for my disabled father so that she can work (rather than collect welfare), that’s eligible for the credit.Second, the credit isn’t available to everyone who pays for child care.A married couple can only take the credit if they both work. The fact that both my husband and I work increases our household income and therefore tax bill by far more than the $450 credit we get.In fact, the $450 probably doesn’t make up for the marriage penalty we pay because our incomes are similar.

Now about the $500 tax credit - that’s should work the same way. I don’t see why you should get a credit for supporting a child under 17, but not for supporting your 85 year old mother.’

12

Doreen

If we are talking about the same tax credit, it does work the same way. It is $400, ($500 the first year), reducing by $50 per $1000 of income over $55,000, $75,000 and $110,000 for married-seperately, single, and married-jointly, respectively.

Here is the link: http://www.irs.ustreas.gov/prod/ind_info/child-cred.html

I did the math. I figure that I plan on having one kid. I probably won’t be eligible for the credit, but if I were, I’d get $6500 over 16 years. I started working full time at 17. I’ll quit at 67. $130 a year, or $5 a paycheck. You know, I’m a republican, but I’m more than happy kicking in my 5 bucks to make a median-income or below parents life easier. Kind of a hey, time’ll be tough for a while, pay it back they leave the house, and I’ll count on you to do the same thing for me. Given that that’s my attitude, I wonder what percentage of people have at least one child over the course of their lives.

Those who don’t believe that we are facing a crisis would do well to examine the current problems facing Japan.

13

bashere

I wasn’t too clear. I believe that on some level, the child tax credit was supposed to be based on the additional expenses associated with the child. My problem is that any dependent, whether it be a child, an elderly parent, or an over-18 college student son or daughter involves extra expenses. I don’t think it’s fair that I get the credit for my children, while my next-door neighbor doesn’t get it for her mother,who is as dependent on my neighbor as my children are on me. The child and dependent care credit, on the other hand, is allowed if a dependent of any age needs care to allow someone to work.

14

Hey andros, look at it this way: in about thirty years, the children you support now will be supporting you, with Social Security and Medicare taxes.

15

I think the custom of using the tax code to attempt to promote this and discourgage that is firmly entrenched. Personally, I don’t like it. Many of the things being encouraged (childbearing, home ownership) need no encouragement. And when you use the tax code to encourage something, you are, in effect, penalizing something else. The encouragement for home ownership, for example, amounts to a penalty for renters.

And consider “sin taxes” – these taxes make alcohol and tobacco way more expensive then they would be otherwise. I really do not think these taxes have any effect at all on the amount of smoking and drinking in the US. It’s just another way for government to get more bucks.

16

(Well, no, actually. Most likely I’ll be supporting me, with sound investment and long-term financial planning.)

I see your point, though. But in thirty years, those children will be supporting everyone. It’s not like the childless are going to get reimbursed directly for the $500 bucks they’re not getting.

I’m more than happy to see my tax dollars go to support education, health care, social services, etc. But the fact remains that parents pay less, while the childless pay more. And I still don’t know why . . .

17

andros - Let me just say that I’m completely in your corner and very glad that you’ve chosen the path of true self-sufficiency. It’s a thankless task, I know, given how incredibly powerful the pressure to have a child, have a child can be in American society. (BTW, check out http://www.ninapaley.com…she’s written some terrific essays on this subject.) You’re quite justified in opposing a bill that encourages breeding, as if we need any more encouragement.

That said, I think you’re overreacting just a bit. One of the most basic functions of any responsible government is giving help to those in need. It takes a certain amount of money to raise a child, definitely far more than $500 a year. We have unemployment benefits and welfare (well, maybe not as much thanks to Clinton’s “reform”), also paid for by all taxpayers, to help out those who really need it. Shouldn’t they expect as much? (And please, none of that garbage about how welfare mothers are driving luxury cars…a monthly check isn’t even enough for a motor scooter.)

doreen - To the best of my knowledge, the dependent credit does apply to all dependents, regardless of age. (I distinctly remember entering my grandfather as a dependent on this year’s TurboTax program.) The 1040 form itself has a section specifically for all dependents. Is there a new, specific credit just for children? I’m unaware of this.
As a side note, I feel that it’s EXTREMELY crass to have children so they’ll support you after you retire (or, for that matter, because society expects you to). I’m not even going to entertain the idea.

18

DKW- The dependent exemption (at the beginning of the form, right under filing status) applies to all dependents. The child credit(on the second page of the 1040,after you’ve calculated the tax)only applies to children under 17.

19

I think Hazel has come up with the best anologue so far, and yet it remains unaddressed.

Why do mortgage paying homeowners get a tax break that renters do not? Why do renters, in the words of andros, have to pay more than their share of taxes?

20

Oh dear, its threads like this which make me wonder… (and for the record, I am neither a home-owner nor a parent.)

Economically speaking there are any number of perfectly good reasons for tax policies such as minor subventions for parents and home owners. We may easily add political-economic or socio-economic justifications to a more purely economic justification.

In regards to subventions to home owners, the question here is one of property ownership and what is widely considered to be the large positive economic externalities to having widespread property ownership. Widespread home ownership also clearly has positive political and social implications in re both stability and investment in free market norms which are not to be assumed. A comparison with countries without widespread home ownership would probably be instructive — I should try to scare up some data if I get a chance, but in any case I believe it is fair to say that economists widely consider home-ownership to have large positive effects in aggregate economic terms. The key is aggregate.

The same concept in regards to children and the directing of social support to their effective raising and education. First, regardless of andros and others self-confidence in regards to their investing abilities, the ability to cash in on this will be largely determined by future economic conditions. These in turn are dependent on the future work force, in part its size, in part its productivity. Despite one poster’s assertion about the crassness of depending on future generations, I’m afraid that is basic to all individual and aggregate planning. Crass? Maybe, but no escaping although one can paper over the reality, despite assertions of “true independence or what not”. Not that I am implying that somehow without a tax credit here or there, one will have economic collapse, but only that there are collectively rational justifications.

So, in terms of social policy what are the concerns? Well, you do need a future work force that is large enough to support future retirees. That is not solely from taxes to social security and medicare but also implicit supports in terms of a market for whatever securities etc. the future retirees will be selling to support themselves. No market, no wealth. You’re fucked. Of course size is not the only consideration as higher productivity of course should allow a smaller number workers to support more non-productive members of society. Nonetheless we would want to avoid a too abrupt demographic transition — Japan may face serious issues in this regard in the future if they refuse to import workers — either through native natality or through imported natality, i.e. immigrants. Further, in regards to productivity, one can fairly clearly see that this depends to a great extent upon education of the workforce, so once more it is in your individual interest to support as much education as is effective to create future productivity so that future active populations can either directly or indirectly support your old ass.

So, although this thread is a perfect example of the individually rational but collectively non- optimal thinking which leads to under-investment, above all in areas like education and the like, I don’t see any valid objections here.