Don't Limit Tax Relief to Families

Posted: Sep 23, 2014 2:50 PM

Sens. Marco Rubio (R-FL) and Mike Lee (R-UT) have a fine op-ed up at The Wall Street Journal today outlining the "pro-family, pro-growth tax reform" they plan to pursue November. Rubio and Lee write:

The current tax code taxes too much, taxes unfairly, and conspires with our outmoded welfare system to trap poor families in poverty, rather than facilitate their climb into the middle class. Our reforms seek to simplify the structure and lower rates. How? By consolidating the many existing income tax brackets into two simple brackets—15% and 35%—and eliminating or reforming deductions, especially those that disproportionately benefit the privileged few at everyone else's expense.

In addition, our plan would eliminate the well-known marriage penalty, which imposes higher taxes on married couples than if they had filed individually. It would also take aim at another pernicious distortion—the parent tax penalty—that is more prevalent, if less understood, even by its victims.

Today, parents are, in effect, double charged for the federal senior entitlement programs. They of course pay payroll taxes, like everyone else. But unlike adults without children, they also shoulder the financial burden of raising the next generation of taxpayers, who will grow up to fund the Social Security and Medicare benefits of all future seniors.

This hidden, double burden on parents isn't offset anywhere else in the system, and so true conservative tax reform needs to account for it. Children aren't consumer goods—they are investments parents make in their futures, and in the future of America, and therefore deserve to be treated as such in our tax code.

Our proposal would account for this and level the playing field for working parents by augmenting the current child tax credit of $1,000 with an additional $2,500 credit, applicable against income taxes and payroll taxes—i.e., the taxes that most burden lower- and middle-income families. The credit would not phase out, and would be refundable against income tax and employer and employee payroll tax liability.

Eliminating deductions "that disproportionately benefit the privileged few at everyone else's expense" is a worthy goal. 

But why do Rubio and Lee insist on plowing those savings right back into other tax credits that benefit just a few select Americans? Why not take those resources and use them to cut the payroll tax for all working Americans?

Not only is cutting the payroll tax a proven job creator, but such a tax cut would appeal to a far broader group of Americans. In 2012, just 36 percent of voters had a child under age 18 living in their home. Compare that to the 60 percent of Americans who work full time for pay.

And the Republican Party already has a lock on married households with kids. In 2012, Mitt Romney won the married with children vote 54 - 45 percent. Meanwhile, Obama won unmarried Americans 62 - 35 percent. Why are Lee and Rubio so intent on running up the margins among married voters with children? Wouldn't it be better to offer all working Americans the chance to take home more of every paycheck?

A payroll tax cut is also effective against Democratic calls for fighting inequality by raising the minimum wage. When asked to choose between a payroll tax cut and a minimum wage hike, voters preferred the payroll tax cut by double digits.

It just does not make any political or economic sense to confine the benefits of tax cuts to those who currently care for young children.