WASHINGTON (BP)–Even if Congress fully eliminates the marriage tax penalty from the current tax system, the income tax will continue to discriminate against traditional families, according to a new study reported by CNSNews.com Aug. 15.
“What is needed to end the numerous marriage tax penalties is nothing less than fundamental tax reform” in the form of a flat tax or national consumption tax, argue the study’s authors, David A. Hartman and Allan Carlson, writing for the Institute for Policy Innovation.
In 1995, the median married couple in America bore nearly 47 percent of the cost of government, according to the study, while an average taxpayer bore less than 40 percent. A typical married couple in 1965, by comparison, paid 37.5 percent of the total cost of government.
The extra tax burden carried by married couple families was then spent on “unproductive government programs that support costly dependents,” namely welfare programs for low-income families, the authors complain.
Taking into account high marginal tax rates and the fact that savings interest, dividends, capital gains and some inheritances also are taxed, income for married couple families stagnated over the last 25 years, according to Hartman and Carlson.
As a result of the tax bite, the researchers described many Americans as being discouraged from rearing children, and thus “our human capital is diminished.”
The idea of getting rid of the graduated income tax, with all of its quirky and complicated deductions, exemptions and penalties, has long appealed to those in search of a fairer, simpler way to pay for government. A flat tax would offer one tax rate coupled with a bigger standard deduction. A consumption tax would replace the income tax with a high sales tax on most consumer purchases.
But the plan put forth by Hartman and Carlson, with its emphasis on using the tax code to primarily benefit married couple families with children, won’t appeal to everyone on the political right.
Carlson’s preference would be to give, for example, a $10,000 deduction to every adult and child in a family, even if only one parent works. So, a father earning $50,000 per year would, for tax purposes, divide his income equally between himself, his wife and children. With five family members, the family would owe no income tax.
“That’s the whole point — to encourage families and to encourage child rearing within families,” Carlson said.
“The only reason to give any benefit or privilege to marriage … as opposed to other forms of companionship … is to encourage people to marry for the sake of the children,” Carlson said. And “unless you have the prospects, or at least the theoretical prospect of child-rearing in a heterosexual, coupled relationship,” there’s no reason for privileging marriage, he said.
Older married couples and married couples who choose not to have children don’t merit special help from the tax code, Carlson said, because “it’s not so much what the American dream is [but] what’s most valuable to the nation and the future.
“The most value is new life and new children. The point of any society is to perpetuate itself into the future.”
But other advocates for tax reform disagree with Carlson’s view.
“To suggest that the only purpose of marriage is the same purpose that cows get together, to generate more cows, is crude and degrading,” said Edward L. Hudgins, Washington director of the Objectivist Center.
“The purpose of government is to protect the life, liberty and property of individuals and otherwise leave them alone to make their own choices in life,” Hudgins said.
“There are economic merits to the flat tax, and one, incidentally, is that it would probably help people trying to raise families,” Hudgins said. But “the principle purpose of government is not social engineering,” he insisted. “People seem to do a pretty good job of having children without government direction.”
Hudgins said he believes Carlson’s scenario of increasing deductions for children to allow a five-member family to pay no income taxes is unfair.
“If the deduction were so high that no person with children pays any taxes at all … you are taking the whole concept of a flat tax and so perverting it … that in the end it may not be much better than the current mess that we have,” Hudgins warned.
Stephen J. Entin, president of the Institute for Research on the Economics of Taxation, said large across-the-board tax deductions for children are not always warranted.
“If children are for the pleasure of the parents, then they’re like consumer durables, and no you shouldn’t” give deductions, Entin said. “But if the purpose is to assure people a certain minimum amount of untaxed income to get along with before you start taxing them, then it is reasonable.”
Using the tax code to consciously influence personal decision-making is bad policy, Entin said. “That kind of distortion has no place in economics. It’s purely philosophical.”
Hall is a staff writer with www.CNSNews.com. Used by permission.