How to fairly tax families

Article Highlights

  • The diversity of proposals illustrates how tricky it is to figure out the right way to tax families.

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  • Based on fairness concerns, the tax system should be more marriage neutral and provide increased support to low-income individuals without children.

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  • We can eliminate both marriage bonuses and penalties by taxing people on their individual incomes even after marriage.

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In his 2015 budget proposal, President Obama called for expanding the Earned Income Tax Credit (EITC) for workers without children. Currently, that program heavily favors parents relative to nonparents. It also gives rise to large marriage penalties, which some observers have proposed eliminating on the grounds that marriage should not be punished. Another proposal to change the way we tax families came, last fall, from Senator Mike Lee of Utah, who unveiled a tax reform plan that would dramatically reduce taxes on parents relative to nonparents. Defending this underlying principle, Reihan Salam has argued, “By shifting the tax burden from parents to nonparents, we will help give America’s children a better start in life, and we will help correct a simple injustice” stemming from the fact that we all benefit from the work parents do in raising the next generation.

This diversity of proposals illustrates how tricky it is to figure out the right way to tax families. Based on fairness concerns, though, there’s a strong case for making the tax system more marriage neutral by shifting to individual rather than family-based taxation, and for providing increased support to low-income individuals without children.

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Sita Nataraj
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