Tax deductions for children

Politicians this election cycle have been talking a lot about increasing tax credits for children, but offering a large tax deduction would actually be a better policy if the aim is to encourage higher birth rate among those who are economically responsible.

A tax credit would most heavily benefit the lower class (because it grants a set sum of free cash regardless of income), but a deduction would more selectively target the middle class. A $20000 deduction per child, for example, would eclipse the standard deduction after the second child. It would essentially eliminate income tax for most middle class families who have 4+ children.

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The average American works for 4 months of wages to pay federal income tax. Don’t take your eyes off the target. Tax credits are just someone else’s 4 months of work.

The point of my post was that child tax credits should be replaced by child tax deductions. This rewards people who are industrious and is very different from a credit. It is not free money.

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