Tax Reform to Address Child Affordability and Support Family Growth

Economy
1

America is facing an aging population issue, a challenge that is observed globally. This issue is largely driven by child affordability concerns, with couples worried about the costs of raising children.

To address this, I propose eliminating the current child tax credit and replacing it with a progressive system of adjusted tax brackets. Under this system, tax savings will increase as both income and the number of children rise. I propose creating sub-tax brackets within the current tax structure (for single filers and married filing jointly) that provide adjusted tax brackets for 1, 2, 3, and 4 children. These sub-tax brackets would progressively reduce total taxation as the number of children increases. This policy serves two key objectives: (1) it encourages couples to have more children by offering progressive tax savings and incentivizes high earners to expand their families, and (2) it motivates families with children to earn more, as higher earnings result in greater tax savings, providing increased financial security for raising children.

This proposal could be further enhanced by including tax deductions for childcare expenses, such as allocations for food, daycare, and other essential costs related to dependents, helping families better manage the financial demands of raising children. Additionally, income-based caps on tax benefits could be considered to address concerns regarding the progressive nature of the tax savings.

High level example for $100,000 of income as a married couple (ignores deductions for simplification):

Married Filing Jointly - No children

Income Range Tax Rate Tax Owed
$0 - $23,200 10% $2,320
$23,201 - $94,300 12% $8,532
$94,301 - $201,050 22% $1,254
$201,051 - $383,900 24% -
$383,901 - $487,450 32% -
$487,451 - $751,200 35% -
$751,201+ 37% -
Total Tax Owed $12,106

Married Filing Jointly - 1 Child

Income Range Tax Rate Tax Owed
$0 - $23,200 0% $0
$23,201 - $114,300 10% $7,680
$114,301 - $221,050 22% -
$221,051 - $403,900 24% -
$403,901 - $487,450 32% -
$487,451 - $751,200 35% -
$751,201+ 37% -
Total Tax Owed $7,680

Married Filing Jointly - 2 Children

Income Range Tax Rate Tax Owed
$0 - $43,200 0% $0
$43,201 - $134,300 10% $5,680
$134,301 - $221,050 22% -
$221,051 - $403,900 24% -
$403,901 - $487,450 32% -
$487,451 - $751,200 35% -
$751,201+ 37% -
Total Tax Owed $5,680

Summary:
No Children: Total tax owed = $12,106.
1 Child: Total tax owed = $7,680 (savings of $4,426).
2 Children: Total tax owed = $5,680 (savings of $6,426)

Summary at $200,000 of income:
No Children: Total tax owed = $34,106.
1 Child: Total tax owed = $27,964 (savings of $6,142).
2 Children: Total tax owed = $23,564 (savings of $10,542)

1 Like
2

The tax savings should be more. Increasing the dependent deduction across the board would help everyone in all tax brackets and is simple. It should also increase annually by some formula, such as the Consumer Price Index, to account for inflation.
The average cost per year per child is currently $8,000 not including day care if the parent works, whereas the current deduction for a dependent for living expenses is
a paltry $1,250. For example, the average cost of diapers for one child for a year is now $950. Just diapers! Look at what a car seat costs - upwards of $300. Formula is crazy expensive (due to only 5 plants for 3 companies for the whole nation.) Obviously the cost to feed, clothe, groom, transport a child per month is more than $100 which the deduction currently assumes. That’s without any toys, recreation, books, child furniture, etc.

Day care should stay separate as a credit because not all children are in day care, and the federal government should not incentivize separating infants and toddlers from their mothers. For developmental, social, and health reasons it is proven that under 1 year they should not be separated for more than 2 hours in 1 day, and for under 6 months not for more than 30 minutes.

Day care for dependents (children, disabled or elderly living with the couple or head of household) is a separate tax credit currently not to exceed 35% of the earned income regardless of the cost of the care. However the cost of care has skyrocketed and won’t go back down. The credit should be increased to 50% of the earned income.

Alternatives to large group settings with high staff turnover & high staff-to-child ratios & high illness spread should be incentivized by a bigger credit. In-home nannies, neighborhood small group in-home paid, are superior for children’s development and physical health. Under age 3 they need reliable consistent caregivers much more than “socialization” with other children, and learn more from adults. However, these are often difficult to arrange, a consequence of the loss of the extended family & stable neighborhoods.

Dementia care, care for a seriously disabled person or a person recovering from serious injury/surgery/illness and care for a disabled child can be substantially more than infant/toddler day care.

3

So you’re penalizing those that can not have children or that have already raised their children. Nope. This is unfair. Tax should be a flat rate sales tax. All income taxes should be abolished! They are completely unconstitutional! Flat rate sales tax, except on food.