Child Allowances are a Bad Idea
By David Henderson
In the recent $1.9 trillion spending bill, Congress passed a measure to give monthly payments to parents with children. Although the measure will expire at the end of 2021, there are moves on both sides of the congressional aisle to implement a permanent child allowance. The amounts are not small. Under the current program that Congress passed, families will get a $3,600 annual tax credit for each child under age six and a $3,000 tax credit for children ages six to seventeen. Many congressional Democrats want to extend the program beyond the end of the year. And Republican Senator Mitt Romney, far from opposing such a program, has recently proposed a child allowance of $4,200 per year for a child under six and $3,000 a year for a child between ages six and seventeen.
Child allowances are a bad idea. It’s wrong to forcibly take money from some and give to others simply because they have children. Moreover, child allowances would create increased dependence, are not targeted at the needy, could reduce the work effort of lower-income women, and would add to the already huge federal budget deficit and debt. Moreover, there are other ways of dealing with the legitimate concerns of those who favor a child allowance, ways that involve not more taxes and deficits but more deregulation, particularly in the areas of housing and immigration.
This is the opening of latest Hoover article, “Child Tax Credits Feed Debt and Dependency,” Defining Ideas, April 23, 2021.
Another reason the Romney child allowance is wrong is that it’s not targeted at the needy. That lack of targeting is what makes the program so expensive. The Romney bill would grant full child allowances to single income tax filers with income up $200,000 a year and to joint (married) filers with income up to $400,000 a year. My wife is not, like me, a libertarian. Instead, she’s a normal person with a lot of common sense. When I told her that people with incomes that high would get federal subsidies, she said that was absurd. And because the subsidy phases out at a rate of $50 for every $1,000 in income above those limits, even families making $500,000 a year could get a partial child allowance. To put those numbers in perspective, in 2019, median household income was $68,703. If there is a case for per-child payments, the payments should be targeted on people with an income below the median and probably well below the median.
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