Sen. Mike Lee (R., Utah) said the government should significantly increase the tax credit for children as part of a tax reform proposal that he introduced in a speech at the American Enterprise Institute Tuesday afternoon.
Lee attacked in his remarks what he called the "parent tax penalty," which is where parents have to pay for the social security of the previous generation while bearing the cost of rearing their own children.
"Right now the tax code penalizes parents. It shouldn’t," Lee said.
Lee’s plan, titled the "Family Fairness and Opportunity Tax Reform Act," creates a new $2,500 tax credit per child, more than doubling the current available credit.
"Coupled with existing child tax provisions, this new credit will begin to equalize the tax code’s treatment of parents and children," Lee said.
Lee’s plan also simplifies the tax code by eliminating most deductions and creating two tax rates, 15 and 35 percent. It then sets up a $2,000 personal credit, a new charitable deduction that does not involve itemizing (making it available to everyone), and a new mortgage interest deduction that is capped at $300,000 dollars.
The plan would be an "immediate, potentially life-changing reform" for middle class families, Lee said, by giving them more money to invest in childcare, education, or businesses.
"It would, in short, restore opportunities to working parents and their children to pursue happiness that right now federal policy unfairly denies them," Lee said.
The plan does not achieve a flat tax or a consumption tax, which some conservatives consider the ideal, Lee said. However, he said that his plan moves the current system toward a more fair system by trying to even out a current bias against parents.
Lee conceded that the expanded child tax credit could take some people completely off of the federal tax rolls. He also conceded that his plan would reduce the revenue coming into the federal government, but he said that the amount it would bring in is consistent with the average revenue over the years.
Lee plans to introduce his bill in the Senate sometime in the next few days.
A panel of tax and social policy experts commented on the plan after Lee made his remarks.
Ramesh Ponnuru, a senior editor at National Review, said Lee’s plan would bring back "a communitarian dimension to conservative economic policy." Conservatives too often emphasize a striving individual, and Lee’s policy proposal balances that tendency by emphasizing the family, Ponnuru said.
The extra financial help for children would help stabilize marriages and families, said Brad Wilcox, the director of the National Marriage Project.
Children raised without both parents are less likely to get a college degree and more likely to end up in prison and experience poverty, he said said. Better family stability means a better environment for children, which he said is better for society.
While the plan focuses on families and children, it does not give enough attention to work, said Elaine Maag, a tax policy expert at the Urban Institute’s Tax Policy Center. The tax code should encourage young men to enter the work force, she said.
Alex Brill, a tax policy expert at the American Enterprise Institute, praised Lee’s plan for focusing some tax provisions, like the mortgage and charitable giving deductions, more on the middle class than the rich.
However, Brill said that these plans could end up costing the government money, with the child tax credit alone more than doubling. Other provisions would broaden the tax base by reducing exemptions, he noted, making it impossible to calculate the actual cost of the bill right now.
"This is not a cheap policy," Brill said.