Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, March 11, 1994 TAG: 9403120012
SECTION: EDITORIAL PAGE: A-11 EDITION: METRO
SOURCE: By JOHN CARLSON
DATELINE: LENGTH: Long
But while senators hold hearings and endlessly pontificate about the cultural problems plaguing American home life, they ignore another major burden on the family that could be cured tomorrow: our tax system and how it punishes marriage and children.
If you want more of something, subsidize it. If you want less of something, tax it. If you ignore all the political rhetoric about the government's intentions and simply look at the things it subsidizes and taxes, you would quickly conclude that the government wants single women on welfare to have children, that it prefers young couples to live together without getting married and that it doesn't want married couples to have children.
There isn't a politician in either party who would dare say he or she wanted those things, but people's behavior is affected more by what their government does than what their congressman says.
Let's zero in on how the government treats a married couple with two children today compared with how it treated a family 45 years ago.
Back in 1948, Harry Truman was in the White House and the typical family of four paid just 2 percent of its income to the federal government. Today, a typical family of four pays more than 24 percent of its income to Uncle Sam. When state and local taxes are included, the tax burden on that family grows to more than 35 percent of its income.
The consequences of this assault on family income are clear. Both parents in many families now have to work to live as well as a family with a single breadwinner back in the '40s and '50s. Many working couples are forced to make a fateful choice: more time with the kids or more income to pay the tax burdens now imposed on them.
Robert Rector of the Heritage Foundation calls this the ``growing anti-family bias in the federal income-tax code'' and he identifies two culprits.
The first is the dilution of the personal exemption for children. The personal exemption allowed parents to deduct $600 from their taxable income per child back in 1948. Since the median family income was about $3,500, this was equal to roughly 17 percent of the income per child. This exemption offset the costs of raising children, and the result was a tax system that imposed little burden on married couples raising children.
But as time passed, the personal exemption lagged far behind the growth of inflation and income. As the relative value of the exemption dwindled, the tax burden grew and family income was diverted from family expenses to government.
Then came the increase in Social Security taxes. In 1948, an employee paid 1 percent of his income to Social Security. The employer matched it.
By 1992, the combined tax had risen from 2 percent to 15 percent of most wages - 7.5 percent from both worker and employer. On paper, this seems fair since most everybody pays the same percentage. But in reality, it imposed a heavier burden on families because there was no adjusting for the added expenses of raising children. It's far more burdensome for a married father of three to pay this portion of wages in Social Security than the happy-go-lucky bachelor working next to him.
A society that values the importance of family life shouldn't treat families this way. This was a theme sounded over and over again by candidate Bill Clinton during the '92 campaign: ``Millions of Americans are running harder and harder just to stay in place ... middle-class families pay more and earn less.''
The Clinton budget however, has not corrected this unhappy trend. Neither does his upcoming budget, which Congress will vote on this week. That has given Republicans a clear, strong issue to push for and run on this November.
The Kasich Alternative to the Clinton budget, proposed by highly regarded Republican Congressman John Kasich of Ohio, would grant a $500-per-child tax credit for every family making under $200,000 per year. A tax credit means that amount comes off your tax bill.
Fifty million families would be eligible for the credit, the overwhelming number of which make under $60,000 a year. The amount of money lost to the Treasury would be $104 billion, which Kasich would pay for with a series of budget cuts aimed at Amtrak, government loans and eliminating most of Clinton's ``investment spending'' increases. Kasich would also privatize some government-run utilities and companies, have wealthy retirees pay a slightly larger share of their Medicare expenses and eliminate welfare benefits for non-citizens.
All told, the Kasich alternative reduces the federal deficit $15 billion below the Clinton budget while paying for tax credits that allow working families to keep more of what they earn.
Finally the Republicans have it right. After half a decade of Dick Darman/George Bush big spending, a Republican alternative emerges (I call it The Family Budget) that cuts government, helps families and grows the economy. Can Clinton top this? If he can, we'll be even better off.
John Carlson is president of the Washington Institute for Policy Studies in Seattle. He wrote this article for the Seattle Times.
Knight-Ridder/Tribune News Service
by CNB