Having a bigger family will translate into a smaller tax bill, if Utah Republican Sen. Mike Lee gets his way.
Lee’s tax reform plan would give a married couple with two children, making the country’s median annual income of $51,000, a tax cut of approximately $5,000 per year.
“It could mean affording health insurance, or community college, or cutting back hours at work to coach little league for a season, or just making it home in time for family dinner,” he told an audience at the American Enterprise Institute.
Lee prefers to think of tax cuts, which he describes as “pro-family,” as simply being fair. “For the party of Lincoln to indulge in the policy of privilege is a corruption of everything Republicans are supposed to stand for,” Lee said.
Lee’s plan would cut tax rates for anyone earning under $87,850 annually — twice that for married couples — to a flat 15 percent. Currently, the 15 percent tax rate is assessed only on the first $8,925 to $36,250 of income.
Any income above that threshold would be subject to a marginal tax rate of 35 percent, though Lee would eventually like to see that rate come down even further.
The highest federal income tax rate is currently 39.6 percent, for incomes of $400,000 and over. Rates were most recently hiked in January as part of the fiscal cliff deal struck between Congress and President Obama.
But the centerpiece of Lee’s plan is a $2,500 per child tax credit, applied against both income and payroll taxes.
“The current system, including its $1,000 per child tax credit,” Lee argued, “does not even begin to offset this unfair tax penalty. It doesn’t treat children as an investment at all.”
Experts have debated what constitutes “family-friendly” tax policy. Even some conservatives and libertarians have argued that policies like the child tax credit clutter the internal revenue code and should be considered”social engineering.” But Lee argues that current tax and entitlement policies are biased against child-rearing.
“Parents are required to contribute to this system not once, but twice,” he said. “First, when they pay their taxes, just like everyone else. And then again, by bearing the enormous economic costs of raising their children, who in time, of course, grow up to become the next generation of taxpayers.”
“Under the current system, parents receive no additional benefits for having contributed or sacrificed hundreds of thousands of additional dollars raising their kids,” Lee added.
“The family is an incubator of economic opportunity,” Lee argued, saying his plan will give families an equal economic opportunity from the start and bring the GOP back to its roots.
“The system is rigged,” Lee said. “The market can’t do that, only the government can — and it does.”
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