03 April 2008

Family Policy

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Buroboi asks, and we deliver. This post is about government policy that could be used to help families in America. Lest we be accused of plagiarizing the ideas, let us say up front: we've read most if not all of these somewhere else. That said, we've been unable to locate exactly where we read everything first so as to give proper credit. We're pretty sure some of it came from the pens of Ramesh Ponnuru and Jim Manzi.

And again, our caveat: these policy ideas should not be confused for a complete solution. We reaffirm our general agreement with buroboi and Decker by saying that there needs to be a cultural sea change with respect to marriage. We maintain that, however difficult, a legal prong to our family pitchfork is necessary. If we can get Constitutional protection of marriage, we'll take it.

- Child Tax Credit: As it stands, families can receive up to $1000 per child in tax credit. This is limited by income and marital status. We would do two things: at least double the tax credit to $2000 and raise the limit from $110,000 to at least $200,000. Our goal, simply put, is to subsidize the production of children. If that sounds overly economic, so be it. We want to reduce the financial costs of bearing and raising children.

- Eliminate the marriage penalty: Because of our progressive tax scheme, married couples filing together often occasion higher taxes than if they were single, filing separately. Our goal should be to eliminate any financial incentive that encourages people to remain unmarried. At a minimum, we should create tax policy that is neutral with respect to marriage.

- Marriage Tax Credit: There are obvious rule of law problems with this one. Some people can't or won't get married and thus, will never qualify for this tax credit. But families are a net benefit to society and it is in society's and our government's interest to promote them. Some sort of tax credit for married couples would accomplish this.

- Family Insurance Tax Credit: Our final suggestion is part of John McCain's health insurance proposal. We've written about health care before, here & here. Currently, because government taxes wages, but not health care provided by employers, they are essentially subsidizing the HMO's everyone hates. This is also why wages haven't risen the way everyone thought they should: your wages are being paid out in increased health care costs.

John McCain and his team of policy experts have proposed, and we endorse, eliminating the tax exception on company health benefits and providing each individual and family a large tax credit so that they can purchase their own insurance independent of their employer. If we remember correctly, he proposed $5000 per couple.

We understand that rising health care costs put stress on families. We aren't unsympathetic to these problems. We just disagree with Obama and HillaryCare. To employ a little demagoguery, we don't want the DMZ administering universal health care.

Separating insurance from employment would give families greater choice, not only in selecting their insurance, but in picking a job. With no fear of losing insurance, working family members would be free to take the job for which they are best suited and best compensated--regardless of "benefits." This would reduce or eliminate one more family stressor.

- Conclusion: This is by no means a finished (or, as you can tell, polished) product. As Mark Steyn concluded in a column on the family last October:
In the space of 40 years, the middle class abolished “living in sin” and embraced “long-term partners,” and the working class stopped worrying about “broken homes” and accepted the sociological designation of “alternative families.” And reversing it will take a lot more than targeted tax breaks and entitlements: It’s the stupidity, economists.
These policy recommendations are simply the easiest solutions to suggest and the easiest to quantify. There must be legal and cultural prongs to our American Gothic family pitchfork.

*UPDATE 4 April 12:13pm MST: For more on expanding the child tax credit, see this now-found article by Ramesh Ponnuru. Really, really good stuff.


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6 comments:

Spikers said...

Eliminating the employer tax credit has at best, ambiguous economic effects. But, on average, McCain's proposal would lessen health coverage. Employer based insurance has a number of advantages, including large risk pools which are less subject to adverse selection, large employer contributions, and government subsidization. Also, the incentive to opt out of insurance is lessened by subsidization and the fact that it is provided incident to employment.

Removing the employer incentive will reduce employer provided insurance, reduce the size of risk pools, increase adverse selection, and probably decrease the net number of insured. Employer + govt. subsidization of insurance probably exceeds $5,000 per couple. Also, uninsureds are disproportionately young and single. So, giving couples a tax credit is unlikely to vastly expand insurance. Furthermore, individual (As opposed to employer based group insurance) is characterized by higher prices, is more prone to adverse selection, and leave individuals will less power to negotiate prices. Large employers are able to negotiate lower premium prices than individuals.

In sum, McCain's proposal will likely lessen the total insurance subsidy, increase adverse selection, and reduce the size of risk pools, and will not increase the net number of insureds. I apologize for the rambling nature of this comment, but i am writing it in the middle of class.

MJ said...

Can you start adding new polls on the site please?

MJ said...

Ya night class!

A few thoughts to shoot your way...

1. If you want me to have kids, you had better pay me a lot more than $2000 a year.

2. The marriage penalty is so stupid to me. What is the argument for it? I can't even remember!

3. Your Marriage Tax credit will INCREASE the number of marriages.

4. Is a two-person household a family?

5. Instead of free health care for families, how about free health care for everyone? Then everyone will be healthy enough and of a good mind to start families.

6. It’s the stupidity, economists. Love it!

jody said...

In response to 5, have you seen the effects of socialized health care? I will pass. HSA's are my preference, I wonder if a tax credit for using a Health Savings Account would help the concept catch on?

jen said...

MJ,

I think McCain's plan includes a tax credit for individuals as well as families and the reason Lybbert didn't talk about it was because his post focused on "family policy." Just a thought.

buruboi said...

1. Increasing child tax credits is a great idea. Is anyone familiar with the Swedish system of incentivizing child bearing and involved parenting? The Swedish government (along with a parent’s employer) pays for 80% of the salary for maternity or paternity leave for up to a year after the child’s birth. With deficit spending running wild, I doubt we could implement such a robust policy but it’s an idea the US should certainly tinker with (currently, there is no paid paternity or maternity leave). Also, Sweden requires businesses to allow parents to spend a day with their child at school. This is an equally good idea. Capitalism’s lust for a better bottom-line should be balanced with the needs of responsible parenting.

2. I’m also for a marriage tax credit. Public policy is about incentives, and this is getting them right. However, I would like to add a tangential note. If advocates for incentivizing marriage with a tax credit don’t feel that it will induce a negative externality of people merely marrying for the benefit of those tax credits, then they will have to dispense with those same criticisms that are applied in opposition to homosexual unions.

3. Health insurance is such a muddled issue. I believe in a two-tier system. One run by government that provides access to simpler medical care, and another run by the free market. Unfortunately, we have neither system—there is little competition between health insurance companies, and so we end up paying artificially higher premiums. Another problem is that few of us have control over who our health insurance company is. This is horrible economics—we essentially pay for our insurance without the ability to choose who provides it. McCain’s proposal seems that it would address this specific weakness of our health care system. I’m not convinced, however, that a married couple’s insurance credit should be any greater than two-times what an individual would receive. In the case of a marriage tax credit, we’re incentiving marriage; a child credit, child bearing. But I don’t think we send a good message when we provide married couples with better health care coverage than single Americans. Even insanely attractive citizens such as I find it difficult finding the right fit. Notwithstanding, I would like good health care to preserve my phenomenal physical appearance.

4. Thanks for the policy proposals. All in all, very good.

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