Contending that parents are double-taxed for children, Florida’s U.S. Sen. Marco Rubio and Utah’s Mike Lee are again pushing a plan to eliminate the so-called “parent penalty” in tax reform, with a letter to leaders of the U.S. Senate and House of Representatives.
“Our tax code today treats parents unfairly. The payroll taxes that help pay for federal retirement benefits fall on American parents who simultaneously bear the financial cost of raising their children, the next generation of workers whose paychecks will be taxed to fund federal retirement benefits. This function of the tax code creates an implicit ‘parent tax penalty’ – in effect, a tax bias against parents,” Lee and Rubio, both Republicans, argue in a letter they sent Wednesday to the chairs and ranking members of the Senate Committee on Finance and the House Committee on Ways and Means.
The issue is one Rubio and Lee have pushed before, with a bill introduced in the last session of Congress. That measure sought to address what Rubio and Lee say is a double taxation parents pay, through the income tax and the payroll tax, while only get tax relief for children on the income tax side.
The bill would add an additional $2,500 tax credit per child. Critics, such as the moderately-liberal Brookings Institute, have argued that the notion of a “parent tax penalty” ignores the government benefits that the taxes support for children, including public education, that have no direct benefit to childless taxpayers.
Rubio and Lee suggest they see an opening and support for their proposal in the 115th Congress and in President Donald Trump.
“We have long advocated for reducing the burden of double taxation and freeing private-sector investment from tax penalties through full expensing, and we are glad to see House Republicans share these priorities,” they write.
“Of course, tax reform should not only reduce the burdens that businesses face, but also do the same for working families. Families are the building blocks of our country, the fundamental units of society, and vital to passing down our values from generation to generation. Strong families are also incubators of economic opportunity, financial security, and generate the social capital upon which our free enterprise economy and constitutional republic depend.
With this in mind, it is concerning that our tax code today treats parents unfairly. The payroll taxes that help pay for federal retirement benefits fall on American parents who simultaneously bear the financial cost of raising their children, the next generation of workers whose paychecks will be taxed to fund federal retirement benefits. This function of the tax code creates an implicit “parent tax penalty” – in effect, a tax bias against parents.
“President-elect Trump recognizes this problem, saying that “very little meaningful policy work has been done” to help parents afford the costs of raising children. In 2016, we proposed correcting this inequity with a larger child tax credit, applicable to both income and payroll taxes,” they write.