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logic of the child tax credit(23 posts)

logic of the child tax creditDuane Gran
Sep 8, 2003 12:51 PM
I have been thinking about the 5k tax credit in the US for having a child. In general that tax code is structured to encourage or discourage various choices. For example, a tax break on mortgage interest paid encourages home ownership. The child tax break doesn't quite make sense. Why encourage people to have children?

Don't get me wrong. I'm not anti-family or something like that. I'm just curious if anyone knows of an institutional justification for the policy.
re: logic of the child tax creditJon Billheimer
Sep 8, 2003 12:57 PM
Two reasons. Either to encourage population growth or to buy votes. In Canada for a number of years we had a baby allowance, basically a monthly welfare cheque for each kid you had. The idea was to encourage population growth, which in Canada and some other countries has been an issue, since the birth and death rates are pretty evenly balanced. Hence we rely on immigration to fill a skill-deficit in the job market. As well, this bought a lot of votes for the liberals. But I'm betting the vote buying aspect is the primary driver in the U.S.
It's not a pigou tax,TJeanloz
Sep 8, 2003 12:58 PM
The child tax credit isn't designed to encourage, or discourage, having children. I don't know what the original basis of it was, but my presumption is that it is a quite effective way to ensure that money is put directly into the economy.

Kids are expensive, so any break you give parents goes right back to the Wal-Mart (or wherever parents are doing back-to-school shopping these days.)

It's not enough money to make child-bearing a profitable venture.
It doesn't encourage just <i>anyone</i> to have children. . .czardonic
Sep 8, 2003 12:59 PM
. . , just people who earn enough to take advantage of this credit. To me, that hints at all kinds of sinister motives. But some say I am a cynic.
It;'s welfare, plain and simple...Matno
Sep 9, 2003 8:55 AM
As a student with children and no income, I get WAY more money back from the gov't than the $0 I pay in taxes. (Approx $2000 with one child, more next year now that I have two). You don't have to make ANY money to take advantage of this "credit."

However, I don't think it's really an encouragement to have children. Rather, I think it's to send a message that we think children are important. Ask any country in Europe, or the UN for that matter, what the greatest threat to their economies is. Answer: population decline.

Bottom line is that our gov't has been using taxation for years to implement "policies" that they can't legally enforce via Constitutional means...
are you sure?ColnagoFE
Sep 9, 2003 9:37 AM
I thought the child thing was a credit against next year's taxes? How do you manage to get a refund with no income tax paid? That doesn't make sense. Sure you qualify for welfare and such with a kid and no income, but that isn't income tax.
now keeping your own money is "welfare"? nmDougSloan
Sep 10, 2003 7:13 AM
he said he had no income thoughColnagoFE
Sep 10, 2003 7:46 AM
I'd have to agree if he isn't paying taxes then it is welfare.
then that doesn't even make senseDougSloan
Sep 10, 2003 7:48 AM
You can get a tax credit if you owe no taxes.
it's supposed to be pro-familymohair_chair
Sep 8, 2003 1:09 PM
The primary reason for the credit is to make parents think that politicians "feel their pain" and understand that raising children is tough and costs money and they are the future backbone of this great nation and by god, that's what made this country the greatest country ever and left us as the only remaining superpower, and anyway, back to children, treat them well and let them lead the way, show them all the beauty they possess inside, and Iiiii-eeee-iiii always love you oo oo oooo and vote for us when the elections come around, because we love children.
Anybody buy the notion that it's just outdated?retro
Sep 8, 2003 1:40 PM
Like a lot of similar things, seems to me, it's a product of an earlier age and we haven't updated our thinking to reflect modern times: The problem now is too damn MANY people. Same with, for instance, tax deductions for mortgages on second homes. For the place you LIVE, OK, but why should you get to write off the house you build in the elk habitat?
But try to take that stuff away in the name of the enviroment, conservation and common sense, and see how long your political career is.
Tax deductions on second homes?TJeanloz
Sep 8, 2003 1:55 PM
My understanding is that you can only write off interest on your "primary" residence. Granted, with modern financial tools, it isn't hard to manipulate that rule.

The tax credit doesn't encourage anybody to have children, it just puts more money in the pockets of those who already do.
baby boomers are running up huge debtsgtx
Sep 8, 2003 3:30 PM
guess who gets to inherit that debt?
debt isn't inheritedmohair_chair
Sep 8, 2003 5:19 PM
What does that have to do with the child credit anyway?
Sure it is.Kristin
Sep 9, 2003 6:40 AM
Someone pays for...eventually. I'm not sure what happens if someone has no will, no next of kin and is in the red; but in most cases debt goes to the inheritee. Doesn't it? If both of my parents die and I am named as next of kin, I am responsible for the portion of the estate that was left to me. That includes assets and liabilities. The credit cards must be paid.
Nopemohair_chair
Sep 9, 2003 7:02 AM
Liabilities are covered by the estate, but if liabilities exceed the estate value, the difference cannot be passed on to the heirs. You cannot be made responsible for any debt which you did not contract yourself. If you cosigned a loan or are a joint account holder with the dead guy, that's another story.
Hmmm. I was almost sure that wasn't the case.Kristin
Sep 9, 2003 7:24 AM
It sounds as if you've done more research on this than I have, so I'll concede. I know in NY state, lots of people inherited some scary land taxes in the early 90's. It was considered a curse to inherit a home in the Adirondaks. Though, I'm not sure if state taxes are considered a "debt" in the traditional sense. I assume we are talking about consumer debt here. Anyway. Is it possible this varies state by state?
different thingmohair_chair
Sep 9, 2003 7:43 AM
Taxes aren't really considered debt in the traditional sense. You can default on ordinary debt, but there's no way you are getting out of paying taxes, even if you die. Taxes really apply to the property, not the owner. Anyone can pay them, even third parties you don't know about. Because they apply to the property, the government will attach liens to the property so that in order to sell it, the taxes must be paid. Good luck selling it!

Even if you inherit the property, you are still not responsible for the debt or taxes on it. One of the basic rules of contract law is that you can't be forced into a contract against your will. You don't have to accept it.
Interesting53T
Sep 9, 2003 12:10 PM
I remember learning this in like 5th grade. The principle of debts being buried with the debtor was fundemental to 18th Century liberal thinking, and was embraced by the founders. Eventualy it found its way into 5th grade history books.
My original point still stands though, someone paysKristin
Sep 9, 2003 7:28 AM
The next generation still gets hit with the bill. If I run up 50 g's of consumer debt, get fired from my job (leaving me with no life insurance), and am run over by a bus the next day, who eats the bill? It all comes out in the laundry somewhere.
debt isn't inheritedgtx
Sep 9, 2003 8:29 AM
I was referring to our national debt. If our birth rate slides too much we'll be in big trouble when all the boomers are in nursing homes. Someone has to keep the economy running. This is why countries like Germany basically pay people to have kids. We don't have quite the birth rate slide they do, though.
No problem53T
Sep 9, 2003 12:12 PM
When folks my age (I'm 40) get to retirement age, we'll cut way back on SS payouts. Problem solved.
re: logic of the child tax creditHammy71
Sep 10, 2003 7:00 AM
It's rather simple really....More people equals a larger tax base, more people to depend on the goverment, and therefore more votes for the party that panders to the people that can't help themselves....