In the past several years there has been increasing salience and support of pronatalist policies. Several people have turned to the IRS income tax code, which already includes some incentives regarding children. The Child Tax Credit (CTC), which lowers a person’s tax liability on a dollar-per-dollar basis, is the most obvious item that addresses children. The other tax credit is for child care expenses, but I won’t be focusing on that here.
Below are the 2021 marginal tax rate brackets and the standard deductions. The standard deduction reduces the taxable income, and then the tax rates are applied.
After the tax liability is calculated, it’s reduced by any tax credits, such as the CTC. In 2021, households earned a credit of $3,600 for every child under 6 years old and $3,000 for every child under 18 years old. Median household income in 2020 was $67,521. That means that the tax liability was reduced by 5.3% – or 3/55ths – of median gross income. But, I have a problem with that.Continue reading