COMMENTARY | Sen. Mike Lee, R-UT, has proposed a tax reform package that may be as important, in its own way, as the Kemp Roth Tax proposal from the 1970s that eventually was passed into law under President Reagan in 1981.
The “Family Fairness and Opportunity Tax Reform Act” has two major features, tax simplification and credits for families with children. It establishes two major tax brackets, 15 percent for incomes up to $87,850 for individuals (twice that for families) and 35 percent for incomes above that. It eliminates or caps a host of deductions. It also provides an additional $2,500 tax credit per child that applies to both income taxes and payroll taxes.
The advantages of a simplified tax code are obvious. Compliance to the current byzantine tax code is not only an aggravation but a huge expense for a lot of people. The myriad of deductions and credits tend to make people and businesses jump through hoops and behave in ways the government wants them to and not what is necessarily rational.
The child tax credit is an expansion of a principle long understood by conservatives, which is that child rearing is a huge, financial burden. The bearing and raising of children is an investment in the future and therefore ought to be encouraged, especially in the tax code. Kids, after all, grow up to become productive, tax-paying adults.
The one thing Lee’s bill seems to lack are provisions that conservatives have fought for to encourage economic growth, such as the elimination of the tax on interest, capital gains, and inheritance. But perhaps that lack can be addressed in the legislative process once a Republican is elected president who might sign a tax reform bill into law.
The politics of the “Family Fairness and Opportunity Tax Reform Act” is somewhat mixed, according to the National Review. Liberals will hate it because it lowers the top tax rate from 39.5 percent to 35 percent. People in high tax blue states will hate it because it eliminates deductions on state and local taxes. Some deficit hawks might hate it because it is revenue negative, though Lee also favors spending cuts to offset that. Pro growth advocates would wonder about where the treatment of investment income factors in.
Nevertheless Lee’s bill represents an argument for family friendly conservative government. One of the major arguments for dubious liberal policies has been that “it’s for the children.” Lee’s tax bill is exactly that and therefore will be hard to argue against.