Thursday, August 15, 2002

A story released today by CNSNews.com reports that according to a study by the Institute for Policy Innovation, even if Congress fully eliminates the marriage tax penalty from the current tax system, the income tax will continue to discriminate against traditional families.

"What is needed to end the numerous marriage tax penalties is nothing less than fundamental tax reform" in the form of a flat tax or national consumption tax, argue the study's authors, David A. Hartman and Allan Carlson.

In 1995, the median married couple in America bore nearly 47 percent of the cost of government, according to the study, while an average taxpayer bore less than 40 percent. A typical married couple in 1965, by comparison, paid 37.5 percent of the total cost of government.

Taking into account high marginal tax rates and the fact that savings interest, dividends, capital gains and some inheritances are also taxed, income for married couple families stagnated over the last 25 years, according to Hartman and Carlson.

As a result of the tax bite, many Americans are discouraged from rearing children, meaning that "our human capital is diminished," the report stated.

The idea of getting rid of the graduated income tax, with all of its quirky and complicated deductions, exemptions and penalties, has long appealed to conservatives and libertarians in search of a fairer, simpler way to pay for government. A flat tax would offer one tax rate coupled with a bigger standard deduction. A consumption tax would replace the income tax with a high sales tax on most consumer purchases.

But the Hartman-Carlson plan, with its emphasis on using the tax code to primarily benefit married couple families with children, won't appeal to everyone on the political right.

Carlson's preference would be to give, for example, a $10,000 deduction to every adult and child in a family, even if only one parent works. So, a father earning $50,000 per year would, for tax purposes, divide his income equally between himself, his wife and children. With five family members, the family would owe no income tax.

"That's the whole point -- to encourage families and to encourage child rearing within families," said Carlson.

Older married couples and married couples who choose not to have children don't merit special help from the tax code, said Carlson, because "it's not so much what the American dream is [but] what's most valuable to the nation and the future.

"The most value is new life and new children. The point of any society is to perpetuate itself into the future."