What is the point of a per-kid tax break?

[ishkabibble]

Can someone explain what this tries to accomplish? I've never understood it.

[szh]

Can someone explain what this tries to accomplish? I've never understood it.

Were you referring to the deductions allowed per dependent? If so, it is not just the "per-kid". You can have adult dependents too ...

I guess it is an attempt to provide some money to take care of them. But, this is a SWAG.

To me, it makes little sense ... having kids should be a personal choice, not something that is influenced by the ability to get a tax break.

I have the same argument against mortgage interest deductions - my choice to buy a house, not a government tax-break issue.

Z

[dusred]

I've never heard of such a tax break. . . but again, I've never really made any money.

If there was a per dependent tax break the government would be paying our family money LOL!

PS. I come from a big family.

[szh]

I've never heard of such a tax break. . . but again, I've never really made any money.

If there was a per dependent tax break the government would be paying our family money LOL!

PS. I come from a big family.

Depending on who can "claim" who as a dependent, yes, there is a deduction available. If you do not have a wife and kids, or dependent (strict measure!) parents, then you do not get this benefit.

Assuming that the original poster meant this, it is not a tax-break per se. More like an adjustment to income before taxes are applied.

I am assuming that he did not mean the "Kiddie Tax" thing ... because that is an extra tax, not a tax break: http://www.schwab.com/public/s....html and it is being further limited in 2008, as I recall.

Z

[smockers83]

Besides for throwing money back in the economy, there are reasons behind policy decisions. As for tax breaks to have kids, a reason behind it could be to increase the economic favorability of having them. Or maybe they want to increase the birth rate of this country.

Another tax issue dealing with the population is marriage. There was or is, or maybe its already been enacted, talk about removing the tax benefit of being married. One of the ideas behind it was to try to lower the divorce rate by making people think harder about getting married.

Lets take CA for another example. SoCal has an overpopulation problem. Until recently, it has gotten very hard to become a teacher in CA if you're from outside CA. Now, one could say that it is there to hire more in-state people, which I'm sure is completely true. But on the flip side it could be a form of trying to control and take on the overpopulation issue.

I took a class on the economics of population and part of it was studying some policies that to the normal person wouldn't look like it, but they were set in place to dictate populations. Kinda gave a different perspective of it besides of what you see at face value.

[szh]

Malthus must be spinning in his grave!

Z

[dusred]

Or maybe they want to increase the birth rate of this country.

If that were the case the Government would outlaw condoms.

Kidding of course.

[ishkabibble]

Sorry, I should have stated that this popped into my mind due to McCain's desire to give a $7k tax credit per child (he probably meant to say "deduction")

[szh]

Sorry, I should have stated that this popped into my mind due to McCain's desire to give a $7k tax credit per child (he probably meant to say "deduction")

Link, please? I need far more info before I could possibly comment!

Z

[smockers83]

Another thing with CA concerning overpopulation are certain HMO programs out there. Now I haven't heard of anything like this except from girls from CA, but apparently HMOs in CA allow them to get birth control pills off of it, with or without parental permission. I'm 99% positive we don't have anything like that here in MI, although we have Planned Parenthood.

[SmithSR]

Quick example:

To the recipient, a Child Tax Credit is a financial shot in the arm come tax time.. (see: single parent)

Mortgage interest deduction is another tool to help offset some of the costs of paying for that roof over our heads.

As a single father and home owner, my interest is in maintaining and increasing both the child tax credit and fighting for every dollar i can write off in mortgage interest.

I feel the money is well deserved, and any parent will tell you the money is well earned.

[ishkabibble]

Link, please? I need far more info before I could possibly comment!

Z

Random link with the quote: http://www.taxfoundation.org/blog/show/23505.html

[smockers83]

^ While that is true and it does really help and those are the main reasons for having such things, there can be other reasons as well. Mortgages for instance and their tax benefits. The government, especially now by soaking up Fannie and Freddie, is in the mortgage industry. Those companies were GSEs, government sponsored enterprises. Giving tax breaks on mortgages provides incentive for people to move into homes via mortgages, providing more business to those GSEs. It also gets people out of renting and into more homes where the government(s) can start raking in more taxes. For instance, property taxes. If property tax revenue is increasing due to more homes, that's less the federal government has to keep giving to that location...in theory.

[szh]

Random link with the quote: http://www.taxfoundation.org/blog/show/23505.html

Thanks.

We already have dependent deductions/exemptions in our current tax structure. Assuming that McCain meant the same thing (and not true tax credit - which would just be a larger amount - no issue there to worry about, like that site seems to imply), then he is apparently proposing increasing those deductions/exemptions.

By the way, deductions are often phased out as the AGI increases - just like many other "tax benefits" the total amount of benefits are limited past a certain income level. For example, given my AGI last year, I did not get one penny of the tax rebate given out earlier this year.

So, this tax benefit that McCain is proposing would be for the "non-rich" as I see it described ... I am using the terms the way it would make sense here.

One possible purpose would be to stimulate the economy - same intention as the earlier one this one. It blipped things ... the effect is helping stability right now, and may have helped avoid bringing on a full recession.

FWIW, I do not like these dependent deductions/exemptions (similar to the way that I do not like the mortgage insurance deductions), because they are attempts to do social engineering and are for the wrong reasons.

Among other things, it is why I am a strong proponent of a flat-tax system.

Z

[Jesda]

The government should not subsidize the act of giving birth.

[smockers83]

It blipped things ... the effect is helping stability right now, and may have helped avoid bringing on a full recession.

It did cause a blip, but I wish I could completely agree with everything else--hopefully in time I can. The most widely used definition of a recession is 2 qtrs of slower growth or something like that. The official determining of a recession is all situational, there really is no clear cut way of determining a recession.

What that blip did do was create a blip of high growth for the 2nd qtr. However, consequently we will see much lower growth in the 3rd. Another thing is the high inflation we're seeing right now, the fall of the stock market, etc. Even though we did have a strong 2nd qtr this year, a lot of it was due to the tax rebates and it'll show soon enough. Preliminary analysis shows that adjusting for inflation and what not, spending fell, however in nominal terms it did rise, but only in the amount of dollars, not goods/services. There was something I really wanted to say on this and for the life of me can't remember...means its time for bed I guess.

[szh]

It did cause a blip, but I wish I could completely agree with everything else--hopefully in time I can. The most widely used definition of a recession is 2 qtrs of slower growth or something like that. The official determining of a recession is all situational, there really is no clear cut way of determining a recession.

Agreed that it is confusing and not exact, but "slower growth" is not the criterion. "Growth" (slower implies it is still positive) in any form is good, not recessionary!

The rule-of-thumb definiition is that a recession is when real gross domestic product (GDP) growth is negative for two or more consecutive quarters. I.e., the GDP actually drops quarter to quarter. A drop of 10% over that period is artificially termed a depression.

And, I also agree that the effects of the blip (how much, how long, etc.) are still quite unknown.

However, if the exemption is indeed raised to $7k per child (or dependent), then it will have a much larger effect, since the tax "refund" is then effectively more than the $600 that most people saw.

Z

[HashiriyaS14]

The government should not subsidize the act of giving birth.

I completely agree.

I'm all for a tax PENALTY, honestly. Do we really need the extra population? Do we really need an increased drag on our education and healthcare systems?

I'm obviously not *seriously* advocating this, as it adds up to a government infringement on personal freedoms that in no way jives with my views, but I wish that people as a whole would pop out fewer kids.

Anyway, in regards to the mortgage interest deduction, I've always been solidly behind it. The government wants to encourage home ownership as it generally creates wealth and allows fewer people, over the long term, to have to rely on the government to sustain them. The institution of American home ownership has lifted more people into the middle class than anything else I can think of, and I can't imagine how this would be a bad thing.

[Eikon]

I'm all for a hike in the dependent tax breaks. I need it. I'll have my second child in November. It's expensive raising kids! I'll take every bit of help I can get.

This whole debate sort of revolves around one idea... Should taxation be doled out evenly to everyone across the board? orShould taxation be based on ones ability to pay the tax?

If you believe the second of those, you should support the child tax credit. Those who earn little income are often the ones seen as abusing the system and the government. But they profit little from the child deductions because they have little income from which to deduct. Those in the middle class who are the ones that struggle to raise their kids

[HashiriyaS14]

This whole debate sort of revolves around one idea... Should taxation be doled out evenly to everyone across the board? orShould taxation be based on ones ability to pay the tax?

I understand this point of view, although I see it more as a debate on redistributive taxation.

Large contingents of the Democratic party, generally, support the idea of taxation acting as a way to redistribute some wealth from the rich to the poor, that the whole point is to act as a sort of equalizer. This is, by far, the prevalent view in Europe also.

I'm not generally a big proponent of this, obviously, but I think that this is the major issue on which the taxation battle is fought, however it is beneath the surface, as the Dems will rarely cop to this being what they really want.

[smockers83]

I'm all for a tax PENALTY, honestly. Do we really need the extra population? Do we really need an increased drag on our education and healthcare systems?

I'm obviously not *seriously* advocating this, as it adds up to a government infringement on personal freedoms that in no way jives with my views, but I wish that people as a whole would pop out fewer kids.

I know you say you aren't seriously advocating it, but I would like to point out a few things in response. Our birth/death rates are essentially at the replacement rate, meaning that there isn't a whole lot of population growth going on. The US is just slightly above the replacement rate. Europe on the other hand is either right at the replacement rate or below it (depending on the country) meaning that they either aren't growing or are decreasing.

In Europe there are some worries around the world concerning its growth while at the same time their population isn't growing or even decreasing. With the tax breaks on dependents it creates more incentive to have kids in order to increase population growth as an investment for future growth in the economy.

[szh]

I completely agree.

Me too!

I'm all for a tax PENALTY, honestly. Do we really need the extra population? Do we really need an increased drag on our education and healthcare systems?

Hmmm ... I don't think we need a tax penalty per se. The cost of raising additional kids is high enough that people do (or should) get it - smack between the eyes.

Anyway, in regards to the mortgage interest deduction, I've always been solidly behind it. The government wants to encourage home ownership as it generally creates wealth and allows fewer people, over the long term, to have to rely on the government to sustain them. The institution of American home ownership has lifted more people into the middle class than anything else I can think of, and I can't imagine how this would be a bad thing.

Not a bad thing per se, I agree. However, I believe that the concept of home ownership is past its prime really. Let me explain why.

The analogy I draw is land-line phones. People move more often, like the freedom, so fewer and fewer folks have a phone in their home hard-wired in. The national numbers are about 15% have mobile phones, and ONLY mobile phones - no land-line phones at all.

Similarly, given the new mobility, owning a home is no longer as much of a deal as it is cracked up to be. How many people still live in the homes they were born in? Or were brought up in? What is the national average length of time for owning a home? Plus, the "gain in asset" value of a home is fragile too (as has been shown recently).

So, I believe it is time for the government to stop the interest deduction. The choice of buying a home, watching it grow in assets then becomes a personal decision. If you can afford a home, buy it. If not, not. That will remain true even if the deduction is removed.

Z

[WDRacing]

Quick example:

To the recipient, a Child Tax Credit is a financial shot in the arm come tax time.. (see: single parent)

Mortgage interest deduction is another tool to help offset some of the costs of paying for that roof over our heads.

As a single father and home owner, my interest is in maintaining and increasing both the child tax credit and fighting for every dollar i can write off in mortgage interest.

I feel the money is well deserved, and any parent will tell you the money is well earned.

I couldn't agree more.

The Gov is taxing us to the bone already. Having a child is expensive, no one has them for a tax deduction, but the tax deduction helps parents. Which I'm FAR happier doing then seeing my tax dollars spent say...picking up rocks on Mars.

The more tax money we keep in peoples hands the better off we are.

We need to be far more concerned with where the money that IS taxed goes, rather then parents who benefit from a deduction or two.

WD

[Jimefam]

I dont see how anyone can suggest that a minor tax break is going to encourage people to have more children. The cost of properly caring for a child FAR exceed any possible tax advantage . Assuming it was set at 7.5k as someone on here stated and you paid an average of 30% in income tax(which is more than most people pay) that would give you a savings of $2,250. I have three dogs and spend 12k a year on them so thats 4k a year per DOG imagine kids.

[szh]

I dont see how anyone can suggest that a minor tax break is going to encourage people to have more children.

Maybe not encouragement per se.

The cost of properly caring for a child FAR exceed any possible tax advantage . Assuming it was set at 7.5k as someone on here stated and you paid an average of 30% in income tax(which is more than most people pay) that would give you a savings of $2,250. I have three dogs and spend 12k a year on them so thats 4k a year per DOG imagine kids.

Most people don't think that clearly!

We have people who look forward to their tax refunds (when they would be better off not paying it in, in the first place!). If we removed the dependent exemption and compensated for it by changing the tax rate, so that the net tax paid would be the same, these folks would still jump up and down because "their tax benefit went away"!

Z

[telcoman]

I have the same argument against mortgage interest deductions - my choice to buy a house, not a government tax-break issue.

Z

If my memory serves me correct,the government encourages home ownership becuase of the way it stimulates the economy.

Whenever there is a home purchase stores like Home Depot, furniture stores, paint, wall paper,appliances,landscapers, decorators, perhaps the purchase of a second car, etc all benefit.

Telcoman

[96Qowner]

What is the point of a per-kid tax break?

Votes.

People with children vote.

[Cold_Zero]

John McCain mentioned doubling the Child Deduction on Federal Income Taxes during his acceptance speech.

Theoretically,The government encourages behavior by giving tax credits, deductions on your taxes, loan forgiveness or exempting certain (parts) of wages from being taxable, so that more people engage in the activity (a carrot).Dependant DeductionSaving money for retirementHealth Saving AccountsDependant Savings AccountsMortgage Loan Interest DeductionStudent Loan Interest Deduction (1098E)Donations to Charities, certain not for profit organizationsRenovating your house with more energy efficient productsBuying an electric carMilitary Service in a Combat ZonePublic Service (Peace Corps)Teaching in at an at-risk school for 5 yearsPracticing Medicine in certain areas of the United States

The government also discourages behavior by taxing the ever living **** out of certain activities (the stick):Making a profitCapital GainsBeing MarriedReceiving something you didn't work for (example being the beneficiary of an estate)Lottery/gamb|ing winningsBuying GasMaking an incomeWithdrawing money from a retirement fund, pension or 401K(and so on)

Jesda and Hash,It's very easy to pick apart a deduction, credits or exemption that you do not particularly benefit from and being blind to the fact that you do benefit from similar ones. When you look at the whole picture of what the Government does to encourage and discourage activity it is all pretty ridiculous. It goes beyond Child Tax Deductions and Home Mortgage Interest. I would prefer the Fair Tax to replace the IRS and the Tax code. I know that this thread was not established to discuss the Fair Tax.

[Sentientbydesign]

I have the same argument against mortgage interest deductions - my choice to buy a house, not a government tax-break issue.

Z

FYI, the morgage interest tax deduction is because the money is already taxed as a profit to the mortgage company.

[Jimefam]

FYI, the morgage interest tax deduction is because the money is already taxed as a profit to the mortgage company.

Ummm. No that is not why, Everything is like that. My whole income is taxed and then when I buy something from a company they get taxed on that as well. If that were the case all expenses would be tax deductable and only savings would get taxed. Most personal income would be tax free and only businesses would pay taxes. obviously that is not the case.