Issues Tearing Our Nation's Fabric The Center for Reclaiming America

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Tax Relief for Families
Chapter Twenty–Two

"An oral agreement isn’t worth the paper it’s printed on." That old bromide of the business world seems to be the official policy of politicians, as well. In 1991 the National Commission on Children, a bipartisan panel which included Arkansas Governor Bill Clinton, examined the problems of the American family and proposed a number of policies to ease the financial burden on parents and children.

The centerpiece of the Commission’s plan was a $1,000 per child tax credit. In 1992, during his run for the presidency, candidate Bill Clinton promised that if elected he would make sweeping tax reforms and would push for an $800 per child tax credit. But three years later, when presented a bill for his signature that had passed both houses of Congress with a proposed $500 per child tax credit for families, President Bill Clinton vetoed it. Likewise, several years earlier, the "no new taxes" campaign pledge of George Bush was broken, in short order, once he was in office. So much for political promises.

The only change in our situation is that each year the tax gouge gets a little deeper, and each year families have to work a little harder to make ends meet. In 1948 the average family of four sent just two cents of every dollar they earned to the federal government for taxes. Today a family of four sends Uncle Sam 25 cents out of every dollar earned. But that’s not where the tax bite stops. State and local taxes, sales tax, value added taxes, utility taxes, gasoline taxes, medical taxes and deductions, property taxes, telephone taxes—the list goes on and on.

The average worker in this country works until May 6 each year to pay off his federal tax, until May 23 to pay the taxes levied by Congress, and until July 3 to pay all federal, state, and local taxes. This means the average wage earner works more than six months of every year for the government before he can keep the first nickel of his personal income for his own use.

Of a family meal at a local restaurant that costs you $40, fully $11 of the tab goes for taxes of some kind. Federal tax, payroll tax, state tax, sales and use tax, unemployment insurance tax, property tax, business license tax and fees, telephone, utility, liquor and excise taxes, and more. But if the impact of so much taxation is hard on local businesses, it’s even harder on the families paying the bills.

In 1948 the $600 per child tax credit was equal to 42 percent of the average wage-earner’s per capita income. If that exemption had been adjusted for the rise in income over the years, it would now be worth more than $9,000 per child (42 percent of average per capita income). But the deduction, as a percentage of per capita income, has dropped precipitously from 42 percent in 1948 to less than 12 percent today.

Government Spending

Since the election of 1992, real median family income in this country has stagnated, despite the fact that more women are working today than ever before. More than 8 million men and women are forced to work two or more jobs to pay their bills. Between March 1995 and March 1996 more than 325,000 high paying jobs in the manufacturing sector simply disappeared; and less than a third of the workers displaced from full-time jobs were able to find new jobs that paid as much as the ones they lost.

Between 1993 and 1996, when the spending programs of the Clinton Administration began to kick in, as documented by research from the Heritage Foundation, tax increases cost the U.S. economy more than $208 billion in lost output—that’s equivalent to $2,100 for every household in America. In addition, the added costs caused the loss of some 1.2 million jobs in the private sector. And real, personal, disposable income dropped by $264 billion, or $2,600 per household. No wonder it’s getting harder to get by on what we make.

The long-term dangers in these statistics should be horrifying to all of us, and responsible lawmakers should be eager to reverse this negative cycle. But some elected officials see the idea of tax relief for families as a joke. When a $500 per child tax credit for America’s families was proposed in Congress, liberal Rep. Jim McDermott of Wash-ington sneered, "If you take the $500 a year tax credit and, I figure, you know, $5 a bottle of wine, that’s 100 bottles of wine for a family. . . ." Tax savings may be a joke to McDermott, but it’s no joke for those who are struggling each day to keep a roof over their head, to put food on the table, and make ends meet.

For most American families, a $500 per child deduction would be good news. For 28 million families with 51 million children, the $500 tax cut vetoed by the White House would have saved $22 billion of their own income each year and, in turn, pumped nearly the same amount back into the American economy.

For some parents with two children, their $1,000 tax cut could mean the difference between paying the mortgage or losing their home. That amount of money would pay the mortgage plus groceries for a month for most families; it would pay 11 months’ electric bills, or nearly 20 months of clothing for their children. For some 3.5 million families who earn $24,000 or less per year, that $500 per child tax credit would actually eliminate their entire income tax burden. In all fairness, both houses of Congress did try to pass a bill to help these people, but one man stopped it with the stroke of a pen.

Fact and Fiction

How curious that America’s political elite run their campaigns on their "respect for families." They wave for the cameras from their front lawns at campaign time, with Fido, their spouse, and their children all smiling and happy. But once in office, in the seat of power, something happens. The record suggests that politicians have an overt bias against the American family. Even liberal Rep. Pat Schroeder recognized that "you can get a bigger tax break for breeding racehorses than raising children."

Hardest hit are the nation’s middle-income families with children. Over the past forty years the tax burden on single persons and couples without children has increased only slightly as a percentage of income. At the same time, though, the tax burden on families with two children has increased more than 200 percent.

The only excuse government can give for refusing to ease the burden on parents is its unwillingness to stop living on our resources. When the first welfare programs were introduced in the early 1930s, after the Depression, government spent $4.6 billion per year to run the bureaucracy. Today government spends more than that every single day of the year. When the federal income tax first began in 1913, with a top rate of 7 percent, few Americans earned enough to pay a tax. But today, government consumes 40 percent of the entire wealth of the nation, spending in excess of $1.5 trillion per year, while running up a national debt of $5 trillion. To illustrate that, Citizens Against Government Waste points out that your share of the national debt is currently $20,347.74.

Chief Justice John Marshall warned that, "The power to tax involves the power to destroy." He understood that authorizing the state to tax its citizens was one of the most fearful and risky propositions a government could undertake. Thomas Jefferson warned that government spending always leads to waste and tyranny: he called it "profusion" and said it would lead to national disaster. He wasn’t far from the mark.

Looking for Solutions

During congressional debates, some members of Congress argued that pro-family tax relief would need to be tied to government programs. For example, some said that in order to qualify for a $500 per child tax reduction, families would have to demonstrate that the money would be used for education or other federally mandated programs.

Such proposals reflect the lawmakers’ basic suspicion and distrust of the American people. Over the last three generations, government officials have adopted the view that they know more about how you should run your family than you do. Sooner or later the American people will have to disabuse them of the notion, and the best way to do that is at the polls. In the meantime, you can become better informed on these issues and become politically engaged so your voice can be heard.

Giving a family of four a $500 per child tax credit is equivalent to giving them one full month’s mortgage payment. Heritage Foundation research shows that the average family now loses $10,060 per year of its income due to the 45-year increase in federal taxes as a share of family income. This tax loss exceeds the annual mortgage payment on the average family home. But the benefit is not for one group or one area of the country. The typical congressional district has some 117,000 children in families that could profit by the $500 per child deduction. The real benefit would be an increase of $54 million per year in tax relief for these families and their communities.

Liberal congressman worry about "means testing," as if only low income families are entitled to the benefits of a tax reduction. The fact is, the graduated income tax scale automatically adjusts the potential reward of such a tax cut. While a family of four with an income of $30,000 per year would recognize a 51 percent decrease in their tax debt, a family with a $40,000 income would recognize a 40 percent decrease, and the family with a $75,000 income would recognize a 12 percent advantage. For a family of four with an income of $100,000 per year, the effect would be just 7.4 percent of their tax debt.

The scale is fair for everyone, but the message of support that this or any other tax-relief proposal would send to America’s families cannot be measured in dollars and cents.

And finally, it should be clear that a tax credit to families cannot exceed the amount of their tax burden. For example, a family of four with an income of $20,000 per year would normally owe only $458 in taxes. Even though they are entitled to a $1,000 credit, the amount of the deduction cannot exceed the amount of the debt. So, in effect, they can only claim a tax reduction of $458, or the amount of their tax debt. Those who argue that tax relief is unfair never pause to deal with basic facts like these.

As the issues in this volume illustrate with painful clarity, times are very hard for America’s families. Mothers, dads, and children are under incredible pressures from a culture that has apparently lost its moral balance. The ability to keep and use our hard-earned income should be a fundamental right, and tax relief for families should be the cornerstone of any responsible policy put forward by either political party or by any candidate who expects to get our votes. There is no better reason to become politically and spiritually engaged in these issues than the need to defend our families and our future.

You can contact these organizations:

Americans for Tax Reform
1320 18th Street, NW, Suite 200
Washington, DC 20036
(202) 785-0266

Heritage Foundation
214 Massachusetts Ave.
Washington, D.C. 20002-4999
(202) 546-4400

For further reading:

Bryce Christensen (Editor). The Family Wage: Work, Gender, and Children in the Modern Economy. Colorado Springs: Focus on the Family Publishing, 1988.

On the World Wide Web:

Citizens Against Government Waste: http://www.govt-waste.org/
American Back in Charge: http://www.abic.org/
National Taxpayers Union: http://ntu.org/

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Copyright 1997, Coral Ridge Ministries. All rights reserved.