Friday, March 27, 2009

Pronatalist Payroll Tax Policy

Philip Longman writes about the scary possibilities of the coming population decline. He and New America Foundation colleague David Gray have been working on a "new social contract." At the root such a contract they propose policies and cultural changes to assure that there is a new generation to have a social contract with.

One of the reasons population decline is scary is that in the future there won't be enough workers to support the retirement and medical entitlements of retired workers. Longman and Gray, therefore, propose that the payroll tax for parents be reduced by a third for each child while the kids are under 18. Parents of three children would pay no payroll tax while raising those future workers. Employers would keep putting in their share, though, and come retirement, the parents would get their full benefit from a grateful nation/economy. Longman and Gray propose to make this full benefit contingent on the kids graduating from high school, which is coming to be a minimum credential for workers.

This proposal seems to me to be sensible. The solution and the problem are tied together rationally. The policy would be simple to figure out and do. And policies that support the next generation of workers are not only good for the economy, they are good for all the family values of the nation.

2 comments:

Susan Weston said...

Ew!

Cut funding to social security on the theory that Americans will have added babies because of tax policy? Social security's in trouble, and I don't see the Europeans adding to their families based on all their incentives.

Babies are a sign of people seeing the giant adventure of life clearly, and that's what we need to build up to get more of 'em.

Audacious Epigone said...

Susan,

Is it that clear in Europe? The French fertility rate has risen over the last couple of years, in concert with the institution of pro-natalist policies (specifically for those couples who have more than two children).

I like this idea because it doesn't require credits or deductions. The payroll tax is simply cut by a third for each child. If the consensus is that the the US needs to shore up its TFR, or at least keep it from sliding below replacement, then it seems reasonable to me that their should be some subsidization of those who have children by those who do not. In terms of individual economic well being, it rarely makes sense to have children in the developed world.