The Fertile Formula
A modest proposal to sharply raise fertility
Here’s a comprehensive tax modification I’ve been daydreaming about. While my first choice is just giving people a tax holiday every time they have a kid, imagine the following alternative. After you calculate your regular federal tax, there’s one final adjustment.
Number of Kids Federal Tax Adjustment
Zero +50%
One +0%
Two -20%
Three -40%
Four -60%
Five -80%
Six+ -100% (income tax-free for life)
“Natalist policies don’t work” is a common mantra, but you’d have to be crazy to think that this wouldn’t sharply raise fertility. And the natalist effect would almost surely be highest for high-earners, because their current fertility is so low and the tax code is so progressive.
Needless to say, this idea will only appeal to people who think that low fertility is a serious social problem. My question for readers is narrower: If my modest proposal were adopted by a country, how much would its Total Fertility Rate rise over the next two decades?
If you have special insight on specific low-fertility countries — starting with South Korea — please elaborate.
Every time I see a fertility post that doesn't have even one picture of a cute baby, I understand why the fertility rate is so low.
Obviously it would work in the broad sense. We could easily solve fertility with the tax code, the childless would just hate it because they couldn't free ride anymore.
I'm not sure income taxes alone are the best bet. A household making $100k (which would be above average) that contributes to their 401k only pays $5,800 in federal income taxes a year. Six kids works out to less then $1k/kid, less then the child tax credit.
A household with $200,000 a year only pays $24,000, despite being in the 90th percentile. Having six kids works out to about $4,000 a kid, not that much more than current child tax credits.
Of course if we took a wider view of taxation. Payroll, state, sales, property, etc then you could easily do what you're proposing.
The most obvious way to increase financial incentives to parents that would cost the state nothing are school vouchers. The same money under parents control would increase utility for free, and that's a lot of money ($25k/kid/year in NYC, more then a 90th percentile household pays in income taxes).
P.S. Payroll taxes have an obvious direct relationship since todays children are tomorrows contributors, so those that have taken on the expense of raising children have already done their part.