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Salmon: A Smarter Way of Subsidizing Parenthood

NEW YORK (Reuters Blogs) -- Ben Walsh has a great roundup of the discussion surrounding Reihan Salam's proposal that we institute a surtax on the childless. At a societal level, we want population growth -- more children -- but when it comes to individual households like my own, there are often compelling reasons to have few or no children at all. As countries get richer their birth rates decline, with nasty demographic consequences.

One fix to this problem is simple: more immigration. Salam has another: giving people a bigger financial incentive to procreate, baked in to the tax code. But take a step back, and no one's really disagreeing with the fundamental premise underlying such proposals. A country can only thrive if it has the human capital to do so, and it's one of the most important roles of any government to maximize the value of its country's aggregate human capital. One way it does that is by encouraging population growth; but the main way it does that is by providing universal education. After all, as technology advances, the skills that a country's workers boast are ever more important than the simple number of warm bodies in the labor force. If your country falls far behind on education (think Portugal, or even Puerto Rico), then it will surely fall behind economically as well.

So if you don't want to start fiddling with the tax code to try to penalize the childless, maybe an easier way to achieve much the same goal would be to invest more, at a federal level, in education.

Right now, most education funding happens locally -- which encourages the idea that education is more for the benefit of individual children than it is for the benefit of the nation as a whole. Each community is responsible for its own education funding, and parents are prone to paying enormous sums, in the form of higher property prices and higher property taxes, in order to get their kids into better-funded schools where the kids come from wealthier households. Those sums are a substantial cost of having kids -- as, of course, is all the money that parents pay towards other forms of education, including private-school fees and college tuition fees. On top of that, the student-loan crisis is essentially an artifact of the way in which US society forces individuals to pay for their own education, even though that education will ultimately benefit society as a whole.

Must Read: 'Handicapped' by wealth: The dangers of unprepared heirs

The result is a country where the childless are prone to consider themselves to be subsidizing other people's children: We (the childless) are paying taxes so your kids can get a good education. This is narrowly true, but it misses the bigger picture -- that we (the childless) should want kids, in general, to be well educated, for any number of reasons, most of which boil down to the fact that it makes us better off in both the short term and, especially, the long term.

Rather than raising taxes on the childless, then, why not just spend a lot more money, at the federal level, on education? There's no shortage of possible investments. Everything from pre-K through post-graduate studies could use more cash. Such expenditures would narrowly benefit kids, and their parents, more than the childless - but would ultimately benefit everybody. By making it easier and cheaper to raise a well-educated child, they might even encourage parents to have more kids.

Most importantly, if the burden of education funding started to move from the local to the federal level, that would help enormously in leveling the educational playing field. If I'm a parent, I care deeply about the schools my kids go to, and much less about all the other schools. If I'm a non-parent, by contrast, I care much more about the aggregate output from the educational system as a whole. My interests are society's interests.

So let's move educational funding up the chain a few notches. It will help parents more than non-parents, while doing so in a way which is more than fair to the latter.


-- Written by Felix Salmon in New York.

Read more of Felix's blogs at Reuters.

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