Should the Tax Code Subsidize Families?

A controversial proposal suggests that tax laws should give more support to those with children. Do you think it's fair?

Apr 13, 2014 at 11:50AM

Raising children is an expensive undertaking, with some estimates putting the total cost of raising a child at $300,000 or more. But a controversial proposal that would give parents tax breaks at the expense of those who choose not to have children has sparked intense debate about the role of the tax laws in providing financial support to families with children.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, takes a critical look at the proposal. Dan notes that the argument in favor of the proposal is that raising kids involves extra expenses that non-parents don't have to pay, and so making non-parents who earn above the median household income pay more in taxes essentially makes economic prospects more even. Yet Dan points out that past attempts to provide tax subsidies to encourage certain activities hasn't always worked out well, noting the role of tax incentives in the savings and loan crisis of the late 1970s and 1980s. Even today, tax-favored vehicles have come under fire, with Kinder Morgan Energy Partners (NYSE:KMP) and similar master limited partnerships, Annaly Capital (NYSE:NLY) and other real-estate investment trusts, and Prospect Capital (NASDAQ:PSEC) and its business development company peers being seen by some as tax-motivated enterprises that have resulted in overinvestment in their respective areas. Dan concludes that with tax incentives for families already in place, further moves would make the decision to have a family too economically motivated.

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Dan Caplinger and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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