Tax breaks for adoptive parents
Thirteen years ago, California taxpayers got a break. Their governor, Ronald Reagan, signed a bill that gave a small tax deduction to people who adopt children. The whole country could benefit if a similar deduction is provided federal taxpayers.
And President Reagan may be the best person to make it happen. Like millions of other Americans, he's an adoptive parent. A word to officials at the Department of the Treasury is all that's needed, since there's strong, bipartisan support in Congress for the idea.
Here's the background. When a baby is born, there are a number of predictable costs, like those for doctors and hospitals. Depending on one's income, those costs are deductible from one's federal income taxes. But not if the baby is adopted.
This obviously unfair discrimination against couples who form their families through adoption is what led Ronald Reagan to sign the California tax deduction bill back in 1968. Similar bills were approved in Massachusetts, Minnesota, and Wisconsin. Average deductions in California, from fiscal years 1978-80, were $ 413 per return. The average was $437 in Minnesota, according to a 1978 sample of the state's returns.
The obvious benefits of deductions for adoption expenses were not the only reason Ronald Reagan and other governors approved them. There was another reason: the fact that the deductions saved taxpayers money. How? By moving thousands of children, who might otherwise have lingered in inappropriate foster care or institutions, into loving homes. Those foster care and institutional costs, from federal and state tax coffers, were much larger than the modest tax benefits given for adoption.
There was another saving for taxpayers as well. Adopting couples, not Medicaid or other public programs, paid hospital bills for babies and mothers. And adopting couples paid legal and other fees for the services babies and mothers received - it wasn't necessary for state employees to provide them.
A tax deduction with so many benefits - for children, young mothers, waiting couples and taxpayers at large - should have been very popular with the US Treasury, right?
Wrong. Every administration's Treasury Department witnesses - including the Reagan administration's - have opposed this sensible tax break. And every administration's used the traditional, weak, inaccurate reasoning in opposing it: that tax law should not be used to make social policy.
The Economic Recovery Tax Act of 1981, signed Aug. 13, did make limited deduction for costs of adopting ''special needs'' children part of the federal tax code.
What's needed now is to take the deduction idea the rest of the way and bring full equity for adoption to the federal tax code. And there's an ideal bill to accomplish this purpose. In the Senate it's S. 1479, with Sen. Howard Metzenbaum (D) of Ohio as chief sponsor. In the House the companion bill is H. R. 4158, with Rep. James Oberstar (D) of Minnesota as chief sponsor. This legislation would provide the essential tax break as well as provide two related features.
The latter would encourage the farsighted companies who are providing ''adoption benefits'' to their employees - firms such as American Can, Foote Cone & Belding, Hallmark, IBM, and Xerox. One change would treat the income received by employees as an ''adoption benefit'' like other fringe benefits - it would not be taxed. The other change would allow employers to treat the costs of providing the adoption benefits as an ordinary and necessary business expense.
Never has there been such a need for this legislation as now. Public funding is dropping for many programs serving pregnant girls and waiting, adoptable children. Overseas, the orphans and homeless wait - and wait. The voluntary agencies have to take up the slack. And, since combined fund-raising campaigns are recommending that adoption and maternity care be ''self-supported'' by fees, making those fees fully deductible is critical.