Senator Lee’s new tax reform plan focuses on young children

Earlier this week, Utah Senator Mike Lee unveiled the Family Fairness and Opportunity Tax Reform Act. Elaine Maag examines the plan which proposes tax cuts to families with children. 

John Nordell /The Christian Science Monitor/File
Incoming tax returns and tax forms in the mail room and Internal Revenue Service center in Andover. Senator Lee's tax reform plan proposes tax cuts for families with children and increases for households with high itemized deductions.

At an AEI panel discussion earlier this week, Senator Mike Lee (R-Utah) unveiled the Family Fairness and Opportunity Tax Reform Act. The centerpiece is an additional $2,500 tax credit for all children under age 17. The plan retains the $1,000 child tax credit under current law. Unlike the current credit, the new credit would not phase out at higher income levels.

Lee’s idea is straightforward—cut taxes for families with children and raise them for households with high itemized deductions.

He’d eliminate the standard deduction and personal exemption (except for dependents under 17) and replace them with a nonrefundable $2,000 per person credit. He’d also repeal the Alternative Minimum Tax and end the taxes associated with the 2010 Affordable Care Act (ACA).

He would also eliminate all but two itemized deductions, including those for state and local taxes. He’d keep the mortgage interest deduction (capped at $300,000 of debt) and the deduction for charitable giving—and make those available to all taxpayers.

The plan would have just two rates, 15 percent on the first $87,850 for single people (twice that for couples) and 35 percent—higher than the 25 percent top rate in other GOP plans.  (The plan would eliminate most marriage penalties for higher-income households and provide marriage bonuses for many. High-income households with one earner and many children would get a huge tax cut.)

While Lee says he’d like to aim for even lower rates, his current design seems to recognize  that you can’t slash tax rates for all without losing billions (or even trillions) of dollars in tax revenue.  However, the 35 percent rate is significantly lower than the 39.6 percent top rate—plus surtaxes associated with the ACA—that applies to top incomes under current law. We don’t know yet whether the plan is revenue neutral because important details haven’t been specified.

Lee would remove many households from the federal income tax rolls. But he sees no special reason why the key feature of his plan—the added $2,500 per-child tax credit—needs to be a tax credit. He’d be willing to use a direct spending program instead (something my colleague Austin Nichols might think was a better idea).

If the new child credit were instead a transfer payment, the plan wouldn’t increase the number of people who don’t pay federal income tax, but it would still provide substantial assistance to families with children, albeit with higher administrative costs. By acknowledging that such a child credit is effectively spending, Lee challenges critics to assess the merits of the plan.

We ought to be talking about whom the federal government should assist and how much aid they ought to get, without turning policy inside out by making every benefit program a tax preference when direct spending might make more sense. I agree with Senator Lee. Spending programs and tax policy can often accomplish the same thing. We should evaluate benefits for families with children and see what form of subsidy makes the most sense. Maybe in the process we could stop obsessing about who does—and does not—pay federal income tax.

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to

QR Code to Senator Lee’s new tax reform plan focuses on young children
Read this article in
QR Code to Subscription page
Start your subscription today