Wednesday, January 18, 2006

More babies (and a flat tax too!)

Low birth rates in the Western world are something that has interested and worried me for a long time, but I have always wondered how the state could encourage people to have more children in an effective way and without offending my libertarian instincts. Martin Helme at the Brussels Journal has a neat proposal that certainly appeals to me more than anything else I've heard before:
There is, however, a better solution for countries that wish to encourage people to have more children, namely to establish a tax bonus for raising children. For every child living in their household parents could be given a 5% tax break. In a flat tax system where adults are taxed at 30% of their income, a family with two children would then pay 20% income tax, a family with four children would pay 10%, and parents of six children would pay no income tax at all.
Such a system is simple and easy to administrate. There is little room for abuse of the system and it will act as an incentive to have children. It is also in line with the philosophy of small government. Taxes should not punish people or redistribute wealth.
Do read the whole thing, in which he smoothes away various apparent objections and problems. I quite like the idea of the state rewarding those who produce new wage earners by mitigating the expense incurred by temporarily lowering their tax burden. And I'm all in favor of the flat tax (see here and here).
There is one passage in the essay that will no doubt trigger accusations of racism:
As the purpose of the tax break would be to encourage higher birthrates among Europeans, it is clear that the tax break will apply only to citizens and not to immigrants (though the adopted children of citizens may of course be of foreign origin).
I think it would be perfectly reasonable to apply the tax break only to citizens, as long as it was reasonably straightforward for legal immigrants to become citizens after residing in the host country for a number of years and after having fulfilled a number of reasonable conditions to ensure integration with the surrounding society (including regular employment and language fluency). Clearly, if the process takes decades and is arbitrary, despite goodwill on the part of the immigrant, it would be problematic and wrong to exclude a portion of the long-established national population from this tax-break. At any rate, to me the above sentence does not smack of racism, as I understand "European" to mean any European citizen, whatever their race, religion or cultural background.

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