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Child Allowances vs. Child Tax Credits

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Child Allowances vs. Child Tax Credits

Pairagraph April 8, 2021
Urban PolicyTax & Budget
OtherChildren & Family

There is an important difference between child allowances and tax credits. The former is long-term free government money; the latter allows families to keep more of what they’ve earned. This distinction is at the heart of fundamental governing questions related to agency, duty, and power.

A child tax credit begins properly, with income—parents working to support their families. It recognizes that parents of younger children are generally not yet in their prime earning years but have elevated expenses. Tax credits allow them to retain more income. This supports families while preserving the governing principle that individuals, families, and communities should be responsible for and have control over the foundational elements of their lives.

Federal child allowances shift authority to Washington, giving the federal government an outsized role in private affairs. An unearned monthly check from Uncle Sam would become part of the calculus in one of life’s most intimate decisions—whether and how many children to have. There are risks to fostering this type of dependence.

First, it unwisely directs more attention and power to our nation’s capital. Washington-centric governing is distant, detached, uniform, and rancorous. It polarizes our politics and only understands local life in the abstract. It pulls our energy and loyalties away from local, familiar bodies where relationships are more personal, disagreements less radioactive, and compromise more likely.

Second, it undermines society’s mediating bodies. Acclimating citizens to looking to distant bureaucracies for aid erases the purposes and depletes the vitality of faith communities, nonprofits, towns, and other components of civil society. This makes us more atomized, alienated, and vulnerable, growing the need for additional faraway interventions, fueling this unfortunate cycle.

Third, once an entity is dependent, Uncle Sam can use—and sure has used—that dependence to advance other priorities. Expect proposals for conditioning child allowances on various policy preferences of those in power.

To avoid this dependence trap, family cash-benefit programs should be proximate, limited, targeted, rehabilitative, and temporary. They should come from a nearby government body; provide relatively small payments; be narrowly tailored to those in need; designed to help families no longer need the aid; and last only as long as the family’s need. The child-allowance proposals under consideration violate all five principles: They come from Washington; provide substantial monthly payments; fund virtually all families; aren’t based on need so don’t aim at rehabilitation; and allow each child to generate nearly two decades of payments.

In my view, allowances look like government largess but they expand the role of the central state in our lives with predictable, concomitant risks. Tax credits prioritize work, limit Uncle Sam’s reach, and leave space for states, local governments, and non-government bodies to support families.

I’m excited by and want to encourage efforts to rethink how policy can strengthen families and communities. I sincerely appreciate Sam Hammond’s contributions to this discussion. But I believe family strength is built by locating power and responsibility close to home, fostering local solidarity, and avoiding dependence on distant authorities.

This piece originally appeared at the Pairagraph


Andy Smarick is a senior fellow at the Manhattan Institute. Follow him on Twitter here.

Photo by AnthonyRosenberg/iStock