One of the most popular schemes that the Hungarian Government pledged to is tax cuts for those with children. So much so that mothers with four or more children will have to pay no income tax for life. This has drawn attention from British populist right circles who champion bringing the idea to Britain.
This should be seen as a no brainer, right? A way to promote the family and cut tax! Who could possibly say this is a bad idea?
As much as I hate to be a party-pooper, we must remember that there’s no such thing as a free lunch. While it may be a tax decrease for those with children, the money to make up for the decrease in tax revenue must come from somewhere. Whether that be through borrowing, cutting spending, or increasing taxes on those without children. When framed as a tax on the childless instead of a tax cut on those with children, it makes the argument look less favorable.
Furthermore, cutting tax for families primarily helps those who are already in a position to start a family, rather than helping those who aren’t in that position. Many might want to achieve financial stability and own property before even considering settling down and starting a family. For example, a tax cut for those who have children is not helping a young adult saving up for a mortgage for a house.
One may argue that decreasing tax on those with children may increase tax revenue in the future since people will be encouraged to have more children and spend more money on them to hopefully get better jobs in the future. However, there’s no guarantee that their children will contribute more to taxes than they get back from the taxpayer.
While I am skeptical towards the policy at its surface, I am for letting people keep more of their hard-earned money.
I would be in favour of a mass reduction of public spending and adding market-based reform in areas such as childcare and education to pay for the decreased tax revenue from these tax cuts. This way parents would have more autonomy and choice over their child’s upbringing and education.