It remains to be seen who will win the election in November, but most polls point to some variety of divided government. It’s unlikely either party has a commanding majority, and so the two sides will have to find areas where they can agree. Family policy is one such area of strong bipartisan interest and, occasionally, even agreement. Especially since many family-relevant tax provisions (like the increased Child Tax Credit) may be up for debate next year, it’s likely that policymakers will be debating family policy in 2025 no matter who wins in November.
With that it mind, it is worth thinking about what kinds of policies might be good for families that are also politically feasible. Here are four pronatal policy ideas.
Fix the EITC’s Anti-Marriage Structure
The strongest factor shaping fertility behaviors is marital status, and the current Earned Income Tax Credit (EITC) is extremely punitive towards married people. If two young working-class people marry, they may be denied thousands of dollars of EITC benefits as their combined incomes exceed eligibility thresholds when the sum of their individual, pre-marriage incomes did not . Marriage penalties like this exist in many programs, but the penalty baked into the EITC is especially large and galling for a program designed to support parents. This should be fixed, and there are many ways to do this.
In principle, the EITC for married couples could be calculated for each individual and then summed. However, this creates even more tax complexity. It is possible for the current system to be far more generous for working parents without being more complex by changing the EITC phase-out thresholds for married filers. Currently, phase-out thresholds are higher for married parents than single parents, and higher for childless marrieds than single marrieds.
We propose that phase-out thresholds should always be exactly double the single thresholds for married couples. The graph below shows what effect this would have on married couples vs. current law. This program would hugely increase subsidies for marriage, partially remedy an existing anti-marriage bias in the tax code, and avoid creating new work disincentives for low-income households, as some scholars worry child allowances might.
Next, we suggest that if the EITC is going to be made more generous per child, the amounts should be fixed per child. Currently, if two single parents, each with one child, claim the EITC, they could get up to $3,995 each, a total of $7,990. But if they get married and combine their two qualified children, their maximum credit drops to $6,604. They lose $1,300 in possible benefits just because they got married. This is absurd. If the EITC is going to be more generous for parents at all, the per-child increment should be designed in a way that doesn’t punish parents for being married.
Improve the Child Tax Credit’s Structure
Several elements of the CTC can be modified. First, total benefit size should be increased, even if this is only on the nonrefundable element. There’s widespread agreement on this: both presidential campaigns have promised to massively increase the generosity of the Child Tax Credit, so it seems likely this can be achieved politically.
Second, eligibility should be retroactively extended to the year of medically demonstrated pregnancy for subsequent live births. In practice, this means children conceived in year X but born in year X+1 would give parents a double-sized CTC in the year of a child’s birth. Especially in light of the Dobbs decision, it makes sense to extend CTC eligibility from at least the point at which unborn babies are legally protected, not just from birth.
Third, CTC refundability could be extended up to the current threshold plus payroll or self-employment taxes paid in the current or prior year, maintaining a strong relationship to work and the exclusion of households staying out of work for extended periods of time, yet increasing generosity for the most financially-strapped families and giving them flexibility around the time of a new birth.
Stop Discriminating Against Stay-at-Home Parents
Right now, the Federal government spends about $25 billion every year subsidizing child care programs. Many of these programs openly discriminate based on family status, and others do so more subtly. Federal subsidies for child care through the Child Care and Development Block Grant ($8.7 billion), the Child Care Entitlements to the States ($3.5 billion), Head Start ($12.3 billion), Preschool Development Grants ($315 million), Temporary Assistance for Needy Families (TANF) shares spent on childcare ($2.5 billion), and the Child and Dependent Care Tax Credit ($12 billion) should all be reviewed.
The logic here is simple: all families are taxed to pay for these programs, but only certain families benefit from them. The Child and Dependent Care Tax Credit explicitly bans people from claiming it if one spouse stays home, and limits payments for care provided by family members. It’s a subsidy specifically for non-family-related childcare. In other words, it’s facially discriminatory against families that choose to have a spouse stay home, or who choose to have care provided by an extended network of kin. In other cases, like grants to child care programs, the discrimination is less overt, but the effect is the same: families with a stay-at-home parent (who are, on average, poorer than two-worker households) essentially pay taxes to subsidize child care for other families.
In some cases, these programs may be justifiable as anti-poverty programs subsidizing work. But in many cases, child care subsidies are going to not-particularly-poor families who will be working either way. Again, harping on the Child and Dependent Care Tax Credit seems reasonable given how blatantly unfair it is: according to data from the IRS Statistics of Income, families with over $100,000 in income in 2021 received more from this program ($4.9 billion) than families with under $50,000 in income ($4.7 billion). There’s no reason to have a program specifically designed to subsidize higher-earning families dropping off their kids at day care.
Money saved through reviewing, reducing, or eliminating these programs could be reinvested through an improved, non-marriage-penalizing EITC program to subsidize work, or else through an expanded CTC. Parents could choose to use CTC moneys on child care if they wish.
Caregiver credits appropriately reward families for their contributions to long-term programs like Social Security, and they help protect women’s retirement interests.
Fix Perverse Incentives in Retirement Programs
U.S. old-age benefits like Medicare and Social Security are not funded through long-term government savings but through taxes on current workers. Thus, the money workers “pay in” to Social Security and Medicare is not invested and yielding a return; the real “investment,” which pays for Social Security and Medicare, is the productivity of future workers. To some extent, public spending achieves this when public health or educational programs boost current-worker productivity. But for the most part, the reality is that the continuity of Social Security and Medicare depends on one factor: population growth.
Having kids is expensive. The USDA estimates raising a child to age 18 costs $250,000 in today’s money, and that’s not even including college, nor the fact that nowadays kids often live with their parents well after college. One recent study shows that government subsidies to parents don’t account for more than 1/5 the total time costs that parents invest in raising children. An extensive body of research documents how “motherhood penalties” emerge when women have kids: their incomes crash. In other words, parents approach retirement poorer than they otherwise would have been. They spent fewer years in work and had to spend more on raising their children.
This is problematic because, again, parents are the ones making Social Security work. Without parents, the whole system falls apart, and yet parents go unrewarded by Social Security’s benefit calculations.
It doesn’t have to be this way. Canada, Finland, France, Germany, Japan, Sweden, the U.K., and many other countries already have caregiver credits. In France, which provides by far the most generous of such credits, these benefits really do equalize the losses women face from childbearing.
Caregiver credits appropriately reward families for their contributions to long-term programs like Social Security, and they help protect women’s retirement interests, as women take the biggest income hits from having kids. The exact structure of these credits could be debated, but Congress should consider implementing some kind of program to enhance Social Security benefits to reflect the contributions of parents.
Conclusion
None of these proposals are especially extreme. Nobody seriously believes working-class individuals should be punished for getting married. Expanding the Child tax Credit has broad appeal and extending it into pregnancy is an obvious way to support maternal health. A close reading of the eligibility rules for the Child and Dependent Care Tax Credit reveals how obviously discriminatory it is, and how it punishes ethnic minorities, in particular, since these families are the most likely to use kin-based child care. The current design of Social Security, which is dependent on the work parents do but then provides them with no benefits, is unfair and counterproductive.
Fixing these problems should be a bipartisan effort, especially since the policies proposed here have already been adopted in countries with both conservative and progressive political reputations. Hopefully, the next Congress will seize the moment to consider these commonsense pronatal reforms.
Lyman Stone is senior fellow and director of the Pronatalism Initiative at the Institute for Family Studies. Brad Wilcox, Future of Freedom Fellow at the Institute for Family Studies and director of the National Marriage Project at the University of Virginia, is the author of Get Married: Why Americans Must Defy the Elites, Forge Strong Families, and Save Civilization.