The Magazine

A Family-Friendly Idea for McCain

The solution is in the tax code.

Jun 30, 2008, Vol. 13, No. 40 • By RAMESH PONNURU
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A vastly expanded child tax credit, applicable against both income and payroll taxes, would reduce the tax burden quite a bit for lower middle class families. To promote growth, the reform could keep taxes on investment low while modestly reducing the top marginal tax rate. To take in as much money as the current tax code, meanwhile, this reformed, pro-family system would have to do two main things. First, it would eliminate or at least cap the deduction for state and local taxes. Second, its top rate, though lower than the current one, would apply to a lot more people.

The big winners from the Thompson/RSC proposal--the people for whom McCain would be taking significant political risks--would be affluent, childless households in high-tax states. The AMT, which has hit more and more of these households because it does not allow a deduction for state and local taxes, would be gone. Their tax rates would go down. And they don't take the child tax credit as it is. These same households would lose money under the pro-family reform. Their marginal tax rate would go down, but it would apply to a larger share of their income, and they would not be able to deduct as much of their state and local taxes.

In 1980, 1988, and 2000, Republicans won presidential elections in part by promising to tax a lot of middle-income voters significantly less than the Democrats would. If McCain wins this election without making such a promise, he will be the first Republican to do so in more than three decades. Or he can embrace a pro-family plan, and thereby go a long way to showing that he intends to reform our institutions to facilitate the pursuit of the American dream.

Ramesh Ponnuru is a senior editor at National Review.