Interesting article in the New York Times: To-Do List: Wrap Gifts. Have Baby, by David Leonhardt:
For decades and decades, the busiest day of the year in the nation’s maternity wards fell sometime in mid-September. Americans evidently do a lot of baby-making during the cold, dark days of December, and once a baby has been made, the die for its birth date has largely been cast….
[S]ince the early 1990s … the federal government has been steadily increasing the tax breaks for having a child. For parents to claim the full amount of any of these breaks in a given year, a child must simply be born by 11:59 p.m. on Dec. 31. If the baby arrives a few minutes later, the parents are often more than a thousand dollars poorer. Unless you’re a cynic, or an economist, I realize you might have trouble believing that the intricacies of the nation’s tax code would impinge on something as sacred as the birth of a child. But it appears that you would be wrong.
In the last decade, September has lost its unchallenged status as the time for what we will call National Birth Day, the day with more births than any other. Instead, the big day fell between Christmas and New Year’s Day in four of the last seven years — 1997 through 2003 — for which the government has released birth statistics. (The day was in September during the other years; conception still matters.) Based on this year’s calendar, there is a good chance that National Birth Day will take place a week from tomorrow, on Thursday, Dec. 28….
The solution to this situation seems simple enough to me, and it comes back to the tax code. If Congress changed the all-or-nothing aspect of the child tax breaks, it would reduce the incentive to rush a fetus along in the final days of the year. A child born in December could be eligible for one-twelfth of a deduction or a credit rather than the whole thing.
(Hat Tip: Mark Sargent.)
3 responses to “NY Times: Tax Incentives Drive Surge in Year-End Births”
I’ll put in my two cents for NOT implementing the proposed “simple solution” to this “situation.”
First of all, not having seen the data, I can’t say for sure that this trend isn’t the result of something more benign (perhaps early Easter / Passover holidays?) which doesn’t require correction.
But more importantly, I reject the idea that we should correct absolutely every perceived imperfection in the tax system. Remember, for the benefit of not over-compensating vernal conceivers (how could they DO such a thing!), we would have to add new code sections, regs, forms in the 1040 and the 1040A, and new instructions to go along with those forms. Not to mention the debates we’d spawn (rounding 8.333% monthly will give an unfair advantage to those with children born in alternate months) on things that make very little difference.
In a world where all of the major professional groups are calling for tax simplification (seemingly against their own financial interests), I think we should just let those lucky enough to have been blessed with a child later in the year reap a small tax windfall.
More importantly, tax professors need to understand that the real world of tax practice is highly and unnecessarily complex. Those of us who are in the profession are not seeking this. I would ask you to reconsider all complexities, and weigh them against our ability to do more important things, and against the need for less bureaucracy.
Happy Holidays,
Jeff F. (J.D., CPA – inactive)
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