Shannon W. McCormack (University of Washington) presents America's Failure to Rescue Parents: A Narrative of Inequitable Tax "Reform", 76 U.C. L.J. ___ (2025), at Missouri today as part of its Tax Policy Colloquium hosted by David Gamage:
Other developed nations provide a slew of direct benefits to parents, such as paid parental leave and affordable childcare. America instead takes a circuitous route, heavily relying on the Internal Revenue Code (the “Code”) to provide tax breaks to certain parents. In addition to being indirect and comparatively stingy, these “parental tax benefits” are not awarded equitably. Instead, they favor non poor one breadwinner families, ignore the plight of non poor working parents incurring substantial childcare and other work-related costs, exhibit an outright hostility towards poor parents and raise a host of other distributional concerns. This preferentialism is sticky––when Congress alters parental tax benefits, it rarely deviates from these patterns.
That is, until the COVID pandemic. Signed into law on March 11, 2021, the American Rescue Plan Act (the ARPA) provided much needed relief to parents attempting to maintain jobs and care for children during this global health crisis. As is America’s tendency, the ARPA leaned extensively on the Code to do so. But it abandoned its consistent preferentialism for non poor one breadwinner parents, expanding the various tax benefits available to non poor working parents and poor parents in historically significant ways.
This was short-lived. These benefits have now expired, leaving parents back where they started. And while it initially appeared that the ill-fated “Build Back Better Act” would resurrect many of the ARPA’s expanded parental tax benefits, Congress ultimately let them all lapse. Because the ARPA was born in an emergency (and expired well before it ended), it will be easy to dismiss it as crisis legislation. I resist this narrative and create a counter one. By situating the ARPA within a broader historical context, an accurate narrative is developed––one where the ARPA’s expansion of parental tax benefits was neither hasty nor creative but instead enacted long overdue adjustments that began to correct the distributionally problematic way in which America has historically favored some families over others.
Preserving this historic narrative is imperative. It underscores the alarming failure of Congress to extend any of the ARPA’s parental tax benefits. It provides context for temporary expansions passed by the House, which, despite making grand headlines, constitute a remarkably modest step towards treating poor parents similarly to non poor parents. And of critical import, the narrative of inequitable tax reform developed in this project, supported by history rather than politics and bias, should ground imminent conversations that will shape the future of how parents in America are taxed. The Tax Cuts and Jobs Act, which amplified Congress’ inequitable treatment of families and favoritism towards non poor one breadwinner families, expires in 2025, providing a date certain on which Congress must revisit its method of taxing parents. During these imminent and other future conversations, a mastery of the historical context preserved in this Article should arm those who advocate for a more inclusive method of supporting parents attempting to raise children in the United States.
Steven A. Bank (UCLA) presents Tax Dodging and Its Evolution at Duke tomorrow as part of its Tax Policy Seminar hosted by Larry Zelenak:
In their book, The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay, economists Emmanuel Saez and Gabriel Zucman lamented the retreat of the United States’ tax system from its heyday between the 1930s and 1970s when it was, in their words, “perhaps the most progressive in world history.” As seen in Figure 1, the top rate shot up from 25 percent after World War I to more than 60 percent in the early 1930s and settled at the astronomically high rate of 91 percent for over a decade between 1951 and 1963. That turned out to be the high point for the top marginal rate. Over the next several decades it dropped to 70 percent, then 50 percent, and finally a low of 28 percent rate in the late 1980s. Although it has crept up since then, the top rate has never approached anything close to what it was at midcentury, remaining below 40 percent for the last four decades. Saez and Zucman and many others have called for a return to something approaching those high mid-century tax rates, while others reject this nostalgia for a so-called “Golden Age” of taxation.
Both proponents and critics of the mid-century rates acknowledge that taxpayers did not actually pay taxes at those high rates on all their income. Under our graduated rate income tax system, the marginal tax rates only apply to the dollars earned “at the margin,” or above the threshold at which that stated rate begins. A more important indicator of the tax burden is what is called the “effective rate.” This is the percentage of an individual’s annual income paid in taxes It is essentially an average of all the graduated rates applied to the marginal increments of income earned from first to last dollar, after taking into account the effect of deductions, credits, preferential capital gains tax rates and other methods of reducing, avoiding, or evading income taxes. It is no surprise, therefore, that the effective rates at midcentury were lower than the statutory rates.
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