One of the interesting elements of Rick Santorum's rise has been the increasing attention paid to the fact that he's the only guy in the field who believes strongly that the tax code should be reworked to promote and support families. It's interesting because it stands at odds with the general Republican approach to tax reform in recent years, and it's worth highlighting because of the decision it represents about using the tax code to promote a certain vision of society.
You're by now probably well familiar with the statistic that approximately 47% of Americans pay no taxes. That's actually inaccurate - they do pay a number of taxes, as everyone does - just not federal income taxes. Why don't they pay federal income taxes? The answer might surprise you.
As it turns out, the largest statistical reason for the growth in the percentage of Americans who pay no taxes is the increase in the child tax credit under Republican leadership over the past decade.
Let's rewind to 1998, when Newt Gingrich was Speaker of the House. Republicans came up with the idea of a $400 tax credit, intended to lighten the tax load on working families and high-child-producing social conservatives. Signed into law by Bill Clinton, the child tax credit didn't stay at $400 - it expanded dramatically under George W. Bush, as he and the GOP Congress sought to please their base. They more than doubled the credit, which had the consequence of pushing more and more households into the category of paying no federal income taxes.
According to the Tax Foundation, in the period from 2000 to 2004 alone, this expanded child credit accounted for increasing total nonpayers by 10.5 million, a 32-percent jump. In 1997, before the child tax credit was introduced, under 20% of federal returns had no tax liability—today, as you know, it's 47%.
Now, few Republicans are willing to admit that the high number of nonpayers today is in large part due to their use of the tax code to further their view of society. Some, such as Michele Bachmann, have decried the fact that there are so many non-payers, calling them "freeloaders" and the like.
This puts conservatives in an unfortunate position. Either they have to walk back this talk about broadening the tax base, or they have to raise taxes on their middle and lower-middle class child-producing base at a time when birth rates are already dropping. (Hey, we need those kids to fund entitlements!).
For Santorum, the decision is easy: he triples down on the child tax credit approach. As the Tax Policy Center notes, Santorum's tax approach would triple the exemption for dependent children, which "would likely add significantly to the number of households that pay no income tax."
Now, fewer people paying income taxes isn't a bad thing, from my perspective or Milton Friedman's, as long as government is simultaneously cut back (my favorite president, Calvin Coolidge, cut the government to the point where only 2% of Americans paid federal income taxes). But where and what would Santorum cut? Without significant cuts, his tax plan would likely explode the deficit even further. And I have my doubts whether Santorum's approach would lead to the kind of economic recovery a flat tax would spawn to compensate for such steps.
For the rest of the candidates in the field, whose tax plans you can compare and contrast here, most have endorsed expanding the tax base and making more of these 47% of Americans pay. But what they ought to be emphasizing that the best way to expand the tax base is not through redistribution of tax receipts depending on who's in power in Washington (and whether they love families or not), but by getting more Americans working, and in higher wage jobs. Unfortunately, that takes time, and may have more to do with education reform than tax reform.