Good morning!  I am here today to talk about the economics of abortion.  Now I know that sounds like a tedious, and even nasty subject, particularly for a Saturday morning.  Perhaps so; but as the old saying goes, to get at truth, follow the money.

Now, under the title The Economics of Abortion, I could look at the question of the money that is made in the abortion business.  Certainly, at the heart of the abortion enterprise, there are clinic operators, doctors, attendants, and other’s who live very well off the blood of the innocents.

Or I could talk about the hidden economic costs of abortion.  A couple of years ago, I calculated the annual U.S. income that will be lost through the 45 million legal abortions that had occurred since 1970.  Using very conservative assumptions, I found that these ghost Americans, in the year 2028 alone, would have generated an additional $3.8 Trillion dollars—yes Trillion—in national income.  This would have brought an additional $968 billion in federal income tax revenues; and nearly $600 billion in payroll tax revenues (eliminating, for example, the much discussed social security deficit).

But I am not going to address either of those matters, this morning.  Instead, at the request of your chairman, I will look at taxes; more specifically, at the often overlooked effects of the federal tax system on social behavior.  I will suggest that shifts in tax burden contributed to the demand for abortion; and also, that a pro-family tax system can create a national climate that is much more welcoming toward children; and I even have a bill now before Congress to recommend. 

I want to start by telling you a fairy tale.  Once upon a time, there was a happy and prosperous Kingdom, filled with contented families and beautiful children.  The land was ruled by a wise and kindly old King.  This King had a venerable Prime Minister as well, who had been in office even during the reign of the old King's father.  Some people from other lands criticized the Kingdom for being too generous to its subjects.  Yet, by every measure, this Kingdom was perhaps the richest on earth.  The Kingdom’s workshops made and sold wonderful things that all the world wanted.  Others came from nearby lands to work in this felicitous place.  The old Prime Minister called this land "The People's Home."  As his predecessor had once explained: "It is a matter of creating comfort and well- being…, making [the home] good and warm, light and cheerful and free.  To a woman there should be no more attractive mission."    

The fathers of the Kingdom received handsome pay for their good work.  The mothers of the Kingdom crafted beautiful homes and lovingly watched as their rosy-cheeked children scampered by the lakes and in the fields and forests of this blessed land.

But it came to pass that a Wicked Force arose, seeking to destroy the happy Kingdom.  The good King had grown tired and frail.  His grandson and heir seemed to be a stuttering boy; some considered him mentally "slow."  The old Prime Minister grew tired, as well, and gave his post to another, and younger, man.

This new Prime Minister was charming and energetic, but he had a cruel gleam in his left eye.  The Kingdom was too contented, he thought; too happy.  It needed to be shaken up and remade in a new, even revolutionary way.  He pondered how this might be done.

A group of gnomes came to his aid.  These gnomes wore green eyeshades and labored in the deepest dungeons of the Royal Palace.  The old Prime Minister had confined them to trivial tasks, like counting beans, where they did little harm.  But the new Prime Minister asked the gnomes to foretell the future.  Gazing into their Crystal, the gnomes saw a time ahead of still greater prosperity.  But the workshops of the Kingdom would need more workers, they cautioned.  The gnomes also warned that future immigrants would be different from those of the past, people of darker skins and stranger tongues who would pollute the land with their foreign ways.  "They won't look like us," the gnomes hissed.  It would be better, they said, if the Prime Minister would force the mothers of the Kingdom out of their homes and into the workshops, so as to keep the dark strangers away.

Also coming to the new Prime Minister's aid was a gaggle of witches.  These wizened creatures had cold hearts and looked with loathing at the pretty homes, hardworking and doting fathers, loving mothers, and frolicking children of the Kingdom.  These homes must be shattered into shards, they said.  The fathers must be stripped of status.  The mothers must be put into the workshops of the Kingdom.  The children must be gathered into little workhouses of their own, where they could be taught about the miseries of the old family ways.  And the number of children must be reduced, the witches said; their laughter was annoying.

The new Prime Minister pondered the counsel of the gnomes and the witches.  He wondered: What would be the best way to dissolve the homes, cripple the fathers, push the mothers into workshops and the children into little workhouses, and slash the number of children born?  Then a terrible grin crossed his face.  He knew what to do!

The next day, the Prime Minister issued his decree:  "In the past, the Royal taxes were imposed on families as a unit, whereby fathers and mothers could split their income and so reduce their tax.  Henceforward, the Royal taxes shall be imposed on each individual alone.  'Marriage' and 'home' and ‘children’ shall no longer be considered in the imposition of the Royal taxes."

The new Prime Minister was delighted.  With this simple change, he raised the marginal-tax-rate on the average family with a mother-at-home to a staggering 90 percent.  Meanwhile, the home with both mother and father in workshops would now have a marginal-tax-rate much lower.  From this point on, it would become more valuable for any extra income to be earned by the mother and not the father.

The gnomes were delighted, as well: no people with colored skin would now be needed in the Kingdom.  The sorceresses shreiked with joy;  they would long call this change the "most important" step in their plot to destroy the Kingdom's happy homes.

Alas, there is no pleasant ending to this fairy tale.  The people of the Kingdom would not live happily ever after.  No virtuous knight would come to their rescue.

Indeed, this is not even a fairy tale.  It is the true story (with certain linguistic embellishments) of what happened in the Kingdom of Sweden—my ancestral home—in 1971, when that nation switched from the joint income tax return to  mandatory individual filing.  The old King was Gustav VI Adolph; the old Prime Minister, Tage Erlander; the new Prime Minister, Olof Palme (the gnomes were labor department bureaucrats who preferred sending mothers to work rather than letting in non-European immigrants; the witches—alas—were the Swedish feminists) and so on through the cast.  Because of this policy change in 1971, Sweden today has the most "fully individualized taxation system" in the developed world.  It imposes the same tax schedule on all persons without any attention to marital status, dependents, employment, or the income of a spouse.

Analysts of modern socialist Sweden are unanimous in labeling this 1971 shift from "joint" to "individual" taxation as the most important policy change in Sweden during the last 40 years.  Sven Steinmo calls it "the most significant" and "radical" reform of the turbulent 1970's.  Through this change, reports Anne Lise Ellingsaeter, the traditional male breadwinner/female homemaker family was "more or less eradicated," the traditional home destroyed.  Using a different interpretive lens, it is fair to conclude that Sweden's current regime of few and weak marriages, fragile homes, widespread cohabitation, extensive day care, low fertility, the universal employment of young mothers, a majority of births outside of marriage, and easy abortion derives—to a significant degree—from this one change in tax policy.  This story underscores just how important tax policy is to family life...and to our relation to children.

I move now to the American scene.  And, with your indulgence, I want to make this a personal tale of my growing awareness of, and involvement in, the problem of anti-family taxation.  And I want to introduce to you a new bill, The Parents Tax Relief Act of 2006, a pro-life measure that would be of real benefit to families.

It was back in early 1982 that I read a brief story in my hometown paper, Rockford Register Star, about a new research paper released by The American Enterprise Institute.  Written by U.S. Treasury official Eugene Steuerle, this paper looked at the shift in federal tax burden according to household structure between 1960 to 1982.  Steuerle had been baffled by one fact: Federal spending and reveneues had soared between 1960 and 1982, to pay for the Vietnam War, the Great Society, Medicaid, and dozens of other new federal projects.  Yet the net income tax rate paid by individuals had not grown at all.  Where was the new Federal revenue coming from? 

On analysis, Steuerle exposed a massive transfer of the income tax burden onto the backs of families raising children.  Specifically, the net income tax paid by single person and married couples without children and corporations had not changed between 1960 and 1982.  However, the net tax—as percent of income—paid by married couples with two children rose by 43%; those with four children, by a staggering 223%.

Why this change?  It was partly due to partial abandonment in 1969 of “income splitting” on joint returns (a change similar to the one described in Sweden and which created the so-called ‘marriage penalty’); mostly, though, it was due to the erosion in the real value of the “personal exemption,” due to inflation.  Some of this shift was unintentional, an invisible, almost unconscious way to raise revenues without raising formal tax rates, under the deceptive cover of inflation.  However, this shift was also justified by new ideologies; such as the population control mentality: where the Population Bomb was said to loom over the nation with the American three- or four-child family condemned as a threat to the world.    

This shift in tax burden also goes some way toward explaining the new acceptance of abortion.  Between 1944 and 1968, the U.S. had had a very family-friendly income tax code.  Income splitting as in Sweden, tied to the generous per-capita personal exemption meant that the average married-couple family with three or more children paid no income tax at all.  On top of this, Social Security taxes were low (1.5% of income) and federal housing policy delivered subsidized home mortgages to young couples.

In short, public policy between 1944 and 1968 encouraged family formation, and fertility.  It should cause no surprise that this turned out to be  the era of the “marriage boom” and the “baby boom.”

In contrast, the 1969-1980 period saw the federal tax burden shifted onto the backs of families with children.  Recently cute little tax shelters, children now became burdens.  Perhaps it is no coincidence that this era, 1969-1980, also saw the legalization of abortion nationwide and a dramatic rise in the number of abortions each year, reaching 1,554,000 in 1980.

In any case, Steuerle’s hard numbers confirmed my earlier suspicions, and I became a family tax relief crusader. 

I began writing on this question, and soon gained a reputation, of sorts.  In 1984, the Republican Study Conference, chaired by then Cong. Jack Kemp, invited me in to discuss the issue.  Other new Congressmen there included Newt Gingrich (later Speaker of the House); and Dick Armey (later House Majority Leader) all reported that this was the first they had heard about this. 

I also became aware of other family ‘tax issues’:  notably, what I saw as an unfairness in child care tax policy.  Since 1976, parents purchasing day care received a fairly generous tax benefit—without income limit—that is, even very wealthy families qualified.  It is now worth up to $3000 in reduced taxes.  However, parents making the sacrifices—including lower income—to care for their own children at home have received nothing.

In 1988, my book, “Family Questions,” contained an appendix outlining what I called the “Family Tax Relief Plan.”  It recommended:

• Doubling Personal Income tax exemption, for children only, from $2,000 then to $4,000;

• Extending the Day Care Credit to all families, including those caring for small children at home;

• Creating a new, universal Child Tax Credit of $1000 per child, making it refundable and fully indexed to inflation;

• And granting an extra tax credit to families in the year when a child was born or adopted.

Partly because of the book, I received in 1988 an appointment from President Reagan to the new National Commission on Children.  I was one of 12 Republican appointees.  The Speaker of the House and President of the Senate also got to name 12 each: both were Democrats at the time, giving the Commission a 2 to 1 Democratic majority.  All the same, I made it my mission to make family tax relief a key part of our deliberations.  To my surprise, the Commission’s chairman, Sen. Jay Rockefeller, Democrat of West Virginia, among the most liberal of Senators, was won over.  To make a long story short, our Commission’s Final Report, released in 1991 and entitled Beyond Rhetoric: A New Agenda for Children and Families, made the creation of a new, universal, refundable tax credit of $1000 per child its primary recommendation. 

In 1996, a bipartisan coalition won a tax reform bill that did create a $400 per child tax credit; President Bill Clinton—who had been a member of the Children’s Commission while still Gov. of Arkansas—signed the measure into law.

In the George Bush tax cut of 2001, Congress did raise the child tax credit to $1,000 (but only through 2010, when it will expire, moreover, this child tax credit remains limited to middle incomes only: the wealthy and low income families are excluded).  And it partly eliminated the marriage penalty (for the lowest income tax bracket).  These were all real gains.  And it may be more than coincidence that the abortion rate and the absolute number of abortions have been going down since the mid-1980’s: the federal tax code has become more child friendly.

More, though, needs to be done.  And I have a new favorite piece of legislation. 

Taking the lead here is Rep. Lee Terry of Nebraska.  His new bill is “The Parents’ Tax Relief Act of 2006.”  It was formally introduced in the U.S. House and Senate in late June of last year (as HR 3080 and S1305). 

As you can imagine, I am excited about this bill.  Specifically, the measure would:

Extend The Dependent Care Tax Credit to Stay-at-Home Parents by granting a tax credit of $250 per month to them: equal to that given to day-care-using families.  This would expand the child care choices available to all families.  Unless the Dependent Care Tax Credit is universalized, it will continue to represent a clear and disturbing federal preference for paid day care above at-home parenting. 

The bill would make the Child Tax Credit of $1000 Permanent and Index it to Inflation. 

H.R. 3080 would increase the Personal Child Tax Exemption to $5000; together with the tax credit, this would bring per child tax relief back to its 1948 level, the dawn of the baby-boom era. 

The measure would eliminate the Marriage Tax Penalty for all tax brackets.  The “marriage penalty” still currently taxes married couples filing jointly at higher rates than two single individuals earning the same income.  This discourages marriage and unfairly burdens families trying to make ends meet.  The 2001 tax cut law reduced this penalty by doubling the standard deduction for joint filers, and doubling the size of the 15 percent tax bracket for married couples.  The penalty remains in place in the higher brackets.  Unfortunately, even these modest reforms will expire in 2010, along with the rest of the tax cuts enacted by Congress.  The Parents’ Tax Relief Act would eliminate the marriage tax penalty entirely to ensure government does not discourage marriage or force both parents into the workforce.

H.R. 3080 would also support Home-Based Businesses by creating a standard deduction for home-office use, replacing existing burdensome reporting relations.  Many parents seek flexible employment opportunities such as home-based business in order to care for their children while contributing to household income; this change would help. 

The bill would also encourage Telecommuting Jobs in the home through tax credits for employers who experiment in this form of home-based employment.  One way stay-at-home mothers or fathers can contribute to family income is through employer-sponsored telecommuting.  The bill would also allow individuals to exclude from income the value of employer-provided computers and related equipment necessary for work from home.

Finally, H.R. 3080 would Protect Stay-at-Home Parents’ Social Security by giving them—for the first time—credit toward Social Security for up to 10 years of full-time child rearing.  If a parent leaves the workforce to provide at-home care to a young child, the family’s finances may not only suffer, but career opportunities and future earnings potential may be diminished.  In addition, many women who stay at home to care for children during prime working years may jeopardize their future Social Security benefits.  This provision recognizes and safeguards parent-provided child care as valuable work that contributes to the character and security of our nation.

By Congressional standards, this bill is still new but it is starting to gain some momentum.  It now has 40 co-sponsors in the House, and 3 in the Senate, led by Sen. Sam Brownback of Texas.  One key challenge right now is to win more Democratic support.

Before I ask for your questions and comments, let me answer two questions that are sure to come:  What would all this cost, in terms of lost tax revenue?  And how could it be compensated for?

Admittedly, the annual tax cut would be high.  Several tens of billions of dollars.  This bill itself does not address any compensating revenue stream.   Still, speaking only for myself here; if it was my call, I would trade the passage of all of these provisions for a small increase in general tax brackets of one or 1.5 percent.  All families raising children—whatever their structure—would gain.  Those without children (or those whose children are grown—a group I soon will join) will pay a little more, but it would be for a good cause: stronger, more functional, and more autonomous families: homes that would welcome new children, and homes that would renew the nation.