Families With Children Deserve Tax Relief—But A Growing Economy Too

Expectant parents may be disappointed that a $5,000 baby bonus—which President Trump himself said “sounds like a good idea”—hasn’t found a place in the massive tax and budget package now winding its way through Congress. The current draft of the “One Big, Beautiful Bill” would create tax-advantaged savings accounts that can be opened for newborns, and a pilot program for the next three years, during which the federal government would contribute $1,000 to kick-start each account. Accrued funds would then be accessible for the child when he or she turns 18 to help pay for higher education, to buy a house and other eligible expenses.

That may be a help for parents concerned about their kids’ futures, but doesn’t feel like the same windfall as an immediate $5,000 baby bonus that was floated last month.

Yet young parents have more at stake in the tax code than maximizing payouts related to the immediate years when they have young children. If bigger short-term credits or dedication came at the expense of higher marginal income tax rates, higher corporate tax rates and slower economic growth, young parents would find that they are still losers in the deal.

Higher marginal rates on top earners may sound like a rich and worthy source of tax dollars, but these top earners also tend to be the drivers of economic growth and job creation. Most small businesses are managed as “pass-through” tax entities, which means higher marginal rates would hit them, hurting workers and job creation broadly. High marginal tax rates discourage work, investment, and entrepreneurship—the very behaviors that drive economic growth and benefit the economy broadly.

The corporate tax rate cuts in the 2017 Tax Cuts and Jobs Act (TCJA) resulted in rising real wages, more generous benefits (including for paid time off, a critical benefit for families with young children), and more and better job opportunities for workers. This kind of growing, dynamic economy, more than short-lived tax breaks, will provide families with financial stability over the long term.

Lana Pol, who runs a family-owned trucking company in Iowa with 68 employees, explained what the 2017 tax cuts meant for businesses like hers: “Before the tax cuts, everybody was struggling at that point, as far as small businesses. The confidence wasn’t there. When these tax cuts came along, we saw a tremendous increase in people’s confidence. Everything seemed to start flowing a lot better, cash flow was better, and just knowing that there was help out there.”

A better economy for entrepreneurs and businesses of all sizes might not seem like a boon to families with small children, but will dictate the economic environment that surrounds them. Most families’ current budget woes stem from steeply higher living costs, which are the result of inflation, restrictive housing and energy policies, and other growth-crushing regulations left over from the Biden era. Simply by blocking the Biden administration’s unfinalized rules, the Trump administration saved the average family of four an estimated $2,100 over the next decade. Rolling back additional red tape will continue to reduce energy and compliance costs, bringing downward pressure on the costs of most goods and services.

Families will also benefit from the administration’s changes in education policy. Returning funds to states and localities—and even better to parents themselves—will not only shake up under-performing government-run schools and help kids learn more, but also free parents from overpaying for housing in purportedly “good” school districts, easing housing costs and alleviating a variety of headaches for parents.

Reducing taxes on families should remain a priority during negotiations for this tax and budget bill. Hitting already cash-strapped families with a massive reduction in their child tax credit—it was doubled by the TCJA—would cause real hardship. If Congress fails to act and allows the resumption of the pre-2017 tax system, the average taxpayer will see a 22% tax hike. A family of four making $80,610 (the median U.S. income) would see a $1,695 tax increase.

The current version of the “One, Big, Beautiful Bill” includes an expanded Child Tax Credit of an additional $1,500 over the next three years, which would provide a big boost to families with the youngest children.

Tough choices always have to be made during tax negotiations—especially when we have to fund a government of this enormous size. Families with children have a big stake in this debate, that goes far beyond any single baby bonus or tax credit. They need a tax system that creates a growing economy with more opportunities and affordable living for the long term.

Carrie Lukas, a mother of five, is president of Independent Women.