Women, children, and taxation

This paper is written a propos of recent initiatives by the U.K. government to integrate aspects of the tax and benefit system in order to support families with children by encouraging unemployed mothers back to work. It is argued in the paper (i) that a shift toward financial support for children is to be welcomed, since children are a public good whose nurture the State ought to support. Similarly, the recognition is welcome (ii) that appropriate support must take into account the inter-relationship of the tax and benefit systems. However, criticism is made (iii) of the mode of support offered; in particular, over the embedded concomitant policy that, rather than supporting parents through universal subsidies (such as a Child Benefit or universal childcare credits), the better approach is to encourage parents to substitute paid employment for home-based child-rearing, and simultaneously to substitute State-provided or -subsidised childcare for home-based child rearing. It is argued that a parent deserves support with respect to child care whether or not the parent is employed, and that structuring subsidies in order to bias the employment/home-care decisions of parents is inappropriate. Finally, these questions are considered (iv) in the context of the present tax-benefit system. Both existing tax law and the new initiatives distort the substitute-childcare versus home-care decision. In particular, the mechanism of a means-tested tax credit is an imperfect one with which to subsidise childcare costs