The federal adoption tax credit is a tiny sliver of federal spending—the $300 million spent annually equals less than 0.01 percent of the federal budget. But the House GOP’s proposal to scrap this little tax credit as part of their overhaul of the tax code is already receiving a lot of pushback.
“The adoption tax credit is not just one more policy issue. Vulnerable children ought to be a priority for us all,” tweeted Russell Moore, president of the Ethics & Religious Liberty Commission of the Southern Baptist Convention. “Amen. Being pro-life means being pro-adoption. Congress must remember this as we work through the details of tax reform in the coming weeks,” Nebraska GOP senator
Ben Sasse replied.
The pushback is understandable because the tax credit costs the federal government so little, but the costs of adoption can be enormous for American families. According to the Department of Health and Human Services’ Children’s Bureau, the cost of private agency domestic adoptions—medical and legal expenses, home studies, etc.—“may range from $20,000 to $45,000.” International adoptions, which often involve overseas travel, cost more. That’s why the federal government currently provides a tax credit of up to $13,000 to adoptive families. As the House’s tax-writing Ways & Means committee explains:
According to the Joint Committee on Taxation, keeping the adoption tax credit would cost the federal government $3.8 billion over 10 years. That’s a small amount of money in a multi-trillion-dollar tax overhaul. Over 10 years, the House GOP’s proposed changes to the estate tax alone (immediately doubling the exempt amount to $11 million and then eliminating it after 2023) will reduce federal revenues by $172 billion—meaning that cutting the inheritance tax will cost 50 times more than keeping the adoption tax credit.
Mind you, adoption advocates argue that the adoption tax credit doesn’t actually cost taxpayers $3.8 billion in practice. Chuck Johnson, president of the National Council for Adoption, points out that Republicans are always arguing that tax plans should be scored “dynamically” in order to account for the impact tax cuts will have on economic growth—but they have failed to consider the overall impact of the adoption tax credit on state and federal budgets. “What they don’t factor in is the total cost to society with a child in foster care,” Johnson tells THE WEEKLY STANDARD. The costs to taxpayers of keeping a child in foster care—health care, food, housing, social workers, and administrators—are far greater than the one-time tax credit adoptive families may receive.
“Comparing the per-child cost of subsidized adoption from foster care with the cost of maintaining a child in foster care, one concludes that the child adopted from foster care costs the public only 40 percent as much as the child who remains in foster care,” according to a report from the National Council for Adoption. “The difference in cost per child per year amounts to $15,480.”
“You’ve got to look at the total cost. You’ve got to look at the future savings,” says Johnson. Children who get out of foster care and into permanent families are better off, which is good for them and good for society. “Children get in families who help them become self-sufficient contributing members of society, instead of folks we have to provide care to for the rest of their lives,” says Johnson.
The GOP tax plan has some pro-family elements. It expands the child tax credit from $1,000 to $1,600 and allows the upper-middle-class to claim it (the current child tax credit begins to phase out for married couples with $110,000 in adjusted gross income; the GOP plan would phase out the new child tax credit at $230,000). But the tax overhaul would leave some upper-middle-class families worse off on net: It increases the standard deduction to $24,000 for married couples, but it eliminates personal exemptions and it limits some deductions and eliminates others for those who would still itemize their taxes.
Even for a middle-class adoptive family that fully benefits from the increased child tax credit, those savings will only accrue over the long-run, while the importance of the adoption tax credit is that it helps defray the high costs of adoption that occur up front. “I don’t think we could’ve done a second adoption without the credit,” Johnson says of his own family.
Congressional Republicans are rushing to pass tax reform before the end of the year, but Johnson says he’s optimistic that they will change their mind and restore the adoption tax credit: “We have already been contacted by many members in the House and the Senate who are going to make a strong, principled stand.”
While principle is important, it may be politics that end up saving it. Republicans will have a very difficult time arguing there isn’t enough room in their plan to keep the adoption tax credit for middle-class families while they eliminate the estate tax for the wealthy.
