President Reagan is promoting his tax plan as "pro-family." But not all families are created equal, and several analysts said last week that some would become more equal than others if Congress enacts his proposal intact.
Within Reagan's sweeping blueprint for lower tax rates is a federal family policy intended to lighten the tax burden of every household with children. It would remove poor families with children from the tax rolls, double the personal exemption for each child or dependent, raise the standard deduction across the board and reduce the taxes of single parents.
But the proposal also favors certain kinds of families over others, aiming the biggest tax cuts at high-income, large families in which the mother does not work.
The savings would come because, in addition to the increased exemption for each child, Reagan has proposed to repeal the "marriage penalty" deduction for two-earner families, change the treatment of child care costs and increase the break for retirement savings of nonworking spouses.
Moreover, families with incomes of $175,000 or more would be taxed at the same marginal rate (35 percent) as families earning $70,000 or singles earning $42,000, making the benefits greater for the wealthiest households.
According to Treasury Department statistics, a family of six with four children, a nonworking mother and a father earning $600,000 would save more than $70,000 in 1986 taxes -- a 20 percent reduction. By contrast, Treasury Secretary James A. Baker III testified last week that a "typical family," with two children and income of $33,600, would have a tax cut of $394, or about 11 percent.
Although numerous factors can skew a family's tax rate, from their brand of health insurance to the investments they choose, the Reagan plan's apparent favoritism toward certain types of families emerges as a sensitive issue -- particularly because women are entering the work force in larger numbers and having fewer children than their mothers.
By touting his plan as "pro-family," Reagan may have stepped onto political quicksand, because the notion of what constitutes a family is in flux. Although the Reagan plan may define a "family" as a working husband with a wife who stays home with children, the reality of the American family is more complex.
About one-fourth of all new households formed since 1980 are headed by women without husbands, according to Census Bureau and Labor Department statistics, and the number of families where both husband and wife work is now more than the number of "traditional" families with only the husband as breadwinner.
Today, more couples are childless than have children living at home, and the average household size has dropped from 3.44 people in 1974 to 2.71 in 1984.
More Americans are setting up new households, but not the traditional "mom-and-pop" homes. Americans are delaying marriage longer to pursue education and careers, and the growth in new homes comes primarily from the increase in people living alone and female-headed households.
Against this background, critics have accused Reagan of trying to legislate morality through the tax code.
"The administration may be thinking of the family as it was prior to women going into the work force, because to some extent it's a proposal that encourages women to stay home," said Rep. Robert T. Matsui (D-Calif.), a member of the tax-writing House Ways and Means Committee. "When the aura of this package wears off, I think they may regret selling it as pro-family because they may have raised an issue they can't defend."
Many conservative groups detect the same agenda, but welcome it, saying stiff taxation of families has forced women into the work force.
"Families who have two parents in the work force for economic reasons and would rather have one home for child care -- this plan may give them that option," said Jerry Regier, president of the Family Research Council of America.
Advocacy groups for children and women also praised those parts of the president's proposal that would improve the status of single parents and most families with children. They constitute "a giant step toward providing poor, working families with children desperately needed federal tax relief," said Marian Wright Edelman, president of the Children's Defense Fund.
Over the last several years, inflation has pushed thousands of poor families into taxable brackets even though the real value of their income has not increased.
Meanwhile, the personal exemption has not kept pace with inflation, and since World War II the tax burden on large families has increased more than on any other group.
The Reagan proposal would raise the personal exemption -- the deduction for a taxpayer and each dependent or child -- from $1,040 to $2,000. It also would raise the standard deduction -- the amount of income exempt from taxes -- for married couples from $3,670 to $4,000 and for single parents from $2,480 to $3,600. In addition, it would increase an existing tax credit for working-poor families that cancels out much of the Social Security tax. These three provisions would reduce taxes on households by $58 billion in 1990.
Reagan said in his television address last week that these changes would remove from the tax rolls families earning up to $12,000, along with blind or elderly people living at or below the poverty level.
But one group below the poverty level would still pay taxes, according to the Treasury: single, childless people. They would begin paying taxes at an income of $4,900, although the poverty level for them is $5,800.
While these deductions would apply to all families with children, others favor those with nonworking mothers. Reagan proposed, for example, to repeal a deduction for two-earner couples who file joint tax returns.
Reagan said that because his plan would have only three rate brackets, rather than the current 15, few couples would be thrust into higher brackets by pooling their income, and the deduction would no longer be needed. But Treasury documents indicate that the deduction would save working couples $9 billion in 1990.
Another proposal would change the child care credit, which benefits low-income families most, to a deduction, which would benefit those in the highest brackets. Families paying a 15 percent rate save only 15 cents on every $1 of child care costs deducted, while those at 35 percent save 35 cents. This change would most affect families with working mothers; if a mother stays home and takes care of her children, there is no credit to be lost.
Congressional analysts said the change would cost the Treasury $300 million more than the current system.
Reagan also proposes to allow the same amount of tax-free contributions to Individual Retirement Accounts for nonworking spouses as for working spouses. Thus, if a married woman does not work, she would get an extra deduction of $1,750 -- an increase from the present maximum of $250 to $2,000; a working woman already is eligible for the maximum IRA contribution, and so would get no extra deduction.
A variety of other proposed changes could affect the tax burdens of certain kinds of families. Reagan's proposal to tax the first $300 of a family's employer-provided health insurance, which now is tax-free, would hit moderate-income families proportionately harder because those with insurance policies worth more than $300 would get the excess tax-free.
Also, Reagan's proposal to abolish the deduction for state and local income taxes will hit hardest on families in the Northeast and the Midwest, where taxes are highest. A congressional analysis predicted higher taxes for many of those taxpayers despite the lower rates. (About 20 percent of all taxpayers would pay higher taxes under the president's plan, about 58 percent would pay less and the rest would remain the same, according to Treasury figures.)
Reagan calls the deduction a federal subsidy to high-tax states that discriminates against taxpayers in low-tax states. He emphasized that only well-off families who itemize deductions now benefit from this.
Treasury officials said that much of what appears to be favoritism simply rectifies past burdens. For example, under the existing system inflation has hit families with children harder than those without.