Adoption Tax Credit A Good Idea

(From Mona Charen’s April 5, 1995 column) In a recent column, I mistakenly reported that the adoption tax credit would be available only for special-needs adoptions. My usually reliable source misled me, and I apologize to my readers.

Just because Republicans won a majority in 1994 doesn’t mean they run things on Capitol Hill.

Does that sound preposterous?

It’s true. Members of the new majority are so busy - so many issues are whizzing past them in the race to complete their 100-days agenda - that they sometimes are swayed by the Washington Old Guard whispering bad advice in their novice ears.

A case study is what is happening to the Family Reinforcement Act, a plank in the GOP’s “Contract With America.” The plan included a long-desired refundable tax credit of $5,000 for parents who adopt children.

That tax relief should be available to parents who adopt is obvious. In the first place, it is good public policy to encourage adoption. Liberals and conservatives, Democrats and Republicans say they agree on that.

The costs associated with making a child available for adoption vary tremendously. If a child is born at full term, healthy and normal, the costs, including the birth mother’s expenses, doctor’s fees, hospital fees and pre-placement foster care, can be as low as $17,000. But if there are complications with the birth or other problems, the fees can rise enormously. The average fee collected from adopting parents is $10,000. What does that mean?

For agencies, the high costs mean they cannot possibly serve all the people they would like to. It even can mean placements are dictated not by who would be the ideal parents for a particular child but who can manage the costs.

For parents, it means many who could afford to put a bunk bed in junior’s room and set another place at the dinner table cannot manage the initial adoption expenses. For families who attempt to adopt babies from abroad (about half of infant adoptions are international), travel expenses often can be prohibitive.

Thus, adoption is out of reach for many people who would be wonderful parents. And children who could be cared for in families are languishing in foster care.

The Family Reinforcement Act called for a refundable tax credit of $5,000 for parents who adopt children. A simple tax credit was seen as inadequate because some families who do not have high tax obligations nevertheless could afford to raise a child. But the refundable tax credit would give them the same advantage as tax-paying families.

Such a provision (though slightly flawed because it neglected to include the words “legal and finalized adoptions”) passed the subcommittee of the Ways and Means Committee that considered the legislation.

But when the bill reached the full committee, the forces of reaction - in this case, the Clinton administration’s Treasury Department - succeeded in frightening the Republicans out of the plan altogether and substituting wording that merely would reinforce the unacceptable status quo.

The revised wording merely offers tax help for families who adopt children with special needs. It sounds humanitarian. The only trouble is: There already is plenty of federal help available to families who adopt children with special needs. Under Title IV-E of the Social Security Act, parents who adopt special-needs children receive reimbursement for non-recurring adoption expenses. The wording of the Family Reinforcement Act, if enacted without change, will provide families who adopt special-needs children the chance to engage in double dipping but will do nothing to help all other prospective adoptive families.

Treasury Department officials argued the tax code is not the proper place for enacting social policy preferences. Oh, really? What do they suppose the home-mortgage deduction is? What about the deductions for children and other dependents? Are those not policy preferences? And, for that matter, what is a provision for tax help to adopt special-needs children?

The department also argued that a refundable tax credit is subject to abuse. But it is awfully difficult to imagine that a refundable tax credit for one-time adoption expenses would be more subject to abuse than, say, the earned income tax credit, which is the darling of the Clinton administration.

What is mysterious is not that the Clinton administration’s Treasury Department opposed this much-needed and socially beneficial tax credit - what is amazing is that the Republicancontrolled Ways and Means Committee was snookered.

MEMO: Mona Charen is a columnist and television commentator based in Washington, D.C.