TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Tuesday, January 2, 2018

NY Times: What Explains The Dearth Of New Year's Babies? Taxes, Of Course

Tax Break BabiesNew York Times, To-Do List: Wrap Gifts. Have Baby.:

In the last 15 years, there has been a huge increase in the number of births that are induced with drugs or come by Caesarean section. In either case, parents or doctors can often schedule a baby’s arrival on a day of their choosing. ...

Over this same period — since the early 1990s — the federal government has been steadily increasing the tax breaks for having a child. For parents to claim the full amount of any of these breaks in a given year, a child must simply be born by 11:59 p.m. on Dec. 31. If the baby arrives a few minutes later, the parents are often more than a thousand dollars poorer.

Unless you’re a cynic, or an economist, I realize you might have trouble believing that the intricacies of the nation’s tax code would impinge on something as sacred as the birth of a child. But it appears that you would be wrong. ...

“It’s phenomenal what’s happening in late December,” said Amitabh Chandra, a Harvard economist who provided many of the numbers here. “December is not really a particularly busy time for babies to be born. So to see a spike that’s equal to September is astounding.” ...

So to see if taxes were truly the culprit, Mr. Chandra and another economist, Stacy Dickert-Conlin of Michigan State, devised some clever tests [Taxes and the Timing of Births]. They found that people who stood to gain the most from the tax breaks were also the ones who gave birth in late December most frequently. When the gains were similar, high-income parents — who, presumably, are more likely to be paying for tax advice — produced more December babies than other parents. ...

By my calculations, about 5,000 babies, of the 70,000 or so who would otherwise be born during the first week in January, may have their arrival dates accelerated partly for tax reasons. ... Mr. Chandra thinks my estimate of 5,000 is conservative, based on his own more sophisticated statistical analysis. ...

The solution to this situation seems simple enough to me, and it comes back to the tax code. If Congress changed the all-or-nothing aspect of the child tax breaks, it would reduce the incentive to rush a fetus along in the final days of the year. A child born in December could be eligible for one-twelfth of a deduction or a credit rather than the whole thing.

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