U.S. birth rates fell to an all-time low last year, and if it stays that way, the native-born population will shrink. There's every reason to think that this is where we're headed. Marriage rates also are on the decline. (While not a prerequisite for child-bearing, marriage does tend to encourage it.) In economic terms, this is bad: When the fertility rate falls below the replacement rate, as it has in some European countries and did last year in the U.S., it becomes a threat to economic growth and undermines the ability to pay for social services and pensions.
With a vested interest in encouraging marriage and family-making, the state has been trying for centuries to foster them. When ancient Rome was in a similar position, it levied a tax on unmarried men, hoping to cajole them into marrying and starting families. In the early 20th century, towns in Germany, Italy, and the state of Montana also levied bachelor taxes. Not surprisingly, they were extremely unpopular, and many people considered them discriminatory.
A version of a singles tax remains in effect, though it applies to both men and women. The figure below shows the percentage point difference in income tax rates for average-earning singles and those married (to a lower-earning spouse) in countries that are members of the Organisation for Economic Co-operation and Development:
Governments like to encourage marriage because it is associated with more stability and wealth accumulation, even if—in this era of dual-income households—it can mean a more rigid labor market. But one of the biggest economic benefits of marriage, at least from a tax perspective, is that it often leads to children. Married couples with kids pay less taxes than couples without them in every developed country except Greece.
In the last decade many countries in the OECD have changed their tax code to encourage marriage and babies. It hasn't worked: Fertility and marriage rates have been declining since at least 2000. That could be because a slow economy has led people to delay having babies. Moreover, income taxes account for only part of the tax burden on new families: Many European countries levy hefty sales taxes. As almost any parent will tell you, having children requires buying stuff.
Some interventions, though, can be effective. There's evidence that financial incentives in France induced people to have a third child, though they may not have shown much impact on the decision to have children at all. An additional study, based on Israeli data, estimates that decreasing the cost associated with having kids is more effective than giving parents money. Governments might get more bang for their forgone tax buck by offering services and subsidizing maternity leave and child care instead of offering tax-breaks.
In the U.S., tax benefits are the biggest governmental financial incentive for middle class people to have children. (Private financial incentives include that your kids will take care of you when you're old.) The cost of services, paid maternity leave, and child care are largely borne by individuals or employers, unless a family is poor. If the U.S. eventually decides to boost fertility, it may need to rethink how it spends its resources.
