Fiscal Externalities of Becoming a Parent

Douglas A. Wolf, Syracuse University
Ronald Lee, University of California, Berkeley
Timothy Miller, CEPAL
Gretchen Donehower, University of California, Berkeley
Alexandre Genest, Human Resources Development Canada

It has often been observed that there are economic externalities to childbearing; however, there are numerous public expenditure programs aimed at the well-being of children, while some taxes treat differently those with and without children. Thus, the net fiscal externality from raising children may be positive or negative. We calculate the net present value of being a parent from the perspective of the combined Federal, State and local public budgets. We compute age profiles of contributions to the public budget—i.e. taxes paid—and age profiles of claims on the public budget—i.e., benefits received—separately for parents and “nonparents.” We employ an expansive definition of “parent,” counting all those who bear private childrearing costs in the form of time, money, or co-residential space. Using a previously-developed intertemporal accounting model, we find that the net present value of the fiscal streams associated with parenting is about $150,000.