The voices of Tax Policy Center's researchers and staff
On Monday, the Georgia Department of Revenue (DOR) released guidance for unborn children newly eligible for the state’s existing dependent deduction. Making unborn children eligible for the deduction was part of a 2019 law that banned abortion once a fetal heartbeat is detected (which can be as early as six weeks). When the Supreme Court overturned Roe vs. Wade both Georgia’s abortion ban and its unborn child deduction became operable.
Proponents argue the expanded deduction will help families expecting children.
However, the expanded deduction is extremely complicated to claim and, even if working as intended, nowhere near as effective as proven state policies that support children and families.
Deductions do not benefit low-income households
As a general matter, deductions—whether for dependents, childcare payments, or charity—only benefit households with at least modest incomes. A deduction lowers taxable income so households with no or little taxable income get nothing from them.
When Georgia’s big income tax cut is fully phased in, its standard deductions will be $12,000 for single filers and $24,000 for married filers. Thus, a filer must earn at least above those levels before benefiting from the unborn deduction. And if the household already has dependents (Georgia’s $3,000 deduction was not changed) that threshold is even higher. For example, a married couple with two children expecting another would need to earn over $30,000 before seeing a dollar from the unborn deduction.
Further, Georgia’s new 4.99 percent flat tax rate means deductions won’t make much of a difference to any filer’s bottom line. Even if a family got the full $3,000 deduction, the most it could get is $150 in tax savings ($3,000 x 0.0499).
Modern families and the tax code don’t always match
Now let’s explore why this small tax benefit is infuriatingly complicated.
The DOR guidance simply says an unborn child is eligible for the state’s dependent deduction.
But a dependent of whom?
If two parents are married, file jointly, and earn a decent amount of income, this is simple: the unborn child is the parents’ dependent.
But what if the parents don’t earn much income? Let’s say they are students and the expectant mother’s mother supports them financially. Can the soon-to-be grandmother claim her daughter’s unborn child?
Or what if the parents are not married and the father is the sole financial provider? Can the father claim the unborn child? Does he need to submit a paternity test to the Georgia DOR?
Speaking of verification, all the DOR guidance says is “relevant medical records or other supporting documentation shall be provided.” Are taxpayers going to send in a sonogram? Can the mother, father, and grandmother all send in the same sonogram? Is someone in Georgia’s DOR going to sort through all the sonograms? What about the IRS? Do federal IRS agents also get to see the sonograms and paternity tests?
Finally, what happens after the child is born? If you have a sonogram for an unborn child in March and a child is born in September do you get to claim both an unborn deduction and a child deduction?
There are also no instructions for claiming the deduction if the pregnancy does not result in a live birth.
There are simple and effective ways to help expecting families
Proponents claim the deduction will help “ensure babies are saved and given the opportunity to have a fruitful, meaningful life.”
The small and overly complicated deduction for unborn children does not do that. But there are simple and proven policies available to Georgia policymakers if they want to help new and expectant parents.
Georgia could follow 39 states and expand Medicaid. Currently, Medicaid covers one-in-11 adults in Georgia, compared with one-in-four in expansion-accepting Kentucky. Notably, a pregnant woman with low income is generally eligible for Medicaid in Georgia but she loses it when the child is born. Under expansion, all adults under an income limit are eligible for Medicaid.
Alternatively, Georgia could join the eight states and District of Columbia that have enacted a paid family leave program. In all of these states a mother can take leave to care for a newborn or adopted child.
Or, if Georgia wanted to stick with tax policy, it could enact a refundable tax credit. Unlike a deduction, a refundable credit helps low-income households because they can claim it as a tax rebate. Twenty-five states and the District of Columbia offer a refundable earned income tax credit (which delivers bigger benefits to households with children) and five states offer a refundable child tax credit (with some, like Vermont’s, targeting its benefits at families with young children). Georgia offers neither.
None of these policies are perfect and they all come with tradeoffs. But they all deliver tangible and often large benefits to parents and children. State policymakers in Georgia and other states looking to help expecting families would do well to start with programs that have a track record of positive results.
Posts and comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.