Putnam's Path Forward for 'Our Kids' Should Start With the Upside-Down Tax Code

04/07/2015 07:03 pm ET | Updated Jun 07, 2015

Robert Putnam's critics are largely right.

On the one hand, the Harvard sociologist's latest bestseller, Our Kids: The American Dream in Crisis, is a synthesis of charts and data brought to life through skillful and at times heart-wrenching stories of the uneven playing field facing young people across the country. The book creates empathy and urgency around America's "opportunity gap," declining economic mobility and life chances for kids from poor socioeconomic backgrounds.

Yet, despite the book's careful exploration of what this gap means, including diminished wealth, financial insecurity, and isolation of the poor from our communities and civil society, the book offers only a broad-brush explanation of what caused the problem and is now accelerating these unsustainable trends.

There is nothing controversial in Our Kids -- no bad guys, no culprits, no boogeymen. By not calling out root causes and key actors, Putnam enables those on both sides of the political spectrum to enter his big tent. This, in itself, is a remarkable victory. But it also means that Putnam has no foundation upon which to build a coherent policy strategy. Indeed, Putnam himself preempts this criticism, noting that he is simply offering a "menu of complementary approaches" and that it would admittedly "take hard work to turn this set of suggestions into a comprehensive plan of action."

Fair enough. But by going just a few steps further, Putnam would find solutions that are less onerous -- and less expensive -- than many assume. He should start by looking at our nation's tax policy, which is one of the most powerful tools at our disposal to address income and wealth inequality.

Putnam notes that making the appropriate investments in kids is likely to be an expensive proposition. Focusing on the tax code would mean that rather than requiring net new expenditures, we can coalesce around the strategic reuse of the existing $540 billion in tax expenditures already devoted to helping Americans build wealth through tax credits, deductions, exclusions, exemptions, deferrals and reduced tax rates. We would shift these dollars to increase investment in low-income children and families, while no longer directing support to wealthy households who don't need these extra incentives.

Putnam encourages consideration of specific tax policy efforts, including expanding the Child Tax Credit and Earned Income Tax Credit (EITC), which increases income for low-income workers. These are excellent first steps. In CFED's report, From Upside Down to Right-Side Up, we detail how the benefits of U.S. tax policy flow overwhelmingly toward wealthy individuals and families. Simply put, the richer you already are, the greater your opportunities to build even more wealth through the tax code. Strengthening the historically bipartisan and demonstrably effective EITC would help turn this upside-down system right-side up.

But we shouldn't stop there. We can help our kids aspire to higher education by restructuring the investment income tax and eliminating the $600 million deduction for college tuition and fees, both of which go primarily to wealthy families. The savings should then be directed into an economic opportunity fund for low-income students.

We already know that children from low-income families with as little as $500 (or even less) in a savings account restricted for higher education are three times more likely to attend college and four times more likely to graduate. We also know there are remarkable ripple effects in social and emotional development in families with Children's Savings Accounts, including less depression and more optimism in parents.

A restricted-use savings account for every child in America, coupled with structured family outreach and support through our existing large-scale civic institutions, would create opportunity and provide hope to millions of our kids and our families.

We should never lose sight of the productive capacity of all people, including the poorest among us whose lack of opportunity severely impedes their potential. Our Kids succeeds in making the case that when this potential, starved of opportunity-sustaining oxygen, withers and dies, it is both an individual and a societal tragedy. Addressing this tragedy deserves a strong and cohesive response. Let's start by taking a serious look at our upside-down tax policies, which exacerbate the wealth gap and do little to help those most in need.