Why A Tax Credit May Not Be The Best Way To Foster Adoption

Why A Tax Credit May Not Be The Best Way To Foster Adoption

The rhetoric says the credit is beautifully pro-life and, in taking it away, Congress is practically consigning children to lives in orphanages or being snuffed out in abortion. But is that accurate?
Elizabeth Bauer

This is an article about adoption. But first, let me tell you about our recent minivan shopping.

You see, our current vehicle is 10 years old. It still runs fine, more or less, and I had hoped to hold onto it for a while longer yet, until I was excited about something new on the market or the vehicle needed major repairs, whichever came first.

But the House version of the tax reform bill removes the tax credit for buying an electric vehicle, so we paid a visit to the nearest Chrysler dealer to look at the hybrid Pacifica. Yes, as much as I might get all high and mighty about tax simplification, we may well accelerate our purchase to take advantage of the tax break while it lasts, because that’s the way it works. Once a tax break is there, it’s hard to sacrifice for the sake of some noble ideological purity.

But we take it for granted that subsidies towards electric car production have to be given to the consumer in the form of “tax credits,”when the whole thing could have been arranged as direct government subsidies to manufacturers and it wouldn’t have even been under discussion in the tax reform proposals because no one would have considered it a part of the “tax system.”

So it is with the adoption tax credit, which was recently threatened in Congress’s tax bills, but then restored. The rhetoric of the credit is that it’s a beautiful pro-life benefit and, in taking it away, Congress is practically consigning children to lives in orphanages or being snuffed out in abortion. But is that accurate?

Let’s Review Some of the Facts and Figures

According to “Adoption: By the Numbers,” published by the National Council for Adoption, in 2014, there were a total of 69,350 unrelated domestic adoptions. Of these, only 18,329 were adoptions of infants. Split another way, of the total number of unrelated adoptions, 47,094 were through public agencies, 16,312 through private agencies, and 5,944 were private individual adoptions (no agency involved). Notably, private adoptions dropped by 55 percent from 2007 to 2014.

At the same time, there were 5,647 immigrant-orphan adoptions (2015 Department of State data). This is a small fraction of the 22,989 at the peak of overseas adoption in 2004, due to various sending countries’ tightening their regulations amid concerns about baby-buying. These children are largely toddler- and preschool-aged.

In 2012, when there were 8,600 such adoptions, 10 percent were infants, about 60 percent were between the ages of 1 to 4, and the remainder were older. The largest number, 36 percent, came from China; other top sending countries were Ethiopia, Ukraine, and Haiti.

And adoption is indeed expensive. According to the Child Welfare Information Gateway, private agency adoptions range in cost from $20,000 to $45,000. Independent adoptions, where the parents themselves find a birth parent via advertising (cost: $500 to $5,000), range from $15,000 to $40,000. Intercountry adoptions cost from $20,000 to as high as $50,000.

American Adoptions cites 2013 figures of $40,000 for agency adoptions, $34,000 for independent adoptions, and $36,000 and $46,000 for international adoptions from China and Ethiopia, respectively. The local nonprofit agency I pass when running errands, St. Mary’s Services, cites fees of $31,400 on their website.

There’s no readily available data on how adoption costs have changed over time. A 2007 report provides some statistics for 2004: “Estimated monetary costs in 2004 range from $0 to $2,500 for adoption of foster care children through public agencies, $5,000 to $40,000 (with the average $10,000-$20,000) for domestic adoption through private agencies, and $7,000 to $30,000 for inter-country adoption through private agencies (CWIG (2004)).”

Going back earlier in time, a 1995 article reported adoption costs of $12,000 for the average family, and indicates this is presumed to include all, or nearly all, of the expenses. For reference, overall inflation from 2004 to 2017 was 31 percent, and from 1995 to 2017, 62 percent. This means that 1995’s $12,000 would be about $19,000 today; and 2004’s $15,000 (to use the midpoint of the average) is about $20,000.

Yet adopting kids from foster care is free, more or less. What’s more, the federal government provides assistance for special-needs foster adoptions in the form of reimbursement for adoption expenses and monthly payments until the child reaches adulthood. In fact, because of this assistance, to provide a “tax credit” to these parents, there is an exception to the usual rules that the credit reimburse documented expenses: parents who adopt a child with special needs, or who receive adoption assistance, automatically get the full tax credit, regardless of their costs.

But this credit has hardly “fixed” the problem because kids in foster care are older, have siblings, or have such substantial needs that there are still 100,000 foster children awaiting adoption at any given time.

Adoption Is About Supply and Demand

How difficult is it to adopt a child? The parents who engage in the services of private adoption agencies and attorneys certainly seem to think it’s worth the effort and the cost to market themselves. Private agencies also advertise online. The top result for a search for “adoption Illinois” is an ad for AdoptHelp, where one can browse prospective parents, and prospective birthmothers are promised that their living expenses—“rent, food, utilities, transportation, maternity clothes, counseling and medical bills,” as well as moving expenses if they wish to relocate—will be paid for.

Prospective adoptive parents are assured that a match will take six months to a year, due to their extensive marketing, and are told that birthmothers are likewise carefully screened to ensure they will not back out.

You can get sucked into reading these profiles, or those of the Adoption Network Law Center, which also pops up as an ad when searching for adoption information. However much it costs, there’s a surprising mix of couples, not just upper-middle-class but working-class families, too. Some are Barbie-and-Ken-doll perfect, with the perfect hobbies, a couple of dogs, and a sprawling home in a great school district; others look, honestly, a bit dorky and overweight.

They’re all white or Asian, since black couples can get matched much more quickly in a nonprofit agency. Some explicitly mention infertility, others are homosexuals or single, but some state that they are looking to adopt because they feel it’s their calling, even if they have other adopted or birth children at home already.

Statistics are hard to come by. One estimate (the ultimate source for which is no longer accessible) is that there are 36 couples waiting for every child available, but the very nature of the supply and demand imbalance is something a tax credit can’t fix.

The very nature of the supply and demand imbalance is something a tax credit can’t fix.

Perhaps marketing increases the number of women willing to consider adoption for their unexpected pregnancy, but perhaps it just puts parents in competition with each other, and drives up the cost or causes the less “conventionally” perfect parents to lose the competition. On the other hand, a prospective birthmother might not want a conventionally perfect parent, and prefer someone she identifies with, from her own social circumstances.

Prospective parents’ desire for children, and agencies’ desire for successful placements, can cause them to veer into unethical behavior, pressuring birthmothers to sign away their parental rights immediately upon childbirth, for instance, or deceiving them into believing that open adoption would give them the right to see their child regularly, rather than it being at the discretion of the adoptive parents. (This was profiled in a number of articles in 2013, such as this New Republic article, and in a book published around the same time.)

Where Does the Tax Credit Fit In?

In our car shopping, I asked myself, “Why is the electric car incentive a tax credit rather than a subsidy?” Certainly a subsidy would eliminate consumer uncertainty about whether the credit will vanish before tax-filing time. And a simple reduction in purchase cost would reduce the sales taxes we pay. Besides this, if it were a subsidy, Congress wouldn’t be looking at removing it in the “tax reform” process.

It’s reasonable to ask a similar question of the adoption tax credit: is it really the right way to help prospective adoptive parents, or to help children in need of homes?

It appears possible that the adoption credit has not made adoption more affordable to families, but just increased the overall amount they’re willing to spend.

After all, it’s not the only option out there. Congress could appropriate funds to agencies directly, as vouchers to cover specific elements of the placement process, or as general grants. Perhaps the money should be targeted to special-needs children. Could Congress ethically appropriate money to programs that increase the degree to which pregnant women with crisis pregnancies see adoption as having the appearance of “buying babies” by covering expenses only if they choose adoption?

Consider that several studies find subsidies for higher education have had the unintended effect of increasing tuition, as universities feel they can charge more without losing prospective students. Looking at the apparent increases in adoption costs, it appears possible that the adoption credit has likewise not made adoption more affordable to families, but just increased the overall amount they’re willing to spend, due to the credit.

However much it may have alleviated the financial burdens of adopting families, it appears not to have increased the number of adoptions. Adoptions of children from the foster care system jumped considerably, from 24,366 in 1996, 42,942 in 2000. While the tax credit was implemented in 1997, a much greater change was the passage of the Adoption and Safe Families Act of 1997, which dramatically reined in the policy of prioritizing family reunification that left foster children in limbo for years.

Domestic adoptions of infants actually peaked in 1992, at 26,672, before dropping to the current 18,329 (in both cases based on quadrennial data). However much extra money prospective parents may be spending on marketing, birthmother expenses, and other costs, it doesn’t seem to be increasing the number of mothers who choose adoption.

What is the right answer, then? I won’t claim that there is one, and it depends on whether the objective is to reduce costs for all adopting families, or only those with the greatest financial need, or the greatest “need” for a child; or whether the objective is to increase the number of children placed for adoption rather than being aborted. In any event, adoption advocates shouldn’t get locked into believing that a tax credit is the only tool in their toolbox.

Elizabeth Bauer is an actuary who works at a pension consulting firm.

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