RALEIGH – I was reading my way through last week’s editions of my afternoon paper when I came across an arresting table, based on data from the Organization for Economic Cooperation and Development.

It compared wage-based tax burdens among several European and North American countries, using a standard measurement called the “tax wedge.” This represents the difference between what workers take home in compensation and what their total cost to employers, including income and payroll taxes. The table compared two different sets of tax-wedge data: those for single taxpayers and those for married taxpayers with two children. In most countries, the wage-tax burdens for the former group are significantly larger than for the latter group:

Country—-SingleFamily
Germany—53%—-36%
Hungary—-51%—-40%
France——50%—-42%
Sweden—–48%—-42%
Turkey——43%—-43%
Britain——-34%—-28%
Canada——32%—-23%
U.S.———-29%—-12%
Iceland——29%—-10%
Ireland——23%—–2%
Mexico——15%—-15%

Now, don’t jump to conclusions. Keep in mind that these data speak only to taxes levied at the point of sale of labor. The calculation leaves out taxes on other kinds of transactions, for retail goods and real estate, for example. Most European countries would actually look higher relative to the U.S. if you added everything in, since they levy high value-added taxes. On the other hand, it’s fair to point out that in these higher-tax countries, families pay less out of their take-home pay for services such as health care than American families do – though it’s also fair, and indeed highly important, to point out that government-provided health insurance does not constitute universal access to health services.

My point is not actually to dwell on the international comparisons, but to call your attention to the large gap between the wage-tax burdens on singles and families. Is this just evidence of the superior lobbying heft of breeders? Are singles being discriminated against?

Not really. A fundamental element of any sensible, neutral system of taxation is to avoid the double-taxation of income streams. I’ll use a familiar example to illustrate. If Jane earns $1,000, pays $200 in income tax, and then uses the remaining $800 for a consumer purchase, her buying power has been reduced by 20 percent. On the other hand, imagine that she earns $1,000, pays $200 in income tax, and invests the remaining $800 in an account earning 10 percent interest. Next year, if she must then pay a 10 percent tax on her $80 in earnings, then her total buying power has been reduced by more than 20 percent. Without tax, the original $1,000 would have grown to $1,100. With tax, her remainder is $872. Use higher tax rates and repeat the effect numerous times, and you have the explanation for the rule that government should tax the principle of an investment, or the return, but not both. That’s the proper justification for how IRAs and 401(k)s are taxed (indeed, there should be no income limits or restrictions on tax-free deposits at all if withdrawals are taxable).

From an economic perspective, having children is a form of investment. Indeed, it’s the oldest retirement plan in human history, predating the IRA by, oh, about 200,000 years (if we’re talking the current species). Children earn future taxable income, not just for themselves but also to care for their parents later in life. It makes sense for income-tax systems to adjust for this, to shield some annual expenditures on childrearing from double-taxation, by using exemptions or per-child tax credits. Most countries do this, albeit to varying degrees.

Ireland wins this particular derby, with a mere 2 percent tax wedge. Families with children are really in clover over there.

Hood is president of the John Locke Foundation.