In Taxing Infertility, Pavel Kohout explains how incentives to increase the birth rate can decrease it:
However, there would be a more significant impact on the fertility rate within the group of people who do not yet have children. An increased tax burden would make it more expensive to form a family. People normally marry and procreate only after they have achieved a certain level of financial strength and independence. This rule has been an ages-old norm for human behavior with the exception of welfare state-dependent classes for whom child benefits constitute a major part of their income. Imposing tax penalties for the unmarried might delay procreation by several years, thus cutting the marginal fertility rate. Some of these people would remain unmarried forever. The total impact of ‘pro-family’ tax policies would certainly be negative.One might argue that this is nothing but speculative theory. However, there is robust empirical evidence. In 1927, Italian ‘duce’ Benito Mussolini launched a program called ‘Battle for Births.’ Mussolini believed that Italy had fewer people than it needed in order to play the part of a major world power. By the beginning of the 1920s, Italy had 37 million citizens. ‘Il Duce’ set the number of 60 million by the year 1950 as national target. To achieve this target, Mussolini introduced generous benefits, especially for families with multiple children. Fathers of six or more paid no taxes at all. Of course, tax penalties for the unmarried were introduced, too. Abortions were outlawed, and contraception was hard to obtain. Later, career obstacles for unmarried men were officially introduced, mainly in government administration.
The fascist government in Italy lasted long enough in peacetime that we may know its results. Exactly as economic theory would predict, the birthrate fell from 1927 to 1934. So did the number of marriages. Not surprisingly, the average age of marrying couples increased.