Here’s exactly how marriage penalties discourage marriage

Family's Economic Mobility in Doubt

Photo Credit: Eric Ward via Wikimedia Commons

How to encourage stable, two-parent families is one of the knottiest public policy problems, but also one of the important. As a recent blockbuster study on economic mobility concluded: “The fraction of children living in single parent households is the strongest correlate of upward income mobility among all the variables we explored.”

As government figures out how to help, it can at least stop harming. For starters, mitigate the marriage penalties embedded in the tax code. AEI’s Robert Doar:

Recognizing that married, two-parent families help poor children succeed, we must address policies that make marriage hard — especially among low-and middle- income Americans.

Marriage penalties can be especially discouraging for those individuals who have the least freedom to forego income. As Eugene Steuerle of the Tax Policy Center and colleagues have explored in det ail, policies aimed at assisting low – and moderate – income households with children often penalize marriage.

Take this example: “A single parent with two children who earns $15,000 enjoys an EITC benefit of about $4100. The credit decreases by 21.06 cents for every dollar a married couple earns above $15040….[I]f the single parent marries someone earning $10,000, for a combined income of $25,000, the EITC benefit will drop to about $2,200. The couple faces a marriage tax penalty of…$1,900.”

Similar penalties are embedded in Medicaid, Temporary Assistance for Needy Families (TANF), food stamps, housing assistance, and child care — all of which apply to low-and moderate-income Americans. Efforts to mitigate marriage penalties have largely taken the form of tax cuts directed toward married couples. But according to Carasso and Steuerle’s analysis, 81 percent of that relief flowed to couples earning above $75,000. A host of reforms could alleviate this burden.

As Carasso and Steuerle describe, implementing a maximum marginal tax rate for low-income families would tamp marriage-induced hikes in rates. Providing a subsidy on individual earnings — not combined earnings (like the EITC) — would enable a low-wage American to marry someone with a child, but do so without sacrificing significant income or transfer payments. And mandatory individual filing, as done in Canada, Australia, Italy and Japan, would either require or allow low-income individuals to avoid income tax penalties.

Follow James Pethokoukis on Twitter at @JimPethokoukis, and AEIdeas at @AEIdeas.

2 thoughts on “Here’s exactly how marriage penalties discourage marriage

  1. “How to encourage stable, two-parent families is one of the knottiest public policy problems”–James P.

    As a public policy matter, I am not sure I agree with this premise.

    Perhaps personally I do—even how we encourage stronger extended families, of grandparents and uncles and aunts etc.

    But as a matter of public policy, social engineering is a slippery slope. Who decides on the engineering?

    And who is to say polygamy is not a better way to raise families, especially if Tyler Cowan is right?

    Are the Amish wrong in their communal dining arrangements and communism?

    If group housing works for some, is that not their business?

    Should we encourage child-less gay marriages? Are three gay guys pooling their resources and living high to be taxed more or less than another household with the same income?

    Families and church attendance have taken a beating in the last 40 years in the USA, yet we have higher living standards and lower crime rates than ever—so why are we worried about either?

    I would argue for the lowest taxes possible, and an end to any sort of marriage penalties.

    But pro-family and pro-housing policies (including the biggest market distortion of all, the mortgage income tax deduction) are perversions of a fair tax system.

    Remember: separation of church and state is always best. If you believe in two-parent families, that’s great and use your resources or other private-sector implements to promote two-parent marriages.

    But leave my wallet out of it!

  2. This is too materialist of a view. The biggest discourager of marriage among lower to middle income earners are state assistance for unwed mothers and the proliferation of “reproductive technologies” (i.e., sex without consequences), which allow women to circumvent their biology to pursue the dream of “having it all.”

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