The Two-Parent Privilege ... and Tax

Written by: Eugene Steuerle

Melissa Kearney’s well-researched new book, “The Two-Parent Privilege,” re-engages a long-standing but delicate topic discussed mainly behind a curtain. Children growing up with two adults in a stable relationship tend to have above-average economic and social outcomes in their later lives. Though many children from all backgrounds have succeeded, no set of government programs has been able to offset, on average, the disadvantages facing those growing up without that “privilege,” as Kearney calls it.

The delicacy is reasonable, but the curtain is not. Few want a statistical fact to appear as a judgment of others, particularly regarding matters like marriage. Single parents make enormous sacrifices that should be honored. The curtain, however, has largely allowed legislators to enact policies with little or no discussion of their effects on family structure. Most tax and social systems, including income tax, Social Security, welfare, and health programs, determine the level of benefits and taxes based partly on the marital structure of the family and the number of children. The curtain has allowed these policies to evolve with significant additional taxes on marriage for many low-to-moderate-income individuals, particularly if they both have earnings and marry or might contemplate marriage.

There’s a related curtain that Richard Reeves has been trying to open—the largely ignored mental health and loneliness crisis among boys and men, many of whom have been left on the sidelines when it comes to stable family relationships, including presence as fathers.

Our system of marriage taxes and penalties may not cause many of these problems for children or absent fathers and mothers. But it certainly reinforces them.

Many researchers—including Kearney, to some extent—are skeptical about the extent to which public policies that create marriage penalties play a significant role, as compared to culture, when it comes to decisions over marriage and child development. I find the skepticism appropriate because we know little about the long-term effect of most policies on behavior. Even well-designed experiments last only a few years and provide limited information about the lasting consequences, good or bad, of policy interventions.

The skepticism is limiting, however, because long-term societal gains are the goal of most policies. While it’s wrong to make exaggerated claims about the potential positive effect of marriage bonuses on behavior, it’s more dangerous to assume away the possible negative impact of marriage penalties. The former may not do much good for society, but the latter may do much harm.

The unwillingness to build this worry into program design, however, has excused a several-decade and haphazard increase in marriage penalties on those very low- and moderate-income households with children. Presumably, the less we know, the less we need to worry about. I’ve found little interest by research funders even in measuring the extent of these penalties.

The penalties or marriage taxes derive mainly from the ways that subsidies for health insurance, SNAP (formerly food stamp) benefits, earned income tax credits (EITC), rental subsidies, welfare (Temporary Assistance for Needy Families), and other programs phase out. These multiple phase-outs act as multiple tax rates on additional income earned. Add a spouse’s income to a single parent’s household’s income, and, in many cases, the couple’s combined benefits are reduced and their taxes increased.

The theoretical argument for these taxes—and the design of many programs, such as those centered on the measure of poverty—rests on the notion that two or more people can live together more cheaply than in separate households. Therefore, they need less assistance and can pay more tax when they marry. However, that rule applies only to those who take marital vows, which can easily be detected administratively. It doesn’t apply to other people sharing apartments, dorms, nursing homes, or other forms of housing. Past efforts in welfare programs to visit households and sneak in to see who is living together have largely been abandoned as both a failure and intrusive. And why would we also want to penalize adults who raise children together, even without a marriage vow?

In effect, marital penalties are marriage vow penalties easily avoided by those who don’t believe in the vows.

All this leads to many people with equal needs or incomes getting very different benefits and taxes. Even if there was no behavioral response to marriage penalties, they still violate a standard of equal justice.

Here I must wonk out for a second. Congress can’t just declare marriage penalties illegal. As long as there are progressive rate structures and phase-outs of programs at high tax rates, it can’t legislate to meet the following two goals at the same time: equal treatment of all individuals with the same income and equal treatment of all couples with the same combined income. Trust me on this technical point, though I’m not going to prove it here. 

Still, there are a variety of ways to reduce these penalties. K-12 public education doesn’t have such penalties. Nor do state income taxes based on individual income. Nor, for the most part, does Social Security. Congress can also limit the penalties by capping the high combined tax and phase-out rates that many low-to-moderate individuals face.

Let’s bring this full circle. We have a significant share of children who grow up without the continual support of two or more adults and who, on average, are relatively disadvantaged later in life. We have a significant number of disaffected parents, predominantly males, who are told by the government that if they marry, they will reduce the income available to their children. We have a vast system of largely uncoordinated programs that favor single parenting by creating significant marriage vow penalties for those low earners who marry or want to marry. We can continue to avoid discussing, much less addressing, these problems and how the government reinforces them. Or not.

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