On May 3, the Senate Appropriations Subcommittee on the District of Columbia held a hearing on government programs and policies that serve as financial disincentives to marriage for low-income families.
In his opening remarks, Chair Sam Brownback (R-KS) noted “research shows that children raised by married parents are far more likely to avoid poverty, crime, and failure in school. By creating financial disincentives for low-income parents to get married, the welfare state actually discourages the behaviors that would be most beneficial for low-income parents and their children. Statistics prove what we all know, that children benefit from being reared by their married parents, and it is a moral and societal imperative that we foster and encourage the institution of marriage.”
Assistant Secretary for Children and Families at the Department of Health and Human Services Wade Horn said that “some government policies may financially penalize some couples who choose to marry, or discourage some couples from marrying despite what they know about the benefits of healthy marriage for themselves, and, importantly, for their children. For some couples marriage would be unwise from a short-term economic perspective because they would lose thousands of dollars in assistance and income to their families.”
He explained: “A complex combination of federal and state tax and program rules determines the financial consequences of marriage. These consequences vary considerably depending on each couple’s specific circumstances, such as the couple’s total income, the distribution of income between the partners, the sources of income, and the relationship of the partners to all the children in the family.” Mr. Horn gave a specific example of a woman with two young children living in the District of Columbia in 2003. “In this example, the woman works 20 hours a week for $7 an hour, has no assets, and has child care costs of $200 per month. She receives TANF, Food Stamps, WIC, housing assistance, and a subsidy that offsets some child care costs. The father of her children works 40 hours a week for $7 an hour and pays $200 in child support. If they were to marry, the father would be able to claim extra deductions and credits on his taxes. However, the mother would lose her TANF benefits, and her food stamps, child care subsidy, and housing benefits would be reduced. The couple’s net income would drop by about $4300 a year.”
Mr. Horn announced the development of “a comprehensive, web-based tool to assess the financial implications facing low-income couples as they choose between living separately, cohabiting, or marrying.” The “Marriage Calculator,” sponsored by the Administration for Children and Families and developed by the Urban Institute, “takes information provided by the user about a family’s income and assets, the number, sex, age, and parentage of the children, and their decisions to participate (if eligible) in a variety of public assistance programs, and computes the net income of the family in four situations: if the man and woman are: (1) living apart: (2) cohabiting, but not reporting their cohabitation; (3) cohabiting and reporting their cohabitation to government benefit programs; or (4) married.” Mr. Horn also briefly touched on healthy marriage and fatherhood grant programs administered by his agency.
Ron Haskins, senior fellow at the Brookings Institution and senior consultant for the Annie E. Casey Foundation, stated that marriage rates fell over the three decades between the 1960s and 1990s. He reported, “Over this period, the marriage rate for whites and blacks fell by 11 percent and 33 percent respectively. Since then, both rates have been relatively stable, although both continue to decline slowly.” Mr. Haskins discussed research demonstrating the importance of family composition to the well-being of children, including an analysis by Professor Paul Amato of Pennsylvania State University using data from the National Study of Adolescent Health, which found that adolescent well-being would improve significantly if more children lived with married parents. “If the same share of adolescents were living with their married parents in 2002 as in 1980, nearly 300,000 fewer would have repeated a grade in school, 216,000 fewer would have been delinquents, and nearly 29,000 fewer would have attempted suicide.”
Mr. Haskins pointed to passage of the 1996 welfare reform law as “something of a landmark” in that it addressed family composition after years of “piecemeal” enactment of tax laws and transfer programs, such as food stamps, Medicaid, and SCHIP. He recommended that policymakers work to reduce the disincentives for marriage in these laws and programs; provide funding for states to try new approaches to “reduce nonmarital births, promote marriage, and increase the involvement of fathers with their children;” and allocate funding “to evaluate programs that show promise.” Mr. Haskins particularly focused on reducing marriage penalties in transfer programs affecting low-income couples. He stated that this objective could be achieved in three ways: by making all transfer programs universal, increasing the income at which the phase out range begins, and reducing the rate at which payments phase out. Mr. Haskins explained, “The first approach I take to be impractical because taxpayers would not support, nor can the government afford, making all transfer payments universal…It follows that policymakers should focus their attention on raising the point at which phase outs begin and reducing the rate at which transfers phase out for couples who marry. Costs could be somewhat contained by allowing couples who marry to enjoy the more generous phase out a year or two after they marry.” He also recommended funding demonstration programs to increase marriage rates among low-income couples, including the healthy marriage promotion program approved in the budget reconciliation bill last year, and expressed his support for the marriage promotion program established in the District of Columbia.
C. Eugene Steuerle, senior fellow at the Urban Institute, stated that “cohabiting has become the tax shelter of the poor.” He discussed his research with Adam Carasso, saying that marriage penalties “are the result of several decades of liberal-conservative compromise. Policymakers have pursued the dual objectives of progressivity giving greater tax and welfare benefits to those with lower incomes and cost containment. As a result, programs like the earned income tax credit or food stamps restrict benefits to lower-income citizens by reducing or ‘phasing out’ the benefits at steep rates as households earn more income.” Mr. Steuerle explained how marriage penalties and subsidies interact in different circumstances: “How much tax and transfer program penalties and bonuses are worth and the rate at which their value falls as family income rises varies by state, by family size, by the age of the children, by additional factors like the cost of rent and child care, and by what other transfer programs the family may be enrolled in.”
At the hearing, Mr. Steuerle focused on his recommendations to reduce disincentives for marriage. The “most promising” reform was the establishment of a maximum marginal tax rate for low-income families. He explained that the maximum effective marginal tax rate can be “50, 60, 80, or even 100 percent” for low-income families when they marry, while the maximum rate for high-income taxpayers was reduced to between 28 and 39 percent in 1986. Mr. Steuerle also recommended a “wage subsidy based on individual wages,” to “help make it possible for a low-wage man or woman to marry someone with children without losing substantial income and welfare, as now happens.” Two other options included “a universal program or tax credit one that goes to households with children without diminishment of benefits regardless of marital status of income,” and either requiring or giving taxpayers the option of filing as single individuals, as is the case in several other countries.
The subcommittee also heard testimony from Kate Jesberg, interim director for the Department of Human Services in the District of Columbia, who described several initiatives of the District government to promote family formation; Curtis Watkins, president of the East Capitol Center for Change, who introduced the organization’s “Together is Better: The Campaign to Strengthen DC Families, Marriage, & Communities,” and Sandra Corley and Winston Graham, a District couple who decided to get married after many years together. Both Mr. Watkins and the Corleys testified at a hearing on Marriage Development Accounts held by the subcommittee in October (see The Source, 10/07/05).
