The Magazine

MARRIAGE AND TAXES

Feb 9, 1998, Vol. 3, No. 21 • By ALLAN CARLSON and DAVID BLANKENHORN
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For the next 15 years or so, these "Principles of '48" had a powerful effect. This period was the only time in American history since 1840 when three things happened at once: The first-marriage rate rose, the divorce rate dropped, and the within-wedlock birth rate climbed. Again, these correlations between tax trends and family trends are almost certainly not coincidental. For example, the economist Leslie Whittington, using a sophisticated econometric analysis, has shown a "robust" relationship between the real value of the personal exemption and fertility: A 1 percent increase in the exemption's value coincided with a remarkable 1 percent increase in births. Researchers such as the sociologists Janet and Larry Hunt have also shown how the tax principles operating in this period directly strengthened the commitment of household members to home production, parental care of children, and civic activism. The legislators, it seemed, had finally gotten it right.


But they couldn't leave it alone. As part of the 1963 tax cut, instead of adjusting the personal exemption for inflation, Congress introduced the " minimum standard deduction," which carried its own modest marriage penalty. In 1969, responding to complaints that unmarried Americans were overtaxed and that the tax code was too pro-natalist, Congress took the damaging step of eliminating the ability of married couples to split their incomes. Among other things, this change created another and even larger marriage penalty -- the one that policymakers are fretting about today. Finally, in the early 1970s, Congress crafted the Dependent Care Tax Credit, giving tax relief of up to $ 800 (now $ 1,440) to employed parents who put their children in commercial child care, thus implicitly assaulting the previously untouched home economy. Some tax theorists justified the new day-care credit as an indirect tax on the "imputed" income produced by at-home parents.


In the late 1960s, the United States began to experience a precipitous decline in marital fertility, a sharp drop in the rates of first marriage, and a surge in divorce. In essence, these trends are still with us. Obviously, federal tax policy has not been the only cause of the weakening of marriage over the past 30 years. But just as obviously, the steady de-emphasis of marriage and home in the tax code has made things worse.


Instead of strolling further down this path, Congress should change course now. And the direction it should take is obvious: To end the marriage penalty, Congress should reject the Weller-McIntosh individual-filing proposal and restore the right of married couples to split their incomes. A bill to do just that has been proposed in the Senate by Republican Connie Mack of Florida and others. Income splitting is the only pro-marriage way to end the marriage penalty. The further individualization of the tax code would be worse than doing nothing.


Does a policy of supporting marriage in the tax code smack of social engineering? In a sense, yes. We see no need to apologize for this. Marriage is more than a special interest: It is our primary social institution and a vital public good. Protecting it in the tax code ought to be a matter of common sense, not controversy.


In a larger sense, however, encouraging marriage is the opposite of social engineering. A certain type of individualism -- the person stripped of family context -- has always been a guiding principle of big-government ideologies. As the Swedish experience shows, "marriage neutrality" in the tax code has become a cornerstone of the post-marriage welfare state, with its heavy emphasis on government-sponsored social engineering. In contrast, protecting family bonds even while collecting taxes is a goal whose importance ought to be clear to anyone who favors democratic civil society and limited government.


For this reason, we should judge all tax-reform proposals now before Congress according to four basic family-support criteria. First, rather than hold up marriage neutrality as the ideal, tax policy should explicitly recognize and seek to protect marriage as a social institution. The main way for the tax code to safeguard marriage is to treat the married-couple household as a single unit of taxation. Second, tax policy should not create disincentives for within-wedlock childbearing or incentives for unwed childbearing or divorce. Third, tax policy should support the rearing of children through generous and universal per capita deductions, exemptions, and credits. And finally, tax policy should not create disincentives for parental care of children or for other unpaid labor in the home or community.


With these criteria in mind, take a case in point, the Dependent Care Tax Credit. Earlier this month, President Clinton proposed a sharp increase in the value of this credit, which was originally conceived as a way to tax indirectly the unpaid labor of at-home parents and is available only to parents who use commercial child care. The president's proposal to make a bad program bigger is utterly irresponsible, a plain assault on parents who want to spend more time with their children. Congress should either eliminate this tax credit or make it fixed and universal -- say, $ 700 per preschool child, regardless of whether the child receives commercial care.


In its handling of the marriage penalty and of measures like the Dependent Care Tax Credit, Congress has a chance to reverse the 30-year practice in the federal tax code of marginalizing marriage. With the approach of the first federal budget surplus in a generation, and exactly half a century after the now-forgotten but absolutely sound Principles of "48, Congress has an important opportunity to get it right. ,




Allan Carlson is president of the Howard Center for Family, Religion, & Society in Rockford, Ill. David Blankenhorn is president of the Institute for American Values in New York.