The new Congress has a rare opportunity to correct a serious flaw in social policy.
Measures that shore up earned incomes at the bottom of the wage scale tend also to discourage marriage. If we want to improve the lives of the one-third of all children now born out of wedlock, we should change the financial incentives that now make marriage a bad deal.
Chief among these disincentives is the Earned Income Tax Credit, an income supplement that provides up to $ 3,800 a year to a low-income working parent. This tax credit was enacted in 1975 and then expanded under both Republican and Democratic administrations alike. It is now the largest anti-poverty measure in the federal arsenal, costing the Treasury close to $ 30 billion a year.
The good news about the EITC is that, unlike welfare, it encourages work. The bad news is that it penalizes marriage.
Take, for example, a mother with two children and a minimum-wage job that nets her $9,500 after payroll taxes. At the end of the year, she will qualify for a refundable credit of $3,800, raising her total income to more than $13,000. But if she marries another minimum-wage worker she could lose almost half this amount, or $1,700. The problem is that the EITC is pegged to wages only.
When two people marry they must combine their wages, which immediately reduces their eligibility for such assistance. No wonder marriage is dying in low-income communities. The federal government, through the EITC, says, “If you get married, it’ll cost you. And it’ll cost you big time.”
This is a travesty. The growth of single-parent families, fueled almost entirely by out-of-wedlock births, is the single most important reason for the growth of child poverty in this country.
The practical reality is that it is not possible to support a family well on only one income if one has few skills or little education.
Furthermore, children born out of wedlock are unlikely to grow up with an involved and responsible father in their lives. Research by Robert Lehrman and Theodora Ooms found that although 57 percent of men who father children out of wedlock visit their children at least once a week during the first two years of their children’s life, that percentage drops to only 23 percent by the time their children reach elementary school.
A substantial body of data indicates that children who grow up without fathers are at greater risk for a host of problems, including educational failure, emotional and behavioral problems, juvenile delinquency and teen-age pregnancy.
Bringing back marriage to the many inner-city communities where it has all but disappeared is no easy task and will require much more than a change in laws. Still, laws send important messages about what we as a culture value, and as such can help catalyze important changes in behavior. Unfortunately, as it stands now, the EITC sends the message that marriage is economically foolish.
Fortunately, there is a solution to the EITC problem. It’s called income splitting.
Philosophically, it recognizes that marriage is a partnership in which husband and wife share equally. But it’s also a relatively low-cost way of reducing existing marriage penalties among lower-income families where the disappearance of marriage has been the biggest problem. (This solution would cost $ 13 billion, according to the Congressional Budget Office.)
Here’s how it would work. Couples would split their total earnings in half and then calculate the credit on each half. In the above example, they would actually get a bonus of $ 900 from marrying. The EITC was originally designed to make work pay and that is its strength. We now need to redesign it so it makes marriage and responsible fatherhood pay as well.
The time is ripe for this reform. If Republicans want to eliminate marriage penalties and support the family, this is a good place to start. If Democrats want to provide additional assistance to the working poor, they should endorse this as well. If both parties want to convince the public that they can forge
Bipartisan solutions to some of the nation’s problems, here’s their chance. We urge Congress to make this happen.