Recognition of Marriage and Family status in tax system?

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Ormurinn
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Recognition of Marriage and Family status in tax system?

Postby Ormurinn » Thu Aug 01, 2013 11:57 am UTC

http://conservativehome.blogs.com/platform/2013/08/dan-boucher.html

I found this quite interesting - particularly the perverse incentives created by the current U.K tax system.

The Tories have proposed recognising marriage in the tax system - which has been vociferously opposed by the other two parties.

any thoughts from those more economically minded?
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Re: Recognition of Marriage and Family status in tax system?

Postby leady » Thu Aug 01, 2013 12:36 pm UTC

It needs to be more than a token gesture to work is my key thought.

My second thought that by definition any group getting a tax break invariably means I get a personal tax hike (no change there)

but I like the principle for a whole heap of social reasons, all of which will cause an immediate off topic debate (or in fact several, if you bring in the civil partnership discussion into tax breaks) :)

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Re: Recognition of Marriage and Family status in tax system?

Postby omgryebread » Thu Aug 01, 2013 1:55 pm UTC

So giving tax benefits to stay at home parents is the key to curing child poverty for conservatives? I thought getting people to work was the cure for poverty? I'm so confus-

ohwait i forgot conservatism is about making sure nothing ever changes and actually helping people is a distant second (or fifth) after making sure their outdated-as-fuck worldview isn't upset.
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Re: Recognition of Marriage and Family status in tax system?

Postby Ormurinn » Thu Aug 01, 2013 1:59 pm UTC

omgryebread wrote:So giving tax benefits to stay at home parents is the key to curing child poverty for conservatives? I thought getting people to work was the cure for poverty? I'm so confus-

ohwait i forgot conservatism is about making sure nothing ever changes and actually helping people is a distant second (or fifth) after making sure their outdated-as-fuck worldview isn't upset.


You don't think that the tax system recognising the way a big section of people live is a good thing?

You think the current financial disincentives to two-parent housholds are positive?

I'm no conservative (perhaps in my personal life), but I do think theres a kernel of truth in the article.
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Re: Recognition of Marriage and Family status in tax system?

Postby Kulantan » Thu Aug 01, 2013 3:19 pm UTC

Ormurinn wrote:You think the current financial disincentives to two-parent housholds are positive?

Its not financial disincentives to two-parent households... It a disincentive to single earner households. However I was intrigued by your implication (perverse incentive and such) that not only is the current system poor because it doesn't allow as much freedom as you want, but that it is actively bad. For this to be true there would have to be serious down sides to dual earner households. I decided that two good areas to look at would be mental health and children's academic achievement (given then "working mothers are bad parents" undertones). In reagard to mental health there here are two good studies I found. In summary they say working helps both partners' mental health except if the jobs are poor for you mental health anyway or the bloke is a misogynistic idiot who feels usurped. In terms of children's education outcomes these two are useful. Both say that children in dual earner households have better outcomes, but importantly:
Kalmijn, 1994 wrote:The main findings are: Maternal occupational status has a strong effect on schooling, this effect is independent of father's education and occupation, it persists through the schooling career, and it is as important for sons as for daughters.

I think this should end any suggestion that the incentives are perverse or a negative. Therefore I think the argument becomes; should the UK in the name of freedom of choice remove the incentives for the statistically superior option?
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Re: Recognition of Marriage and Family status in tax system?

Postby Ormurinn » Thu Aug 01, 2013 3:31 pm UTC

Kulantan wrote:
Ormurinn wrote:You think the current financial disincentives to two-parent housholds are positive?

Its not financial disincentives to two-parent households... It a disincentive to single earner households. However I was intrigued by your implication (perverse incentive and such) that not only is the current system poor because it doesn't allow as much freedom as you want, but that it is actively bad. For this to be true there would have to be serious down sides to dual earner households. I decided that two good areas to look at would be mental health and children's academic achievement (given then "working mothers are bad parents" undertones). In reagard to mental health there here are two good studies I found. In summary they say working helps both partners' mental health except if the jobs are poor for you mental health anyway or the bloke is a misogynistic idiot who feels usurped. In terms of children's education outcomes these two are useful. Both say that children in dual earner households have better outcomes, but importantly:
Kalmijn, 1994 wrote:The main findings are: Maternal occupational status has a strong effect on schooling, this effect is independent of father's education and occupation, it persists through the schooling career, and it is as important for sons as for daughters.

I think this should end any suggestion that the incentives are perverse or a negative. Therefore I think the argument becomes; should the UK in the name of freedom of choice remove the incentives for the statistically superior option?


Interesting - I'll be sure to read those later.

Do they control for income?

I hope I didn't imply any bias against working mothers, since I don't hold that opinion.

Anecdotally, at least in the U.K, It's always seemed to me that it is stay-at-home parents who are stigmatised more, but it seems to cut both ways. Society is silly.
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Re: Recognition of Marriage and Family status in tax system?

Postby Chen » Thu Aug 01, 2013 4:31 pm UTC

Kulantan wrote:Its not financial disincentives to two-parent households... It a disincentive to single earner households. However I was intrigued by your implication (perverse incentive and such) that not only is the current system poor because it doesn't allow as much freedom as you want, but that it is actively bad. For this to be true there would have to be serious down sides to dual earner households. I decided that two good areas to look at would be mental health and children's academic achievement (given then "working mothers are bad parents" undertones). In reagard to mental health there here are two good studies I found. In summary they say working helps both partners' mental health except if the jobs are poor for you mental health anyway or the bloke is a misogynistic idiot who feels usurped. In terms of children's education outcomes these two are useful. Both say that children in dual earner households have better outcomes, but importantly:
Kalmijn, 1994 wrote:The main findings are: Maternal occupational status has a strong effect on schooling, this effect is independent of father's education and occupation, it persists through the schooling career, and it is as important for sons as for daughters.

I think this should end any suggestion that the incentives are perverse or a negative. Therefore I think the argument becomes; should the UK in the name of freedom of choice remove the incentives for the statistically superior option?


I can't actually read the articles myself, but what factors did they correct for? I mean does a household where one earner works at a minimum wage job (due to lack of skills for other jobs) still end up better than a household where say the mother has a post-graduate degree but chooses to stay home? Or perhaps a comparison between a house where the parent in question both have similar work experiences but one chooses to stay at home and the other went to work? I need to wonder if "two income households" is merely a proxy for an attitude that is shared by the people who more often than not decide to go to work, rather than being stay at home parents.

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Re: Recognition of Marriage and Family status in tax system?

Postby Thesh » Thu Aug 01, 2013 6:08 pm UTC

What about households with a single parent? What about someone who is living alone with no kids? Someone helping a friend out while they get back on their feet? They tend to have it much harder than two earner households, so why should two earner households be given the break while they are not? The obvious solution isn't to tax couples differently, it's to provide a tax write off or credit to households with a single earner, not give tax breaks just because you are married.
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Re: Recognition of Marriage and Family status in tax system?

Postby LaserGuy » Thu Aug 01, 2013 6:15 pm UTC

A single-earner with a large income and a stay-at-home spouse is probably actually quite a bit better off than a two-income family at the same income level, and the spread between them grows enormously as the number of children increases. This is primarily due to the fact that the latter family will probably need to pay for some form of external childcare, which is really friggin' expensive, and scales per child. I don't know about the UK, but here in Canada*, basic daycare costs ~$600 per child per month, so the effective benefit of the stay-at-home spouse is ~$7200/yr net, per child just from that.

[*]Except Quebec.

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Re: Recognition of Marriage and Family status in tax system?

Postby Thesh » Thu Aug 01, 2013 6:20 pm UTC

The thing is that expenses don't scale linearly with the number of people. So a married couple each making $30k may be better off than a single person making $45k, while the tax code may be taxing the single person at a higher effective rate.
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Re: Recognition of Marriage and Family status in tax system?

Postby Tyndmyr » Fri Aug 02, 2013 7:58 pm UTC

Ormurinn wrote:You don't think that the tax system recognising the way a big section of people live is a good thing?


I don't. The popularity of a given lifestyle isn't a great metric for it's desirability...and giving tax incentives to certain lifestyles skews desirability anyway. The legal construct of marriage is not exactly a perfect cure for things.

Yes, a two income family has certain advantages, as does having two parents to take care of a child, but neither of these things is exactly the same as marriage, and can occur with or without it(and hell, marriage does not guarantee them). Sure, there's probably a correlation there, but it means there's going to be some serious mismatch between incentives and the actually advantageous behavior.

And even if these things are more advantageous, giving them incentives can have undesirable effects. It's harder for the single people to financially prepare for marriage if they are subsidizing the married. It's harder for renters to save to own if they are subsidizing homeowners.

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Re: Recognition of Marriage and Family status in tax system?

Postby BattleMoose » Mon Aug 05, 2013 9:05 am UTC

I've never agreed with the concept that married couples should be entitled to tax breaks.

Couples or single parents who are raising children should probably be entitled to tax breaks. Possibly having other kinds of dependants also should qualify for tax breaks.

The UK has come right on this, but still in many countries these tax breaks are only available to married couples and many couples cannot legally marry which is clearly not okay (See gay marriage).

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Re: Recognition of Marriage and Family status in tax system?

Postby leady » Mon Aug 05, 2013 10:12 am UTC

I think several people are missing the point of what this is intended to do. Its not around the financial incentives per se but around the prodding people in the 'right' direction particularly around family structures i.e. that 2 person married couples overwhelming provide the best outcomes for children. Its not about removing benefits for single parents, but an attempt to reduce the number in the first instance

Whether it will work or not is debateable - and whether you agree with why is debateable (although I'd say the evidence for why is very strong)

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Re: Recognition of Marriage and Family status in tax system?

Postby Thesh » Mon Aug 05, 2013 10:19 am UTC

If the intent is to make things better for children, then why do married couples without children get a break? A couple isn't going to get married or stay married just for some tax break.
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Re: Recognition of Marriage and Family status in tax system?

Postby Ormurinn » Mon Aug 05, 2013 10:27 am UTC

As it is, a two-earner household, or a single-earner + stay at home parent is at a disadvantage relative to a single person household making the same money.

Most households organise their economic affairs as a household, not as individuals. The proposal is that one part of the couple ought to be able to transfer their excess tax-free allowance to the other. That equalises the tax burden per household in all three of those situations - a single man on 50K, and couple on x+y=50K would both have the same effective tax burden. It also makes being a stay-at-home parent more economically feasible.

Full gay marriage is availiable in the U.K, so that concern is a red herring.

Why shouldn't people have the option to be taxed as the same unit they conduct their economic affairs as?
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Re: Recognition of Marriage and Family status in tax system?

Postby leady » Mon Aug 05, 2013 1:06 pm UTC

the more interesting quesiton is whether gay marriages should get the tax break :)

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Re: Recognition of Marriage and Family status in tax system?

Postby icanus » Mon Aug 05, 2013 1:11 pm UTC

Why restrict it to couples at all? If the reasoning for a tax break is that married couples operate as a single economic entity (and not all of them do), why not also have that apply to, say, siblings sharing a house, or families with adult children living at home?

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Re: Recognition of Marriage and Family status in tax system?

Postby Thesh » Mon Aug 05, 2013 1:16 pm UTC

What about groups of people living together, sharing major expenses like food, rent, and utilities? Should they be able to tax 70% of their income jointly? What about a non-married couple that are living together and sharing all expenses?
Last edited by Thesh on Mon Aug 05, 2013 1:17 pm UTC, edited 1 time in total.
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Re: Recognition of Marriage and Family status in tax system?

Postby Chen » Mon Aug 05, 2013 1:17 pm UTC

icanus wrote:Why restrict it to couples at all? If the reasoning for a tax break is that married couples operate as a single economic entity (and not all of them do), why not also have that apply to, say, siblings sharing a house, or families with adult children living at home?


As stated above, the intent appears to be to attempt to incentivize have married couples in households since this is apparently good for children. Presumably though any dual income family with children would gain this benefit (correct me if I'm wrong I haven't read the studies), so it would seem like incentivizing that would be a better way of going about it. Doing it via children benefits could work I guess. If your child has two income earners in the household, you get X tax break.

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Re: Recognition of Marriage and Family status in tax system?

Postby rieschen » Mon Aug 05, 2013 1:34 pm UTC

I live with my best friend. We don't bone, and are therefore not eligible to marry. If I could marry her, I would get a tax break larger than her actually finding a minimum wage job (which is what she's trying to do right now). I don't think the state should give a shit if I'm boning my roommate or not, and therefore I think our laws regarding taxation of single-earner households are ludicrous.

I'd love being able to make a marriage-like commitment to her and have the state recognize that we're doing a thing that's stabilizing both of us (I'd probably be on sick leave again if she weren't so alarmingly good at helping me manage my mental illness), but alas.

In short: I agree with Thesh.

PS: I feel that if you want to create an incentive towards child-rearing, you should do it directly, attached to the child - not to the marital status of the people raising the kids (whether they be the parents or not). There are plenty of married couples that have no kids, and there are plenty of unmarried people who do.

:oops: Mispelled Thesh's name, sorry.

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Re: Recognition of Marriage and Family status in tax system?

Postby Thesh » Mon Aug 05, 2013 1:54 pm UTC

Also, since it hasn't been mentioned already, joint filing doesn't necessarily give you a tax break. Take the following tax brackets:

Single
10% 0-10,000
20% 10,001-25,000
30% 25,001-75,000
40% 75,001+

Joint
10% 0-20,000
20% 20,001-50,000
30% 50,001-150,000
40% 150,001+

So let's say spouse A makes $25,000 per year and spouse B makes $50,000 per year:

Filing separately, spouse A will pay $4,000 in taxes, and spouse B will pay $11,500 per year, for a combined tax of $15,500 per year.
Filing jointly, their combined $75,000 in income will be taxed $15,500 per year.
Advantage for filing jointly? 0.

Joint filing is basically a random tax incentive for married couples.
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Re: Recognition of Marriage and Family status in tax system?

Postby Tyndmyr » Mon Aug 05, 2013 8:16 pm UTC

Thesh wrote:If the intent is to make things better for children, then why do married couples without children get a break? A couple isn't going to get married or stay married just for some tax break.


There are also tax credits specifically for children, which seem like a much cleaner way to provide advantages to having children, if such is desired.

Of course, while two parent families have an advantage over single parent families, you've got to be at least a little bit skeptical of if the legal status of "married" is the cause there. You can be married, and not live together. You can also live together, and not be married. It's a sort of crude reward system if it is designed to reward the parents being active in the child's life.

I can't help but note that flat tax/screw all the deductions automatically solves all these issues, as well as cases of roommates vs married or unusual marriages, or whatever. Suddenly, you no longer need government approving of your lifestyle, which seems damned nice.

PS: I am aware that the system is not always advantageous to be married under...this really only makes it all worse. The whole thing is a convoluted mess that doesn't map well to the behavior it is purported to encourage.

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Re: Recognition of Marriage and Family status in tax system?

Postby Heisenberg » Mon Aug 05, 2013 8:47 pm UTC

Thesh wrote:If the intent is to make things better for children, then why do married couples without children get a break? A couple isn't going to get married or stay married just for some tax break.

If the intent is to provide a better environment for the next generation of children, it works. A married couple may not consider having a child until their financial situation is relatively stable, so a tax break may encourage some married couples to accept children.
Tyndmyr wrote:There are also tax credits specifically for children, which seem like a much cleaner way to provide advantages to having children, if such is desired.
I'm not so sure. Houses are easier to keep track of than children. If a single tax credit is meant to relieve some of the financial burden of raising a child, what happens when those parents separate? I'm not sure the current system is more just, but it seems to avoid the Solomon's Baby problem.

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Re: Recognition of Marriage and Family status in tax system?

Postby Tyndmyr » Mon Aug 05, 2013 8:49 pm UTC

Heisenberg wrote:
Tyndmyr wrote:There are also tax credits specifically for children, which seem like a much cleaner way to provide advantages to having children, if such is desired.
I'm not so sure. Houses are easier to keep track of than children. If a single tax credit is meant to relieve some of the financial burden of raising a child, what happens when those parents separate? I'm not sure the current system is more just, but it seems to avoid the Solomon's Baby problem.


The current handling of parents seperating is adequately sticky, and has the same issue of who gets the tax credit(answer, one, and only one of you, and it is a person who has the kid the majority of the time. In case of split custody, consult your lawyer). Since this already exists, and the child does not get cheaper to raise when you divorce, the marriage tax credit does not seem to be particularly useful here.

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Re: Recognition of Marriage and Family status in tax system?

Postby Zamfir » Mon Aug 05, 2013 8:52 pm UTC

rieschen wrote:I live with my best friend. We don't bone, and are therefore not eligible to marry. If I could marry her, I would get a tax break larger than her actually finding a minimum wage job (which is what she's trying to do right now). I don't think the state should give a shit if I'm boning my roommate or not, and therefore I think our laws regarding taxation of single-earner households are ludicrous.


Perhaps this is unusual elsewhere, but Dutch law (and Belgian law if I am not mistaken) allows for this situation. If you live together and sign a formal "cohabitation contract", the tax service will treat you as "fiscal partners", basically the same as a married or registered couple.

I am not sure if there are any requirements on what's in the contract. Such a contract can include mutual support clauses ( so you promise to take financial care of each other or pay alimony if you split up), but I think that's not even a requirement to count as fiscal partners. You could also just write down how you will split the rent and other shared costs of the household.

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Re: Recognition of Marriage and Family status in tax system?

Postby Heisenberg » Mon Aug 05, 2013 9:08 pm UTC

Tyndmyr wrote:The current handling of parents seperating is adequately sticky, and has the same issue of who gets the tax credit(answer, one, and only one of you, and it is a person who has the kid the majority of the time. In case of split custody, consult your lawyer). Since this already exists, and the child does not get cheaper to raise when you divorce, the marriage tax credit does not seem to be particularly useful here.

True, I think the main purpose is to allow married couples to start a family and continue having children. They get the marriage tax break and the kid tax breaks. Considering the drastic reduction in fertility, I imagine western countries want to reward couples who stay married and continue producing citizens.

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Re: Recognition of Marriage and Family status in tax system?

Postby Derek » Mon Aug 05, 2013 9:59 pm UTC

I can't help but note that flat tax/screw all the deductions automatically solves all these issues, as well as cases of roommates vs married or unusual marriages, or whatever. Suddenly, you no longer need government approving of your lifestyle, which seems damned nice.

This is one reason why I like the idea of a flat tax + flat handout/negative income tax/citizen's wage.

Zamfir wrote:Perhaps this is unusual elsewhere, but Dutch law (and Belgian law if I am not mistaken) allows for this situation. If you live together and sign a formal "cohabitation contract", the tax service will treat you as "fiscal partners", basically the same as a married or registered couple.

I am not sure if there are any requirements on what's in the contract. Such a contract can include mutual support clauses ( so you promise to take financial care of each other or pay alimony if you split up), but I think that's not even a requirement to count as fiscal partners. You could also just write down how you will split the rent and other shared costs of the household.

I don't believe any such thing exists in the US, at least. It's an idea that I've considered before, as a way to provide the economic benefits of marriage without any of the social status hanging on.

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Re: Recognition of Marriage and Family status in tax system?

Postby BattleMoose » Tue Aug 06, 2013 12:26 am UTC

Zamfir wrote:Perhaps this is unusual elsewhere, but Dutch law (and Belgian law if I am not mistaken) allows for this situation. If you live together and sign a formal "cohabitation contract", the tax service will treat you as "fiscal partners", basically the same as a married or registered couple.


Once again the Netherlands being awesome with their laws and stuff.

I'm pretty sure most people already regard a couple raising kids living together as the ideal. Also the cost savings of living together are huge compared to not living together. I cannot imagine a single scenario where a tax break based on cohabitation is the deal breaker for a couple living together to raise children.

Who really need help are those single parents actually struggling to raise children. If the concern is actually about helping children then welfare and tax breaks should be directed at people who actually need the help and are struggling the most.


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