Think tax reform fixed the "marriage penalty"? Think again, especially when it comes to the phase-out of means-tested welfare benefits or tax credits. The research group R Street has a well done and fascinating new paper detailing the problem:
For example, in Arkansas (one of the states with the highest marriage penalties) if a nonparent marries a parent with two children, and they have a 50/50 split of $40,000 in combined earnings (counting benefits, a total income of $41,892), they would lose approximately $13,248 in annual means-tested benefits, or 32 percent of total household income....
By size, major means-tested programs include Medicaid; the Supplemental Nutrition Assistance Program (SNAP); Temporary Assistance to Needy Families (TANF); child-care subsidies through the Child Care and Development Fund (CCDF); school meals; and the Low Income Home Energy Assistance Program (LIHEAP).
Adjusting for inflation, federal spending on the nine largest means-tested programs climbed from about $77.6 billion in 1968 to about $658 billion in 2011, an increase of about 748 percent. This growth was seen during a period when the U.S. population grew by only about 56 percent....
The current system encourages cohabitation (or continued cohabitation) at the cost of marriage... We are struck by how thoughtlessly marriage penalties are created in contemporary programs and how difficult they are to undo. The benefit cliffs in child-care programs and, more recently, in the ACA [Affordable Care Act] may facilitate administration, but at a real cost to wise policymaking.
Is it any wonder that marriage is declining? The R Street paper, by Douglas Besharov of the University of Maryland and Neil Gilbert of U.C. Berkeley, reports, "In the United States, between 1980 and 2012, the proportion of women aged 40 to 44 who had never been married almost tripled, rising from 4.8 percent to 13.8 percent."
If the government takes away welfare benefits when you get married, lo and behold, fewer people will get married!