X hits on this document

PDF document

Institute for American Values Institute for Marriage and Public Policy - page 22 / 44





22 / 44

Appendix A: Testing the Analysis: Is the Estimate of $112 Billion Too High or Too Low?

In this appendix, we consider in detail four arguments that suggest the estimate that the total taxpayer cost of family fragmentation of $112 billion is too high and four arguments that it is too low.

Is $112 Billion Too High?

In this section, we consider four arguments that suggest the $112 billion estimate is too high:

    • 1.

      If cohabitating households were to marry, most of them receiving transfer payments would receive a marriage bonus from the federal tax and trans- fer system.

    • 2.

      The use of Holzer’s research in this study exaggerates the actual impact of low income on childhood poverty.

    • 3.

      The use of Thomas and Sawhill’s research in this study overestimates the impact of marriage on reducing poverty.

    • 4.

      The main assumption of this study—that the percentage of government program costs due to family fragmentation is proportional to the amount of poverty due to family fragmentation—overestimates the taxpayer costs.

  • 1.

    If cohabitating couples were to marry, they would receive a marriage bonus from the federal tax and transfer system.

The earned income tax credit (EITC) is an approximately $40 billion antipoverty program that provides cash subsidies to low-income working adults, and Temporary Assistance to Needy Families (TANF) is a $16 billion cash assistance program for low-income families. Gregory Acs and Elaine Maag report that of the 1.1 million people living in cohabitating households earning less than 200 percent of the poverty level and receiving the EITC and/or TANF, about three-fourths of these households would receive an average marriage bonus of approximately $2,423, while about 10.5 percent of these households would receive a marriage penalty of $1,742 in 2008. Thus, if the cohabitating adults in these households were to marry, taxpayers would face increased expenditures for these two social programs. Taken together, these estimates from Acs and Maag suggest that taxpayer expenditures for the EITC, TANF, and the child tax credit would increase by about $0.5 billion if all cohabitating couples were to marry.45

Given the results in Acs and Maag, is our estimate of the taxpayer cost of family fragmentation too high by $0.5 billion? In table 7, we ignore any costs of family frag- mentation on the EITC. We do so because of complications such as the one pointed out by Acs and Maag that some households would get higher EITC payments if they became married households and nothing else about them (e.g., labor supply) changed. Nevertheless, it appears likely that the net taxpayer costs of family

Page 22

Document info
Document views145
Page views145
Page last viewedWed Jan 18 02:03:50 UTC 2017