December 27, 2006
Column #1,322
Advance for Dec. 30, 2006
Government Subsidizes Cohabitation
by Michael J. McManus

Why has the marriage rate fallen by 50 percent since 1970? 

Many couples cohabit rather than marry.  The number of cohabiting couples has soared 12-fold from 430,000 in 1960 to 5.2 million in 2005.  About half of those who live together, never do marry.  The result is that the percentage of never-married Americans aged 30-44 has tripled.  That pushes down the marriage rate.

However, did you know that the government is subsidizing cohabitation for low income people, which fuels its growth?  A rule of economics is that whatever is subsidized, will grow.

For example, if a man in California working full time at $7 an hour cohabits with a woman working half-time at the same pay, their combined monthly income is $1,820.  However, if she has two children the government supplements her income by $196 a month in an Earned Income Tax Credit (EITC).  She also receives $440 a month in welfare, $114 in food stamps and a big $662 monthly in housing subsidy.  Including other subsidies, her monthly income is $2,106, yet she pays no taxes.  In fact, her EITC comes from the IRS.

By contrast, her live-in boy friend earns $1,213 a month, receives no subsidies, pays $157 a month in taxes and, as the father of her children, pays $200 in child support. That reduces his income to $857; however combined with her income and other subsidies, the couple has an income of $2,963 a month if they are cohabiting, and don't report it to the IRS. 

What if they marry?  First, they lose her $440 welfare check and their food stamp allotment is cut from $114 to $68 a month. The housing subsidy drops from $662 to $445, and  the EITC falls Why?

The government assumes her need is less since she has access to his earned income.

However, if they are living together, she already has access to that income. The bottom line is that if the cohabiting couple marries, even though he no longer pays child support, their combined income will drop from $2,963 a month to $2,552.  Their annual income falls from or $35,556 a year to $30,624.

Thus, government is paying this couple $5,000 a year NOT to marry.

This is perverse public policy that ought to be reversed. Marriage is not only good for individuals, but for society as a whole.  People who are married live longer than those who are single (ten years for men), are twice as likely to say they are very happy, and will have three to four times as much wealth at retirement as the divorced, widowed or never married.

Children of never-married parents are three times as likely to be expelled from school or to become pregnant as teenagers as those from married parents, five times as apt to live in poverty and are more likely to have emotional problems and become delinquent.

Therefore, it is marriage not cohabitation that should be subsidized.

The Bush Administration and Congress have recognized this need to change the law. Before 2001, middle class couples who married saw their taxes jump. To their credit, the Bush Administration proposed and Congress passed tax reform that is slowly eliminating that marriage penalty, phasing it out by 2008.  Its cost was $63 billion, from 2002-2011.  Congress also passed a Bush proposal to strengthen marriage with $100 million a year of grants for marriage education.

I think these are Bush's most important domestic achievements.

However, the marriage penalty persists for low income people due to subsidies of income and for housing, food, day care, etc. given to a single mother and her children.  She can live with a man, get the benefit of his income, without relinquishing her subsidies. So millions have cohabited and not reported it to the IRS, rather than marry.

This is not in the interest of the parents or the children, who are both better off if they parents marry.  "The current system serves no one's interests and actively undermines family formation and stability.  The marriage penalty certainly undermines government's efforts to strengthen the institution," states a new paper by the Institute for American Values by David Blankenhorn and Alex Roberts.

It argues that there are too many programs to eradicate the marriage penalty in a piecemeal fashion.  It proposes, "Give low-income couples a refundable tax credit for the exact amount of their marriage penalty."

The cost is unknown but is certainly much less than $63 billion to eliminate the marriage penalty for the vastly larger middle class.

It deserves support from Bush and the Democratic Congress.