Marriage against the State
I’m pleased to announce the publication of my new Cato Policy Analysis, “Marriage against the State: Toward a New View of Civil Marriage.”
As I note in the introduction, it’s quite rare that Congress ever considers marriage as a policy area in its own right. There are comprehensive health care bills, defense spending bills, farm bills, and civil rights bills, but no really comprehensive marriage bills.
Of course, this might be a good thing, but one of the side effects is that marriage policy can be haphazard in the extreme. Inconsistencies and surprises abound. Marriage influences welfare, immigration, tax law, child custody and support, and many others besides.
Are all of these things legitimate? A popular view among libertarians is that the federal government, and possibly the states, should get out of the marriage business altogether. It’s an approach with much to recommend it, but I can’t entirely agree. For at least some areas of public policy, marriage represents a barrier to government meddling in your financial, family, and intimate life. In these areas, it’s an unqualified good. Marriage is often a defense against the state, and as such, it’s something libertarians ought to want.
Consider child custody. All children born to a married couple are presumed to belong to them. You don’t have to do anything special to assert your paternity (or maternity). You are presumed to have it. This is probably for the best. Inviting the government to prospectively examine married couples’ fitness as parents is one of the most corrosive things I could imagine doing to the nuclear family.
Or consider the gift-tax exemption for married couples. Husbands and wives may gift one another money or property without limits, tax-free. It’s an important part of the financial independence that we are accustomed to having in our families, and it allows a family to conduct an interdependent financial life with dignity and autonomy.
Yet this same exemption, oddly enough, can make a legal divorce cheaper than the breakup of a never-married relationship. A married couple can divide their assets, including houses, cars, and other properties, before they split up. A never-married couple will often have to pay taxes on their pre-breakup transfers — making the government in effect a third party to their relationship. No one would want this for all couples, of course, least of all libertarians.
Extricating marriage from other parts of federal law won’t be easy, either. For some fairly complicated reasons that I explain in the paper, the only way to make the income tax fully neutral with respect to marriage — and also neutral across families with unequal income distributions between spouses — is to adopt a flat tax. While I share the view of many of my Cato colleagues that a flat tax is a good idea, the marriage-related consequences of our current tax system aren’t always appreciated as a reason to move in that direction. They should be.
As a third example, consider immigration. Marriage to a citizen considerably hastens the process of immigrating legally. Even if that process were not unconscionably slow (which I think it is), we would probably still want the immigration of marriage partners to be a high priority. Immigrant spouses of citizens are clearly integrated to some extent into American society. The American spouses’ own liberty interests are clearly implicated. And, perhaps best of all for critics of immigration, immigrant spouses’ numbers are relatively small in any case.
Lastly, and because I know a lot of you probably skimmed up to this point, I do discuss same-sex marriage. One of the more common arguments against same-sex marriage is that those who have moral objections shouldn’t be forced to subsidize same-sex unions with their tax money.
Let’s grant the basic justice of the argument (and never mind that Quakers, Buddhists, and others could morally object to our enormous defense spending!). Still, it’s not well known that by the best available estimates, federal same-sex marriage would leave the government in a better fiscal position, not a worse one. A good way to channel less federal money to same-sex couples is actually… to allow them to marry.
Why is this? Well, some married couples still pay a marriage penalty, and gay and lesbian couples obviously would too. More significantly, spouses’ incomes and assets are declared in the means testing for federal welfare programs. Marriage would exclude some gays and lesbians from these programs. They may want marriage anyway, but on balance, it’s clearly not for grabbing federal dollars.
I discuss quite a few other marriage-related issues in this Policy Analysis, and even so, it’s not remotely comprehensive. My goal is to suggest a new way of thinking about marriage, one that evaluates the effects of various marriage-related policies using the individual right to form a family as the standard. Not every aspect of federal marriage policy stands up, but some of them do. Let’s let a new conversation begin.
Good paper Jason.Report
Jason, I look forward to reading the paper. Really fascinating stuff just in the post, though.Report
In cases of divorce or child custody disputes, who settles them? Courts. Since the Gov has a prime role in settling civil disputes it will always be involved in marriage. No matter what arrangements people may make in their marriage, the court still needs to consider the best interests of the children in determining custody and needs to protect parties that may be suffering from threats or domestic violence.Report
“One of the more common arguments against same-sex marriage is that those who have moral objections shouldn’t be forced to subsidize same-sex unions with their tax money. “
Unfortunately for the resolution of this issue, the tax angle is small potatoes compared to the thought-control/forced recognition issue.Report
Ah, the thought-control through grammar argument. Where have I heard that before?Report
Five points to Slytherin.Report
Heeeeeeeeeeeeee-haw.Report
So are you saying that gay people should step away from the chapel and go back to the closet?
Or am I being uncharitable?Report
Unfortunately for the resolution of this issue, the tax angle is small potatoes compared to the thought-control/forced recognition issue.Hurr Durr I hate fags.Report
I downloaded the paper and I’m interested in looking at it.
One small quibble, though. “Executive Summary”? Whatever happened to a good ol’ “Abstract”?Report
It’s my ambition to talk to executives?
Seriously, every Cato PA is like that. Just following the style.Report
I understand; like I said, it’s just a quibble. It just sounds kind of pretentious, although “Abstract” may sound just as pretentious. Are these PA papers read by a significant non-academic audience?Report
flat tax? Don’t believe in the marginal value of a dollar? Want the poor and middle class to bear an increased burden compared to what they pay today? no, thanks.Report
You only have three choices — with mathematical certainty. There are no other ways to do it.
1. You can choose a flat tax.
2. You can choose a marriage penalty.
3. You can choose to have two married couples, of equal total incomes, paying disparate levels of tax.
I see you’ve un-selected choice 1. Which of the others do you prefer?Report
Are those really the only three choices? Couldn’t you just require everyone to file individually, therefore negating the influence of marriage on taxes? Perhaps there are reasons this isn’t ideal, but it certainly seems an alternative. I’m sure there are other, more complicated, options as well.
I’m opposed to the flat tax. I’m also in favor of same sex marriage. I guess that means, given just your three choices, I choose number 2. From what I know of the three, I don’t feel too bothered by that. Spoken like a true single person, eh?Report
If everyone files individually (with a graduated marginal income tax), you will get some couples where the income is divided 50-50, and where both partners are therefore in a lower tax bracket. If all their income came from one of the partners, it would be in a higher tax bracket. Equality between families would be violated then.Report
I’m well aware of the problem. (while tax class was almost 20 years ago, I found that discussion quite interesting.)
I think #3 is clearly the correct answer. The second working spouse should not be taxed at the first spouse’s marginal rate on her first dollar. She (he) should get the benefit of starting at the lowest rate.
If this means that the family in which one person earning $200k pays more than the family in which each spouse earns $100K, I think that’s fair and appropriate. In the second family, both spouses are working; in the first, the second spouse is free to do uncompensated labor — like raise the kids, keep house, do volunteer work, all the things my mother did back in the 60s.
Since the norm these days is for both spouses to do at least some compensated work, I see no moral problem in putting the family where one spouse chooses not to work in a more adverse tax position. Choice 3 also eliminates the marriage penalty.Report
If that is indeed how it works (again, I’m not married so I don’t know practically how it all works), then I think #3 is obviously preferred, for many of the same reasons that Francis points out. Two people making $100K each should not be treated the same as one person making $200K. Why should they be? They are two people where the other person is an individual. The fact that he/she might be married to a non-working person doesn’t or shouldn’t change the scenario, as far as I’m concerned.
I know there are other ways in which marriage influences taxes. The ability to file dependents or take larger deductions is surely a factor as well, but again, I’m not clear on how that operates. Regardless, I struggle to see the argument in favor of taxing 2 people making $100K each the same as 1 person making $200K; arguing that these families are being treated differently is to put the emphasis in the wrong place.Report
In fact in southwestern states that is what is required now if people file seperatly, community property says take total income divide by 2 and put that 1/2 on each return. If you went to individual filing folks in those states would be forced by law (unless changed) to do what is suggested, thus no difference. Perhaps the solution then is to bring the whole country under community property lawReport
#2 sounds kinda fishy to me, since it certainly seems possible to take any pooled income tax (which is presumably how one would avoid #3) and ‘slide’ the scale until the marriage penalty is entirely replaced by a penalty for being unmarried. That’s basically what one of those Bush era tax cuts did IIRC.
As for #3, I’m not really feeling the grand injustice of it. Every time I file a 1040, there’s about 40 lines that are each a way I could not be paying the same amount as even another single guy who makes the same amount.Report
You could transform the penalty into a marriage bonus, yes.
As to the injustice of the third option, consider that you’re making one family poorer than another, despite equal pre-tax incomes. For what reason? Is there even a reason to it? I can’t find one anywhere. This sets it apart from deductions and other forms of incentive, which at least do have a reason, if not necessarily a good one.Report
But why view the family as a unit? Are we going to include children’s incomes as well? Treat everyone as an individual.Report
Why view the family as a unit?
What other types of families are there?Report
I mean, why view a married couple as a single, income-earning, taxable unit? Why not view them as two people, each earning income, each being taxed?
As for the flat tax, we already have that, with the sales tax. And, if we instituted it on income as well, would there be a minimum threshold people would have to meet before being taxed?Report
if we instituted it on income as well, would there be a minimum threshold people would have to meet before being taxed?
I’d favor a threshold, yes, combined with a guaranteed minimum income/negative income tax system that would allow us to replace most or possibly all forms of welfare.Report
Come Jason, don’t argue this way. There are lots of reasons to tax two unmarried individuals each at $100 K in the same way as two married individuals each at $100K, and differently from two married individuals with one at $200K. I’m no tax expert but off the cuff:
1. Taxing the second working spouse at the marginal rate of the first working spouse is a strong disincentive to do paid work and encourages tax avoidance.
2. The formation of a household by marriage should not be penalized, especially where the tax penalty can be avoided simply by remaining unmarried. We encourage marriage in all sorts of ways, then penalize it in the tax code? That’s lousy public policy.
3. Women working is so common these days that it should be treated, for tax purposes, as the norm. If a family chooses to have a non-working spouse (usually the woman), and the husband working extra-hard to make up the lost revenue, they should not expect preferential tax treatment. The non-taxed work that the non-working spouse is free to do — like raise the kids — is more than sufficient to justify the differential tax treatment.
4. Last I checked, the marriage penalty only really started to have a bite once the family income was well above average, simply because of the way deductions work. If we flip the policy around, and create the unemployed spouse penalty, and it still bites at the same place, this is not the most sympathetic group of taxpayers, because mostly they’re doing just fine. And if we go to a flat tax and keep the size of government the same, this group would be seeing their taxes rise dramatically anyway.
Because you’re a smart guy, frankly I suspect you know all of these arguments; you’re using the marriage penalty argument to serve as the basis for a flat tax, in the ultimate hope that a flat tax would fall so hard on middle to upper-middle class voters that the ‘starve-the-beast’ theory would finally come true. Hasn’t worked yet; this is how we got a $14 trillion public debt.Report
1. Taxing the second working spouse at the marginal rate of the first working spouse is a strong disincentive to do paid work and encourages tax avoidance.
Taxation encourages tax avoidance. Our complex tax code encourages tax avoidance. Taxing everyone equally — you mean to tell me that that’s worse?
2. The formation of a household by marriage should not be penalized, especially where the tax penalty can be avoided simply by remaining unmarried. We encourage marriage in all sorts of ways, then penalize it in the tax code? That’s lousy public policy.
3. Women working is so common these days that it should be treated, for tax purposes, as the norm. If a family chooses to have a non-working spouse (usually the woman), and the husband working extra-hard to make up the lost revenue, they should not expect preferential tax treatment. The non-taxed work that the non-working spouse is free to do — like raise the kids — is more than sufficient to justify the differential tax treatment.
I agree entirely, except possibly with the last sentence. I still think on balance it’s a reason to favor a flat tax.
4. Last I checked, the marriage penalty only really started to have a bite once the family income was well above average…
Actually, it’s worst for low-income families, because marriage may mean losing the Earned Income Tax Credit.
As to “starve the beast,” I have written often and critically about it. Never do I recall advocating it, and it’s quite out of favor at Cato, particularly after William Niskanen demonstrated empirically that it simply doesn’t work. When you lower taxes, it has the effect of sending a price signal — government benefits are cheap. People demand more of them.Report
To those who know more about this than I do (which is at least the two of you and perhaps others), I feel like I’ve seen the option to file as “Married, file individually”. Is that an option? If so, what does it mean?Report
Regarding marriage and immigration, I have a couple short anecdotes.
One of my friends recently got married to his long-distance girlfriend of a few years and they’re still trying to get all the paperwork in order 5-6 months later just so she can work, and you know, help support her family. And this is the “easy” way to immigrate to the US…
I have another friend who was in a same-sex relationship with a Frenchman in the US on a student visa for his Masters’ degree. They seemed to have a really strong and healthy relationship, but eventually the Frenchman had to return home. They tried doing a long-distance relationship for almost a year before coming to terms that it would be extremely unlikely for either of them to be able to emigrate to either France or the US. I don’t know if they would have stayed together otherwise or would have eventually broken up anyway, but it does seem quite unjust for state policy to keep those like these two apart, even if it’s probably a rare occurrence otherwise.Report
My cousin in marrying a Canadian next month so I know that the British system has a whole series of hoops to jump through to prove that a marriage is going to be ‘genuine’ and get permission to marry.
Anyway Jason’s analysis looks excelent on the face of it, though I would wonder why you need a gift tax exemption because I don’t see why you need gift taxes, certainly we don’t seem to have them and I have checked with accountants on this. Instead of having one category where you can give gifts without tax (marriage) we have one category where you can’t (business) and this seems fairer given that the relationships of people who give gifts are both varied and personal. I certainly don’t like the idea of taxing friendship or turning levels of closeness into tax categories.Report
The gift tax serves in part to frustrate attempts to evade the estate tax. If we didn’t have a gift tax, then very few would pay the estate tax — they would get on in years, fall ill, and give away their property before they died.
The married couples’ exemption from the gift tax parallels their exemption from the estate tax — if you leave everything to your spouse, there is no estate tax.
(A disclaimer may be appropriate: I am not giving tax advice here, and I do not intend it to be taken as such.)Report
I see, we approach it rather differently by treating any gift made within 5 years before death as if it was an inheritance.Report
“Perhaps best of all for critics of immigration, immigrant spouses’ numbers are relatively small in any case.”
Thank God for that. Wouldn’t want all those Russian mail-order brides taking all the contruction jobs.
But seriously, this issue is near and dear to me, and I’m looking forward to reading the whole paper. Can we post responses to the actual policy analysis here?Report
Please do. I’m going to try to keep up, but I may have to pick the battles. Same-sex marriage threads around here tend to be that way.
As to immigration, my own views are well known. I favor making legal immigration easier across the board. Failing that, it’s also question of picking our battles.Report
Jason:
Having read the paper, I’m quite shocked that you failed to go into the implications of the flat tax at a quantitative level. While it is true that a flat tax will eliminate the marriage penalty / bonus, it does so at the cost of substantially reducing the income to the Federal government from high income earners. You are apparently arguing that this issue should be resolved independently of the larger issue of the size of the federal government and should therefore be revenue-neutral.
But if it’s a revenue-neutral change and the rich pay less, who pays more and by how much? Your paper is silent, and that’s bad.
It’s fine to tell people about a terrible injustice in the tax code and propose a solution. But when you then fail to tell people that the solution requires that a vast chunk of the middle class will need to pay more taxes to make up the shortfall due to taxes being reduced on the rich, that’s just deceptive.Report
In my defense, this isn’t a paper about taxation. Although I favor a flat tax in the abstract, I am less certain about how to implement it, and I do think that it would be best to do so only after significantly reducing federal spending. This would perhaps address some of your concerns.
If your real concern, though, is income inequality — why is it that confiscatory taxation is the answer? If we grant that the top 1% doesn’t deserve its high income levels, it still doesn’t follow that the government is better entitled to that money.Report
That’s really weak sauce. Of course your paper is about taxation. It’s the very first change in federal law your paper discussed in detail. Your own original post talks about the tax implications of marriage right after child care.
And look at your own comments on this very post. [C]onsider that you’re making one family poorer than another, despite equal pre-tax incomes. For what reason? Is there even a reason to it? I can’t find one anywhere. … I agree entirely [with my points 2 & 3 as to why it’s ok to tax equal-income families differently], except possibly with the last sentence. I still think on balance it’s a reason to favor a flat tax. … Although I favor a flat tax in the abstract, I am less certain about how to implement it, and I do think that it would be best to do so only after significantly reducing federal spending.
There are some radical changes in there. You go from no reason as to why it’s ok to tax equal-income families differently to agreeing with me, and from arguing in favor of a flat tax unreservedly to saying that you’re uncertain how to implement it.
And now instead of defending your paper, you attack me, with the dog-whistle expression “confiscatory taxation”? I’m not the one who put a paper out. I’m not the one arguing that the solution to the marriage penalty is to raise taxes on the middle class. That’s your position; you defend it.Report
If two equal income families are taxed unequally — as a mere side effect of our tax policies — then I think I’m justified in saying that that’s unfair.
The solution to the marriage penalty is very definitely to make taxes flatter. Indeed, that’s how our tax code currently minimizes the marriage penalty –the 15% bracket is expanded to include more people. There isn’t any other way to do it, and I’m sorry if this makes you unhappy. Your argument is with basic math, not with me.
As to how to implement a flat tax, I would say: Cut spending first. Then pass a flat tax. It should be no mystery why I’m “less certain” about how to do this. It really is a hard problem.Report
Jason, I find your comments on this issue particularly telling.
The goal of libertarianism is, allegedly, to increase aggregate liberty. Yet, on the issue of federal taxation, your belief and the belief at Cato is that the distribution of the impact of taxation should be shifted on to those making less.
Based on the fundamental principle of the marginal value of money, a flat tax is not liberty-enhancing. As compared to a marginal tax rate system, a flat tax imposes a greater tax burden on those who make less, and are therefore more adversely affected by increased taxes.
A standard knock on Cato and Reason is you guys claim to be libertarian, but when the chips are down you’re a bunch of Republicans who want to allow gay marriage and smoke pot.
I always thought that was a cheap shot, but I was wrong. You’re openly advocating for a profoundly liberty-decreasing policy, ie, more tax cuts for the rich. You really are a standard-issue Republican on tax issues. Well, since both Cato and Reason get funded largely by private donations from wealthy individuals who loathe the federal government, I guess it’s too much to ask to stay true to your mission on such a core issue for your donor base.Report
Based on the fundamental principle of the marginal value of money, a flat tax is not liberty-enhancing. As compared to a marginal tax rate system, a flat tax imposes a greater tax burden on those who make less, and are therefore more adversely affected by increased taxes.
Is that the only thing that happens to taxes in your worldview, Francis?Report
I’ve said repeatedly that we need to cut spending first. I’ve suggested — in threads I know that you read — some ways we might do it that would not be a burden on the poor. If we were to do so, the supposedly extra tax burden would not be so great after all.
I don’t see that anything else needs to be added to this debate. If you were looking for a reason to disparage Cato, I’m sure you would have found one in any event. Shrug.Report
Jason, have no idea if this is a response to me or just another mix up in in the ‘response’ mechanism on this site. If it’s directed towards me, I’m at a complete loss for what you mean.Report
It was directed at Francis, Heidegger.Report
Jason-
Looking at this more practically (meaning cutting spending is, unfortunately, pretty much off the table), what do you think the bets remedy is, at least in the short term? Imposing a flat tax with spending what it is would destroy many individuals and families. Yet we still have the issues with the potential for the “marriage penalty”. A flat tax may be the right solution in an ideal scenario, but given the scenario we find ourselves in, what would you propose?Report
In practice, the way our tax code minimizes the marriage penalty is to make taxes flatter for the middle class. It’s not a perfect solution, but it does minimize some of these objections. I’d keep those adjustments in place indefinitely.
But then, I’m guessing I’d get some grief for that.Report
Jason, a while ago you had made a statement to the effect, that SSM would actually SAVE taxpayers money–(I hope I’m paraphrasing you correctly). Well, I thought that was just crazy–how could SSM possibility save taxpayers money if for no other reason than the added expenditures caused by having the right to be covered by your spouse’s health insurance’s policy. Also, being married also allows you to claim an extra tax exemption and in the event of death, the living spouse could collect the dead spouse’s social security. Well, guess what? As compelling as these reason may seem, it’s not correct. And for that matter, Jason, I forget the reasons it would be incorrect. Could you do me a huge favor and provide a link for me to see the other side of this argument? Thanks so much.Report
Do most flat tax proposals involve a large standard deduction or retaining EITC? My largest issue with flat taxes is the effect on the poor; I’m not all that interested in class warfare between the middle and upper classes.Report
I’m not sure about “most” proposals; it probably depends on how you count. The one I favor would include a lump-sum guaranteed minimum income in combination with a flat tax. This would prevent people at the lower end from really getting socked when they started working. It would also consistently incentivize people to work harder even so.Report
Heidegger January 13, 2011 at 8:05 pm
Jason, a while ago you had made a statement to the effect, that SSM would actually SAVE taxpayers money–(I hope I’m paraphrasing you correctly). Well, I thought that was just crazy–how could SSM possibility save taxpayers money if for no other reason than the added expenditures caused by having the right to be covered by your spouse’s health insurance’s policy. Also, being married also allows you to claim an extra tax exemption and in the event of death, the living spouse could collect the dead spouse’s social security. Well, guess what? As compelling as these reason may seem, it’s not correct. And for that matter, Jason, I forget the reasons it would be incorrect. Could you do me a huge favor and provide a link for me to see the other side of this argument? Thanks so much.Report
Jason, I read your paper enthusiastically, and you have convinced me that there should be some special protections for married couples. (I’m always eager to find common ground with social conservatives.)
However, I was hoping you’d explore the fact that the U.S. does not recognize common-law marriage. It seems like a lot of the good effects of government involvement in marriage that you describe would remain with less intrusiveness were the government to simply recognize common-law marriage, as Canada does. Such a move might also be particularly beneficial to the poor, who are more likely to cohabitate and share resources. Legislation to that effect wouldn’t be particularly hard to push through Congress I’d think.
Second point, related to taxation: you can still have a progressive tax regime with a flat income tax (or no income tax, fingers crossed) plus a VAT or some other variation on a progressive consumption tax. Such a tax regime plus recognition of common law marriage would really allow the institution of marriage to evolve organically in conjunction with the preferences of each couple.
I’m curious whether you considered the idea that, while marriage is indeed an institution antedating the state’s control over marriage, it has historically always been for the purposes of protecting wealth for the next generation. Historically, all marriage was strategic marriage. Does the new role of marriage in society undermine your argument or make it stronger?
Finally, ten points for using the word trilemma.Report
Several good points and questions here. Thank you for sharing them. I will likely write a detailed follow-up post on Monday, because I’d like to answer each of your questions in turn, and do so with a bit of research and substantiation.Report
Thanks. I look forward to reading it.Report