Our tax and welfare policies often penalize marriage, trapping too many people in poverty.
‘I continue to be amazed by the trajectory difference between my married versus unmarried friends,” a University of Virginia graduate student from Arkansas recently wrote to Brad Wilcox. “I keep thinking of my high-school classmates who are basically trapped by Medicaid and other income-based programs, never to get married.”
He is on to something, and research backs him up. This country’s public policies — especially our tax and welfare policies — often penalize marriage, locking couples out of marriage and trapping too many people in poverty. In fact, marriage penalties, which generally fall hardest on working-class families in the lower half of our income distribution, can end up robbing working-class families of between 10 percent and 30 percent of their real income. One study found that a working-class couple with two children in Arkansas stood to lose 32 percent of their real income if they married.
Not surprisingly, these penalties seem to play a role in fueling working-class Americans’ retreat from marriage that we have seen play out over the past three decades. In recent years, for instance, a majority of children born to working-class parents have been born outside of marriage, whereas the vast majority of upper–middle-class parents continue to have children in marriage.
Working-class children — and the communities where they grow up — are the big losers in all this. Children from intact, married households are 70 percent more likely to graduate from college. Girls in such households are half as likely to end up pregnant, and boys are half as likely to end up in jail or prison. And as Harvard economist Raj Chetty and his colleagues have found, one of the strongest predictors of economic mobility for lower-income kids is the share of two-parent families in their community.
In 2017, members of Congress had the right idea in attempting to eliminate marriage penalties in the tax code. Unfortunately, they were only partly successful, as their efforts ended up focusing on income taxes that affect Americans in the upper half of the income distribution. They failed to touch any of the marriage penalties in the means-tested policies that most affect working-class families.
Take the earned-income tax credit, one of our nation’s three biggest welfare programs in terms of both participation and cost. Dispensing $62.9 billion in benefits to 25.4 million tax filers in 2019, for an average benefit of $2,470 per family, the EITC often ends up penalizing marriage among working-class couples.
Suppose a couple has two children together. One partner earns $10 per hour and the other $15 per hour. They can maximize their benefit by having the parent with the lower wage file for the EITC as head of household with two children, giving them $5,605. As a married couple, they would receive only $275. The marriage penalty is $5,330.
Food stamps — another of the big three welfare programs — provides another example. To see how this works, consider the same couple as an example but with a twist. Technically, if they live together and share the same food budget, they are supposed to be defined as the same food-stamp household. If they follow that rule, there would be no marriage penalty.
However, given that many states do not check on who is living in the household, there is a financial incentive for couples to maximize their food-stamp benefit by using the same tactic mentioned above: have the parent with the lower wage apply for benefits, along with the children. They would receive about $6,108 in an EBT debit card for the purchase of food. As a married couple, their income would make them ineligible. Deploying this tactic along with the EITC means that the marriage penalty for this couple would exceed $11,000.
Medicaid is also problematic when it comes to the marriage penalty, as the comments from our Arkansas graduate student suggested. Medicaid is the third of the big three welfare programs, and it is by far the biggest in terms of dollars spent, expected to exceed $1 trillion in cost by 2027, according to the federal government’s official actuary. It, too, penalizes marriage and is associated with higher unmarried childbearing and more cohabitation. Medicaid expansion has only made the situation worse. This is just one reason why the Georgia Center for Opportunity has proposed an alternative approach of providing medical assistance to the poor that is better than Medicaid and still promises universal coverage.
Recognizing the complexity of the issue, Congress and state governments should take three steps to start minimizing marriage penalties. First, on the technical side, Congress needs to accelerate the push for fully integrated eligibility systems where all welfare programs are streamlined and processed through the same door. This will establish a single welfare agency at the state level responsible for coordinating all assistance and giving recipients a road map to prosperity, which does not exist today. Currently, responsibility is spread across many federal agencies, congressional committees, and state agencies, with insufficient coordination.
Second, the cumulative effect of the programs needs to be assessed specifically for marriage penalties, similar to the computational analysis performed by the Georgia Center for Opportunity. This assessment would allow policymakers to understand the scope and depth of the problem by balancing the financial advantages and disadvantages of marriage, identifying the eligibility rules that are the most problematic, and developing modifications to those rules to mitigate the penalties so they are no longer barriers. For example, EITC rules need to be adjusted so cohabiting couples with children do not end up with thousands of dollars more than they would receive if they were married.
Third, the programs themselves need to have clearly communicated rules for married couples that make it clear that couples will not be penalized for tying the knot. For example, Medicaid could double the eligibility threshold for married families as compared with single parents and clearly communicate to working-class couples that getting married will not be an obstacle to getting health-care coverage for them and their families.
Taking such steps would end the marriage penalties facing too many working-class couples across the country. It would make marriage more accessible, freeing couples from the trap of our nation’s ill-designed welfare policies that make it difficult to choose the strongest and most stable form of family life.
W. Bradford Wilcox is an American Enterprise Institute visiting scholar and director of the National Marriage Project at the University of Virginia.
Erik Randolph is director of research at the Georgia Center for Opportunity and author of a three-part series on how to reform welfare to address welfare cliffs and marriage penalties.