Are tax breaks for married couples a good idea?
In many ways economics is the study of incentives. An incentive is any factor (financial or non-financial) that enables or motivates a particular course of action, or counts as a reason for preferring one choice to the alternatives.
In English, Incentives make you want to do something you otherwise wouldn’t want to do. Today let’s talk about an incentive which is in the media at the moment, the oft criticised, proposed marriage tax break.
The plan is essentially an easy one. Cut the costs for people who want to get married via a tax rebate, and it makes sense. There is a lot of evidence to support the claim that marriage is good for society.
As the Telegraph reports
The statistical evidence is overwhelming: children brought up by two parents do much better, on average, than children brought up by just one. They are less likely to drop out of school or end up in prison, and more likely to pay taxes and remain in employment. This is not to deny that single parents do an excellent job and raise children who grow up to contribute much to society. It is simply to point out that across the population as a whole, two-parent families are more likely to achieve that result – and couples who marry are five times more likely to stay together, and provide that positive environment, than those who cohabit without any public commitment.
We all benefit from well-adjusted children, who are ‘polite, well educated and contribute to society’ this is what economics calls an ‘externality’ a benefit by a party that is not directly involved in the transaction. Parents are paying an extra cost which we all benefit from.
Well the first is the claim by Ed Balls that the tax is “trying to socially engineer family life through a tax policy… [it] is hugely expensive and unfair.”. An economist would claim however that “Ahhhh! All taxes change peoples behaviour” and The Working Families Tax Credit increased the benefits available to single mothers who sought employment thus penalising women who stayed home to look after their children or who remained with their husbands.(the latter claim being VERY VERY contentious)
The second claim is that the credits “could stigmatise children” whose parents are not married. Again many feel that this is false by providing tax incentives for marriage it is difficult to see how it would “stigmatise” the children of the unmarried, any more than providing incentives for single parenthood would “stigmatise” those whose parents live together.
There is of course one issue with the above arguments, they all involve children, supporting and subsidising ALL married couples regardless of their parental status, in effect , penalises everyone else. So should the ‘tax break’ be administered to just married couples with children? I don’t know? Of course, nothing will replace a loving, stable, family; interested in their child’s upbringing and this is something that no taxbreak can fix.
January 25th, 2010 at 9:24 am
Why on earth should i as a single person pay extra tax for married couples. They already share the heating and lighting in the home plus the TV licence and the family car. If i find out there are further tax breaks for married couples then i will squirrel away a similar amount from the tax man
January 27th, 2010 at 1:17 pm
Being married is important – I always find it funny when those who are unable to find someone who would want to be with them for a sustained period of time complain about the benefits married couples get. The cream rises to the top, those singletons will be end up as the dregs! Great post!
February 6th, 2010 at 2:47 pm
Saw your blog bookmarked on Delicious. I love your site.
February 8th, 2010 at 2:36 pm
Tax breaks for married couples may appear to some to have benfits. However, quite apart from the potential problems discussed in the post, what about the “innocent” party in a marital split. For the purposes of argument, if we assume that it is right that married couplesare entitled to tax breaks, is it right that one party should lose any such tax break because of the infidelty/cruelty/intolerable behaviour of his/her spouse?
March 27th, 2010 at 11:39 am
If you are going to use the tax code as a device for engineering social behaviour, you need to be prepared for the fall out. At what point do you say that someone can’t be married? Two people of mixed race? Two people of the same sex? Two people that have the same parents? Maybe someone and their pet? When government starts social engineering it becomes an extremly slippery slope that has countless unintended consequences.
March 31st, 2010 at 8:40 pm
Definitely think its a good idea to give tax breaks to promote marriage. In Russia they go a lot further than this. They give parents something ridiculous like $1000 for every kid that is born to boost the population growth. Its seems that in UK there’s more incentive to stay single. As soon as you get married, some benefits are taken away from you. For example, it is a lot more thrifty to remain a single parent.
March 31st, 2010 at 8:43 pm
Definitely think its a good idea to give tax breaks to promote marriage. In Russia they go a lot further than this. They give parents something ridiculous like $1000 for every kid that is born to boost the population growth. Its seems that in UK there’s more incentive to stay single. As soon as you get married, some benefits are taken away from you. For example, it is a lot more thrifty to remain a single parent.
April 4th, 2010 at 9:17 pm
Your closing remarks regarding the notion that nothing will replace a loving, stable, family still seems to make the most sense. However, the question concerns equity of alternatives and with that I don’t suppose any legislation will appease everyone. When all else fails, please do look after the children, but I agree that the incentives should lean toward marriage and the potential for stability and idealistic normalcy.
December 23rd, 2012 at 6:39 am
no its bs, the government shouldn’t be dictating morality, theres pros and cons to getting married, the government should let people decide for themselves if they want to marry or not and therefore should not give any special treatment to anybody. justice should be blind…, taxes should be based on individual merit, taxing married couples harkens back to the days when men earned most of the money and women quit working after marrige, what sense did it make taxing a couple as seperate entities when the man made most of the money and the woman made spending money for herself. Now a’days with more women working than men, the govn’t needs to cut the sherade and stop recognizing marrige as anything but a contract between two consenting, seperate individuals. Taxes should be individualized its the only fair way forward…
October 13th, 2014 at 4:30 am
There are only a few financial advantages for married couples, like better pensions and lower risk insurance and that is why less income tax is such a positive thought. Married couples married couples, both get taxed if both are employed. If the wife stays at home, the one income is definitely not enough to support a family of four. Rather that giving married couples a higher tax allowance, the marriage transferrable allowance will allow the couple to transfer a certain percentage of their personal income tax allowance to their partner.
October 14th, 2014 at 5:35 pm
Giving a tax break to married couples may have its benefits. The proposed idea, however, also brings about substantial problems which the government must take into consideration.
Such legislation would be a breeding ground for tax evasion. Taking a single couple into consideration, the the cut wouldn’t be so significant, but on a large scale the effects would have a tremendous impact on a country’s wellbeing. In addition, someone would have to pay for the deficit, and it is highly unlikely that the majority of single individuals would be willing to pay for another’s lifestyle. Apart from the economical consequences, the cut would also bring in its fair share of moral issues; people staying in marriages because they would not have the financial means to sustain themselves individually, which has a larger effect on the children – being raised in a miserable home – to the detriment of society at large.
The tax rebate for married couples is a double – edged sword. What must be considered is whether or not the benefit exceeds the cost, at large.