Tax deductions, marriage, and children

This is mostly for the libertarians among us.

Governments have a few basic duties including:

  • preserving natural rights through police and military
  • provide limited public goods (roads, harbors, parks, etc.)
  • punishing bad behavior
  • encouraging good behavior

The police and military is pretty obvious – preventing invasion by the Huns and shooting drug lords is a clear cut appropriate use of public funds.  Goods that by nature benefit the public (harbors for trade, some roads, some rail, GPS, etc) that all people can use are also an appropriate use of public funds.  It is also pretty clear that if there is a swindler running around then one appropriate role of government is to punish that swindler.  Even libertarians will concede that the government ought to enforce contracts – that is if someone lies they can have their property confiscated by the government or be thrown into jail.  This punishes bad behavior (jail) while encouraging good behavior (honesty).

Let’s consider for a moment what the most valuable long term asset of any nation is.  Not oil, not coal, not uranium, not military, not land.  The most valuable long term asset of any nation is the next generation.  Or in another way – lets consider if everybody decided to stop having children for the next 20 years.  What happens when there is nobody to farm, nobody to mine coal, nobody to repave roads, and nobody to prevent invasion?  Every society continues through the birth and rearing of the next generation.  If the greatest asset of our nation is our next generation, then proper safeguarding and management of that asset really ought to deserve special protection and legal treatment.

For a moment consider a public park*.  Bill goes to the park every week and picks up trash, removes weeds, and tries to keep the rocks of the rock garden in place.  In the spring he plants wild flowers, and in the fall he trims some of the trees.  Joe goes to the same park dumps his trash in the middle of the field, and sets it on fire.  Should these two people be treated the same either by the HOA or the legal system?  Or is the one who cares for the public asset deserving of extra privileges?

Now lets go back to children.  Married couples raise children that are more beneficial to society by every metric I have ever read about including:

  • High school graduation rate
  • Drug usage
  • Likelihood of going to prison
  • Likelihood of being in gangs
  • Likelihood of having children out of wedlock
  • Lifetime earnings
  • Likelihood of attending college
  • Likelihood of being on welfare
  • Suicide rate
  • Obesity rate

These patterns hold up after controlling for maternal education level, household income, mother’s age at first birth, and race.  I am sure the list is longer, but that is all I can remember off the top of my head.  So, married couples raising children together provide vast societal benefits compared to single parents, or cohabitating non-married couples.  The absolute best rate of return our society can have for our current tax structure is to stop taxing married couples with children so much.  That is – the cost of appropriately rearing children is very high.  The value of the next Bill Gates or Andrew Carnegie is also very high.  If the marginal cost of raising Bill Gates is lowered and the marginal cost of raising the meth dealer down the street is higher we will get more of the former and fewer of the latter.

Our society should recognize the relationships that form its backbone (long term exclusive heterosexual relationships largely centered around raising children – marriage) with the strongest possible incentives.  The current tax breaks pale in comparison to the incentives for single motherhood (medicaid, WIC, sCHIP, food stamps, section 8 housing vouchers, subsidy structure for new health benefits, etc).  Not only should our government not get out of incentivizing marriage, it should increase its incentives.  For example – welfare benefits should be limited to married couples with a few narrow exceptions:

  • death
  • abuse (substance, sexual, physical)
  • a 6 month “transition” period in case of divorce (benefits continue to be available for 6 months, but then stop unless you are remarried)

I would be more accepting of the “get government out of marriage” if it were also couple with a government limited to 5% of GDP with ~3%  of GDP going to protection services (fire, police, military).  This would provide the proper incentive to marry since children born out of wedlock would carry their own disincentive.  That disincentive was strong enough for most of humanity’s existence to limit the numbers of out-of-wedlock births (and encourage “shotgun” weddings).  Without such a limit married couples (who by nature are in higher tax brackets) have to pay the taxes used to cover everyone’s medical bills and also bear the cost of raising the next generation of doctors (since by in large single mothers don’t).  You need to come up with a viable method to end Medi-everything and Social Security and all other safety net programs before it would be justified to remove any of the paltry marriage incentives.

*Note: I am well aware that children are not a public good.  However, the example does hold that those who treat valuable assets well should be afforded benefits while those who cause damage for everyone should not).

[Updated to recognize that humanity without a nanny state naturally disincentivizes single parenthood and to include our new stupid health subsidy structure as an additional marriage penalty with its greatest effect on the poor]