Forget The Tax Divorce, How About The Benefits Divorce?

Glenn Reynolds linked to a piece in The Fiscal Times that talks about the continuing marriage penalty in the tax code, and how the rate increase on “wealthy” would hit dual earner especially hard in places where both the cost of living and salaries are high.

As noted by a commenter there, the tax divorce is child’s play compared to the possibility of a benefits divorce for single income families. Consider a study from Pennsylvania Secretary of Public Welfare Gary Alexander that found that a single mom is better off earning $29,000 with $57,327 in net income & benefits than to earn gross income of $69,000 with net income and benefits of $57,045.

071212welfare

in a previous ZeroHedge piece they calculated that a “one-parent family of three making $14,500 a year (minimum wage) has more disposable income than a family making $60,000 a year.

Now some have suggested that most people wouldn’t willingly move from a higher paying job to a minimum wage job, because it’s very possible that the minimum wage job would be unpleasant. In the case of a married couple with a single earner this objection becomes moot because the non-wage earning spouse doesn’t even have to work to start collecting these benefits.

Here”s the “plan:”

The wage earner keeps the house, the non-wage earner gets support. The support that the non-earner receives is made low enough that the non-earner is technically eligible for all the welfare programs noted in the graphic below from the second linked piece:

Money Earned

The wage earning spouse pays for big-ticket things, at least as far as taxes go. The beauty of the “benefits divorce” is that you still live together and pay for things as you did before, you just take a portion of your income and call it alimony and child support. You would have to have two checking accounts, but mostly it’s just moving money around.

Another benefit to the wage earner is that they would be able to scale back on their employer-provided healthcare since they would no longer need family coverage. With the government-funded Medicare coverage for the non-wage earner and children the total family health care costs would probably go down substantially. Throw in food stamps, school lunches, tax credits, etc. and the net benefits to the non-wage earning parent really add up.

If the single wage earner family made $100,000/yr (with no or negative net benefits), after a benefits divorce they’d still have the same $100,000 (collectively), but pick up an extra $25,000 to $40,000 a year in government benefits simply by being divorced.

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  • Commander_Chico

    Interesting, but the table does not show healthcare insurance premiums for those earning too much for Medicaid.

  • mikegiles

    Can they still live together, and collect benefits?

  • sabbahillel

    There are people who regard marriage as a totally religious function. They could get married and let the government treat them as “single”. This has occurred many times within the past centuries. For example, the Austro-Hungarian empire passed a law that only the eldest son in Jewish families could marry. The Jews married according to the religious law but just did not register the marriage with the government. The same thing occurred in Tsarist Russia. That is why the children of brothers would have different family names on the government census.

    The current regime will force people to ignore the government definition of “marriage” and continue to teach everyone that government regulations are to be ignored.

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