Marriage is already tough enough; fewer and fewer Americans are even attempting it, and while divorce rates are down slightly, that may only be a temporary side effect of the pandemic. Yet the evidence is clear—marriage is the not-so-secret ingredient for success in life, for men, women and especially for children.
But marriage is about to become even harder. Congress’ massive reconciliation bill, clocking in at more than $5 trillion, is riddled with provisions that undermine society’s most fundamental institution—the family. From multiple marriage penalties to taxes that will prevent parents from passing businesses and farms down to their children, to lower household incomes paired with higher prices (financial stress is still the primary cause of divorce), the bill makes marriage more expensive and even cost-prohibitive in some cases.
We’ve long known that fiscal policies can have a big effect on marriage rates. Chief among these policies are welfare programs.
“A safety net marginally reduces the costs of single parenthood, nonmarital childbearing, and divorce,” a U.S. Congress Joint Economic Committee report said in 2020. “It also can create a significant tax on marriage because the addition of a spouse with income typically reduces safety net benefits, and if he has only modest earnings or unsteady employment, the trade-off may not be worthwhile.”
But Congress and the Biden administration are doubling down on such policies. If the reconciliation bill passes, marriage will be even less advantageous to couples and to children.
Let’s look at a few examples of how.
First, multiple marriage penalties are found in the bill. A marriage penalty occurs when tax liability for a couple increases after the wedding because of differences in tax bracket thresholds, deduction limitations, and other aspects of the tax code. Some couples could find nearly all of one spouse’s income now subject to a higher tax rate. Marriage penalties in the proposed structure can total $130,200 annually in higher taxes.
Estate taxes are another way the reconciliation bill chips away at a family’s opportunities. Family businesses and family farms will be severely penalized upon the death of a parent. The federal estate tax, also known as the death tax, currently applies only to estates valued over $11.7 million, with the top marginal rate at 40%. Democrats would lower the exemption by $8.2 million and increase the top marginal rate to 65% while also introducing a tax on unrealized capital gains. The total tax rate on an estate can easily climb over 70%, even on relatively modest estates.
One former Democratic senator says hiking the estate tax is a mistake. “I’m trying to sound the alarm, both economically and politically, for Democrats that this is not a path to walk,” says Heidi Heitcamp of North Dakota. “The disruption that it would create for small family business and farmers and family assets is not worth the pain.”
The bill will also result in fewer jobs and lower household incomes. Our analysis shows that the “Build Back Better” plan (as the Democrats are now euphemistically calling it) will reduce employment by the equivalent of 5.3 million full-time jobs.
And it will reduce incomes. Despite the Biden administration’s repeated promise to not raise taxes on those earning less than $400,000 a year, there are many implicit and even explicit tax increases on that group. Aside from the bottom quintile, those who earn under roughly $20,000 a year, all income groups will see their after-tax incomes decline as a result of the Democrats’ tax agenda, through a combination of direct and indirect taxation, as well as reduced income from lower economic growth.
Combined with runaway inflation due to the Democrats’ love of modern monetary theory, the pressures on married couples and other families will only intensify.
As historian Will Durant pointed out, “The family is the nucleus of civilization.” It’s our most basic institution. We can’t build back better on top of its ruins. Congress must reject the reconciliation bill.