Stay married longer, pay less tax. Good idea?

The evening debate had just finished when the Sunday Times social affairs editor walked up to me.

OK Harry, let’s see if you’d make a good journalist. Did you spot the story?”

I had. Alas, so did the Times, Telegraph and Mail correspondents in the room, all of whom filed the story for their Saturday papers, thereby pipping the Sunday Times (who ran their main story a week earlier)!

At our Marriage Foundation debate on whether cohabiting couples should have the same rights as married couples when they split up, my colleague Sir Paul Coleridge – prompted by the inimitable John Humphrys as the evening’s moderator – had suggested married couples should be rewarded by lower taxes if they stayed married. After ridiculing the current proposed married tax break as ‘small scale‘, he told the throng of journalists:

We need tax incentives and they would have a real effect on the way people behave. They would also reflect the reality that people who stay together do not cost the State much, whereas couples who split up cost the State an absolute fortune. A milestone tax break could be staged so newlyweds would have minor advantages over unmarried couples. But there could be increments to increase the tax allowances at five and ten years, possibly linked to the arrival of children. By the time of a silver wedding anniversary after 25 years, a married couple would expect to enjoy a major income boost under the scheme compared to people their age who never married.”

Is this a good idea?

You won’t be surprised to hear that I think there should be a substantial tax advantage for married couples. Seven out of ten parents who are married or who get married also stay together. Just two out of ten parents who never marry stay together. In any other field of public policy – health, safety, education – this kind of huge gap in outcomes would provoke government into all sorts of policies to promote, prevent, reduce, penalise, tax, reward. You name it, they’d do it.

Although most politicians are willing to admit that family breakdown is bad news, inexplicably few are willing to acknowledge the trend away from marriage as the main driver. It’s all down to income or education of the kind of people who commit anyway, so they say. This makes an odd excuse for the doubling of family breakdown in the last 30 years. It’s not as if income and education have collapsed, nor that the stock of people able to commit has somehow mysteriously reduced. No, the issue with commitment is about the decision to commit, not the kind of person who commits.

So would a delayed tax break for those who stay together encourage commitment more than an immediate tax break for all married couples? I’m not yet sure.

Here are some of the issues I’d want to explore further.

  • Would either of these rewards or breaks – or whatever you like to call them – help increase the overall stock of commitment? I think it would. Rewards undoubtedly influence behaviour. I see no reason why extra money wouldn’t lead to more marriages. For those extra couples tempted to sign on the dotted line, I suspect their commitment would also increase. The very act of marriage would encourage them to think and talk about their long term future. It would make their commitment clearer, less ambiguous and more intentional. This is the essence of dedication: the decision to be a couple with a future.
  • Would a delayed reward for time married have a bigger long term impact than an immediate reward simply for being married? I suspect it might, but only in the long run. This might make it more politically unpalatable than it already is.
  • Would a delayed reward cost a lot more, in order to be meaningful, than an immediate tax break? We’ve already suggested that a marriage tax break needs to go some way toward competing with the ‘couple penalty’. In other words, it needs to be in the order of thousands and not hundreds. It would also have to be limited to married mothers with their first child aged under three, perhaps by simply adding it to child benefit in order to make it independent of income. Given that delayed rewards will apply for a lot longer than three years, the Treasury will see this as an ever increasing cost to them rather than a cut in tax for couples.

Whichever route taken – delayed or immediate – the key thing is that a reward would encourage couples to stay together longer and possibly entice more couples to get married in the first place. If the upshot is an increase in overall stability, the biggest benefit to the state – never mind the children who get to spend their Christmases with both parents rather than one – would be the reduced need to pay out benefits to support couples who then became lone parents.

Couples who stay together cost the state little. Couples who split up cost the state a fortune.

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