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July 09, 2007

Marriage and Tax

Well, yes, it's all very well stating that marriage is the best place to raise children, that a committed couple is better than single parenthood, that married couples stay together more often (or longer) than those cohabiting but.....

If the CSJ advocates unequivocally a transferable tax allowance for married couples, and Mr Cameron stands by this recommendation (as he signalled yesterday that he would), then the debate about Britain's future and its most serious problems will be transformed.

We do rather come up against a problem here. Certainly, people respond to incentives: but often not all that much. Such a transferable tax allowance will make a post tax difference of how much in income? £500 a year? £ 2,000 a year? (I have absolutely no idea myself.) This might well move some of those who are committed but unmarried over the line to being committed and married. But does anyone really think that such paltry rewards will move that many from being uncommitted to being married?

Again, some perhaps, but not many.

There is another argument as well of course: that all of those millions of already married couples will gain from such an arrangement. Politically, this is a great benefit: many people will gain from this change. Economically, it's a huge problem. Many people will gain without changing their behaviours at all. This isn't what we're trying to do at all. We want to target whatever money we have at encouraging people who otherwise would not be married into it, not reward those who would be anyway (this is, of course, assuming that the basic identification of marriage as a good thing is in fact correct).

Whatever else this might be it's a hugely expensive way of changing the behaviour of a few at the margin. But then millions will benefit without changing their behaviour, which is what makes it good politics and bad economics.

As it happens I'm in favour of transferable tax allowances, but don't see why they should be restricted to married couples. Why not siblings? Friends living together? A carer and caree?

July 9, 2007 in Politics | Permalink


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If anyone were serious about encouraging marriage, they would prohibit confiscation-by-divorce.

Posted by: dearieme | Jul 9, 2007 9:37:54 AM

"That all of those millions of already married couples will gain from such an arrangement. Politically, this is a great benefit: many people will gain from this change"

How is this an objection? Those of us married and hit by the weakening of the married couple's allowance and then hit by its abolition were those precisely disadvantaged by the changes now (hopefully) to be reversed.

This is like complaining that, after years of tax increases in the higher rates, only the rich benefit from the first signs of a reduction.

Transferable allowances in stable relationships may well be welcome but first things first. Marriage as the bedrock of stable family life, and thus a healthy society, needs reinforcement of all sorts. Tax allowances, only one weapon, are an important first step.

Posted by: geoffh | Jul 9, 2007 10:10:30 AM

What Dearime says.

a Citizen's Income scheme would sort it out much better (assuming that it is pitched at the amount equal to tax-free personal allowance x flat tax rate).

The flaw with what the Tories say is that if married people pay less tax, then single people will pay more ... but the real villains of the piece are single mothers, half of whom don't pay tax anyway. So this largely punishes entirely innocent single people without children, which strikes me as a perfectly valid and inoffensive lifestyle choice.

Posted by: Mark Wadsworth | Jul 9, 2007 10:23:26 AM

Tim, I don't agree with your point about it being disadvantegous that the already-married are rewarded despite no change in their behaviour. We want them to stay married and thus they are rewarded for it. Couples are thus encouraged to marry and to reamin married.

Posted by: Philip Thomas | Jul 9, 2007 11:07:59 AM

I would be very tempted to get married if this allowance was brought back in - our income distribution is rather skewed and it is costing a lot in tax paid by one half and not the other.

Posted by: sanbikinoraion | Jul 9, 2007 12:57:00 PM

So the government says it will rob me slightly less if I sign away half my assets?

Somehow I don't think I'll go for this one.

Get rid of income tax is the wisest option.

Posted by: AntiCitizenOne | Jul 9, 2007 5:48:07 PM

Sorry Mark, but with the way the Pension Ponzi scheme is set up, single people without children are actually parasites.

Your taxes pay for your parents pension, and your children's taxes pay for yours.

If you don't have children then you are parasiting upon those who do have children. Paying more tax to compensate sounds eminently sensible to me.

But of course I would say that - I have 3 children. :-)

Posted by: David B. Wildgoose | Jul 9, 2007 6:48:23 PM

Unfortunately, the only people to which this is going to have any impact are cohabiting, stable, non-married couples with significantly differing incomes.

i.e. virtually no-one and especially not anyone who is likely to be the progenitor of the next batch of neds.

The analysis is absolutely correct (marriage is the best environment for the raising of children) but the solution is cack-handed to a ridiculous degree.

Until you tackle the welfare state, you will have no effect whatsoever on anything.

Posted by: Cleanthes | Jul 10, 2007 5:39:06 PM

And another thing. Anyone for whom the tax advantages are the tipping point in the decision to get married really shouldn't be.

Posted by: Cleanthes | Jul 10, 2007 5:41:42 PM