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There is no evidence the marriage tax break will work

Next stop: tax break? Phil Hawksworth

Restoring the tax break for married couples has long been a Conservative Party commitment, and one they now intend to pursue this autumn. The outgoing Chief Rabbi, Lord Sacks, has now – from a non-party political standpoint – added his voice to the idea in order to “support” marriage.

The key questions are whether this tax break would be effective in encouraging couples to marry rather than cohabit and if so, whether it would be right to introduce the measure.

Would more people marry?

At present, only married couples (and civil partners) where one spouse was born before 6 April 1935 are eligible to receive an additional tax allowance, and this is limited to 10% of the usual personal allowance. Its value is therefore minimal, although not worthless, particularly given the low incomes of pensioners.

But a tax allowance for all married couples and civil partners would affect around 22m people. It is hard to see how the government could afford to fund an allowance for all these couples pitched at a level that would make a significant difference to those thinking of marrying.

Even if they could do so, there is no evidence that couples would actually respond rationally to the allowance and marry when they would otherwise avoid it. Research into couples’ motivations for deciding whether to marry or cohabit suggests that these have more to do with how solidly committed to each other they feel, and whether they want to make that commitment public.

But it also shows that many couples don’t agree on whether to marry – one partner might wish to do so, but the other is resistant. There are lots of factors that might discourage someone from deciding to marry such as uncertainty about their partner, reluctance to commit indefinitely and potentially for life, satisfaction with the current position, and so on. It is unlikely these issues would be outweighed by a tax break unless it were really high.

And if more couples whose relationship is not sufficiently secure did decide to marry because of the tax incentive this would still not necessarily be a good thing. If these couples then find that their relationship breaks down, all that would have been accomplished is a reversal of the reduction in the divorce rate we have seen over the past decade.

Family friendly?

It is frequently argued that marriage provides a better and more stable setting in which to bring up children and should therefore be encouraged. There is some support for the claim that cohabitation is more unstable than marriage, but much of this is due to cohabitation being used as a trial period for younger couples deciding whether to marry – and deciding to break up.

The evidence that marriage is better for children is also disputed, with research finding that when socio-economic status and income, ethnicity, education and self-reported quality of the relationship are taken into account, the benefits ascribed to marriage disappear.

Advocates of the tax break have claimed this shows that marriage is a class issue: marriage rates are higher among the better off, so providing financial support for marriage would particularly benefit those on lower incomes, which would in turn benefit their children.

But if this is so, then we are driven back to requiring the tax allowance to be substantial if it is to have an impact and we again run the risk of increasing the divorce rate if all we do is dangle a carrot in front of couples whose relationships cannot, in fact, last the course.

Symbolic support

It would be possible to provide a more generous allowance only to those on low incomes or with children (possibly limited to those under the age when some parents would prefer to stay at home to look after them) and it will be interesting to see if this will be the policy the Conservatives actually put forward.

Whatever eligibility criteria are chosen, it seems likely that the tax allowance will be presented as a symbolic affirmation of the government’s support for marriage as an institution.

But tax is a system for raising revenue for government. It is fixed according to what the government needs, how much the taxpayer can reasonably afford and what the Inland Revenue can efficiently do to gather it in. It should not be used to favour particular lifestyle choices, particularly where there is no evidence that it would actually influence those choices.

What’s the alternative?

If government (of any political hue) is serious about supporting families financially – and particularly families with children – then tax revenue should be directed towards helping parents meet child care costs, which are the highest in Europe.

If this is felt to discriminate against those who wish to stay at home, or against in-family care such as that given by grandparents, then it would be perfectly possible to pay the equivalent amount to anyone caring for children. The objective would be to offer meaningful support to those bringing up children, rather than to make an empty gesture seeking – ineffectually - to shore up marriage.

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