Eagle Forum Legislative Alerts

Tuesday, November 08, 2011

Incentives for marriage matter

Phyllis's column attacked tax proposals that do not have a benefit for married couples, and Jennifer Lata wrote a letter to the editor of a newspaper attacking it:
All political commentary aside, the assertion that the institution of marriage will be impacted by a flat tax, or any change to the tax benefits of married filing jointly, is beyond belief. ... Any couple that marries for the sole purpose of a better tax status will have more to worry about than their income tax rate.
This letter demonstrates a simple error. One of the most basic principle of economics is that people respond to incentives. If you make something cheaper, people will do it more. If more expensive, people will do it less.

If a grocery store raises the price of its apples, it will sell less. This is true even tho some people are insensitive to the price of apples. If you go to the store determine to buy an apple, then a few cents will probably not alter your decision. But it will affect others.

The tax code is filled with incentives of various sorts. We have home mortgage deductions to give people incentives to buy homes and to borrow against them. More people have mortgages as a result.

Reducing the incentives for marriage will reduce marriages. It is not the case that everyone gets married anyway. About 40% of American births are to unwed moms.

If anyone discovers an incentive that does not affect people, that would be economic news.

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