Reforming California’s Subsidized Childcare Toward Marriage Neutrality

EXECUTIVE SUMMARY

America’s safety net has alleviated severe poverty but comes with unintended consequences. For the most part, program eligibility is determined by household income and makes no adjustment for households where two married adults are both breadwinners. Said differently, households, where only one adult’s income counts toward eligibility, receive large subsidies, but households where two adults’ incomes count toward eligibility often receive no benefits.

On paper, this bias is against two working adults who are both biological parents of the children covered under the program—because both adult incomes count toward eligibility if they are both biological parents. Meanwhile, the income of a live-in boyfriend goes uncounted toward eligibility. In practice, these rules stack against married parents more than unmarried, cohabiting biological parents. This is because of trends in how families report cohabitation, relative to authorities’ ability to track marriage.

Significant evidence exists that the safety net’s anti-marriage bias impacts marriage rates among the poor and working class—and the poor and working class is where America’s decline in marriage over the last fifty years has been almost entirely concentrated. Worrying about the large decline in marriage among Americans, particularly those at the bottom half of the income scale, isn’t moralizing. Marriage plays a significant role in reducing poverty and increasing social mobility, especially for children.

America’s safety net programs also have another undesirable quality. Quite often, programs end abruptly if a recipient family’s household income increases above the eligibility threshold. When the benefit lost is large, as is particularly the case with the childcare assistance program, this places a significant burden on poor and working families and amounts to a tax on income of well over 100 percent as the value of lost benefits exceeds any additional earned income.

Commonsense reform involves three components: First, end the test that doesn’t count an unrelated adult’s income (such as a live-in boyfriend) toward program eligibility but does count the income of a biological father living with his children. Second, raise the income eligibility threshold for working class married couples to—just as in the federal tax code—account for the fact that married families contain two adults with earnings power. Finally, reduce the burden created by an immediate drop-off in benefits if a household breaches the existing income-eligibility threshold by creating a phase-out period for program eligibility.

California’s subsidized childcare program is ideal for these kinds of reforms. The program has by far the largest marriage penalties, largely because of the high cost of childcare generally and the high relative cost of childcare in California specifically. Subsidized childcare is also inherently pro-work. Further, these reforms won’t reduce benefits for any existing beneficiaries, and reform can allow families flexibility by not requiring both adults to work full-time, and only covering childcare for the hours worked by the adult with a part-time job.

Aligning California’s childcare subsidy toward marriage neutrality will reduce the marriage penalty by around $10,000 per year, depending on the family type and the incomes of each adult. This amounts to around 10 percent of many eligible families’ pre-tax household income. Overall, this legislative change pivots a large part of federal and state expenditures away from maintaining a large marriage penalty and toward marriage neutrality. Because of the high social and personal costs of marriage breakdown, especially among the poor and working-class—measured not just in immediate poverty but in lost economic opportunity and increased incidence of crime—reform is properly seen as a long-term investment in California’s working class families and children.

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