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1. Tax SimplificationThe current income tax system has long been recognized as unnecessarily complex.[218] Such complexity harms the economy because taxpayers, their attorneys, and the court system must wrestle with complex tax rules.[219] One of the causes of tax complication is the differing treatment of items that should have the same treatment. If preferential treatment is granted to one item over another, taxpayers would naturally attempt to identify their transactions with the lower tax option.
The distinction between child support and alimony is the cause for much of the complexity.[220] If alimony and child support payments are treated the same, most of § 71 definitional rules would be obsolete.[221] The current proposal provides unambiguous rules that would benefit the tax system, taxpayers, their attorneys, and the courts.[222] In addition, the proposal would eliminate traps for the unwary.[223] Under § 71(c)(2), child support payments take priority over alimony payments. Thus, if a taxpayer makes a payment that is less than the combined alimony/child support that he owes, he has an incentive to adjust the child support portion downward and claim a higher alimony payment deduction.[224] For the payee taxpayer the reverse is true. Therefore, the government is at the mercy of taxpayers classifying payments as alimony or as child support. The revisions to § 71 eliminates the ambiguous code language that instigates this problem.[225] In short, a deduction/inclusion rule would terminate taxpayer’s manipulation of the alimony/child support payment rules.
2. An Incentive to PayProviding a financial incentive in the form of a tax deduction will encourage deadbeat dads to pay their child support obligations.[226] Yet, it also creates an emotional incentive. The government’s refusal to allow the father to deduct child support payments reinforces the feeling that his contributions are meaningless.[227] If a father can deduct child support payments, he will feel that his contributions are valuable and necessary for his children.[228] It is easy to speculate that over time this would increase societal pressure on men to pay their child support obligation and create an environment where payments are consistently made.
It should be noted that the deduction for child support rests on stronger policy grounds than the deduction for alimony payments.[229] The high income tax rates that set the stage for alimony payment deductions have been lowered.[230] Still, the deduction persists. A deduction for child support payments should achieve the important policy of providing more money to custodial parents without unduly sacrificing revenue, and might have the ancillary benefits of promoting amicable relations between divorced couples while increasing contact between parent and child.
3. Taxing the Right PartyClassifying child support payments as income to the recipient is necessary. As it stands, the recipient obtains the funds tax-free and enjoys all available child tax deductions and credits. Under assignment of income principles, the payor and payee are “arms’ length economic antagonists.”[231] By not recognizing this, the IRC fails to recognize the economic implications of marriage and divorce.[232]
The problem might lie in viewing child support payments as solely a “personal, living or family expense.”[233] As tautological as it might be, both child support and alimony payments are personal expenses because they are not business expenses under § 162 or expenses incurred in the production of income.[234] Moreover, neither case law, nor the legislative histories of §§ 162, 212 and 262 adequately define “personal, living or family expenses.”[235] Still, there are a number of code sections that provide deductions for personal expenses,[236] including alimony payments, despite the lack of any economic difference between alimony and child support.[237] The rationale supporting the distinction is that while the marital relationship has ended, the non-custodial parent’s relationship with his children does not terminate.[238]
Absent the drafting of a deduction via “legislative grace,”[239] there is another way to view the income-deduction conundrum. Currently, child support payments are not recognized as taxable income to the payee.[240] In light of the provision of § 71 that excludes child support payments from the payee’s gross income because the payor may not take a deduction under § 215,[241] the receipt of child support should be considered a taxable event. Once a child support payment is made, the payor has little dominion or control over the payment. He could hope that the money goes toward supporting his child, but this might not always be the case. Thus, an argument can be made that, pursuant to § 61, the recipient of support payments has accession to wealth and, therefore, income.[242]
V. ConclusionThe deadbeat dad phenomenon causes both short-term and long-term social and economic problems. In the short term, it is one of the causes of childhood poverty. In the long term, it denies economic opportunities to children and deprives them of developing a bond with their fathers. As argued above, a strong bond with parents is greatly beneficial to children. As a society, we have advanced from ignoring the problem to attacking it, and neither approach has worked. There are numerous reasons for this failure.
We are faced with a quandary that we must resolve. It is time for a new approach. This new approach is the offering of a carrot to the deadbeat dad. Along with the stick that we adopted in the 1980s, it is our best hope to erase the deadbeat dad from our lexicon.
In this Article, I have argued that the current governmental approach to addressing the deadbeat dad problem is simply not working because the problem is worsening. The Article has provided ample evidence of this worsening situation. There are many reasons why a dad would refuse to pay his child support obligations, but the root cause of the problem is that the typical deadbeat dad feels that he has gotten the raw end of the deal. That is, he is bearing the economic burden of child-rearing while getting few of the benefits (i.e., actively participating in child-rearing). Although some may argue that this feeling is not well-grounded and is only a perception, as far as the deadbeat dad is concerned, this is reality. If we want to change the current situation, we must change the perception of the deadbeat dad.
This Article provides a three-prong approach to solving the problem: (1) set realistic child support payments, (2) provide a deduction for the payor of child support payments (payee will take payment into income), and (3) retain the penalties for failing to pay child support. The purpose of the first two prongs of this approach is to create incentives for the deadbeat dad to pay his child support obligations because, often, he does not pay because he cannot afford to pay. Setting realistic child support payments would go a long way to addressing ability to pay. States such as Maryland have adopted a shared income model where both parents are responsible for the support of their children. In addition to making payments by the non-custodial parent more affordable, such an approach is also seen as more equitable as it puts the burden on both parents. Coupled with the added deduction incentive, my proposal would create an environment where there will be little excuse for not paying child support obligations and, thus, societal pressure on the deadbeat dad to pay his obligations will increase. The proposal recognizes that the proposed incentives will not work in all cases; hence, the current penalties for failing to pay child support obligations must be retained.
To be sure, some will particularly oppose the second part of this proposal on many grounds but, as argued in this paper, the benefits of the deduction/inclusion approach outweigh its costs. A particularly potent argument against the deduction/inclusion approach is that it will hurt mothers because the tax burden will be shifted to them. This argument, however, fails to note that mothers that need the support payments, but do not receive them, will see an economic benefit by receiving regular payments regardless of the potential tax liability. A by-product of increased child support payments will be increased visitations by dad and increased psychological benefits for the children.
Finally, this Article provides proposed language to § 71 that would result in simplification of the section and easier administration by the IRS. This proposed language should be embraced by tax simplification advocates. Tax simplification would be achieved by the proposed changes giving similar treatment to both alimony and child support payments. Hence, § 71(c)(2) would be entirely eliminated because the concern of disguising child support payments as alimony payments would no longer exist. Moreover, child support payment would be defined according to state law with the result that the complicated rules under § 71(f) to guard against disguising non-deductible property settlements as deductible alimony payments would not spill over to the child support area, since state law zealously patrols the definition of child support.
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*Associate Professor, FAMU College of Law, Orlando, Florida. Prior to teaching Prof. Mombrun was an Assistant Branch Chief in the National Office of the IRS in Washington, D.C., specializing in corporate taxation. Prof. Mombrun is co-author of A Complete Introduction to Corporate Taxation (Carolina Academic Press 2006). Prof. Mombrun has also published a number of articles appearing in the Ohio Northern Law Review, The Tax Lawyer, The Journal of Law and Education, The Journal of Corporate Taxation, Tax Notes and other journals.
[1]. See Judge Orders Bobby Brown Arrested, USA Today, Oct. 2, 2006, click here [hereinafter Brown Arrested].
[2]. See Danny Adlerman & Kim Adlerman, Songs for America’s Children (2002).
[3]. Carole A. Chambers, Child Support: How To Get What Your Child Needs and Deserves 11 (1991) (quoting Justice Richard J. Huttner, New York State Supreme Court) [hereinafter Carole Chambers]. As the title of the book suggests, this is a self-help book for the custodial parent looking to get child support from the non-custodial parent. The book has some very good suggestions for the custodial parent, such as reminders that she is to put her feelings aside and focus on her children’s needs. However, some of the recommendations, such as when determining how much your child needs “this is not the time to underestimate expenses,” can be misinterpreted. See id. at 20-21; see also Martha Minow, How Should We Think About Child Support Obligations?, in Fathers Under Fire: The Revolution in Child Support Enforcement 302, 305 (Garfinkel et al. eds., 1998). Minow summarizes the duty of parents by quoting William Blackstone:
The duty of parents to provide for the maintenance of their children, is a principle of natural law; an obligation . . . laid on them not only by nature herself but by their own proper act, in bringing them into the world; for they would be in the highest manner injurious to their issue; if they only gave their children life that they might afterwards see them perish.
Id.
[4]. See Andrew Taylor, Senate Approves $70 Billion For War Spending, S.F. Chron., Sept. 29, 2006, available at click here
[5]. Carole Chambers, supra note 3, at 17 (claiming an arrearage of $4 billion annually as of 1984).
[6]. Id.
[7]. See William S. Comanor, Child Support Payments: A Review of Current Policies, in The Law and Economics of Child Support Payments 1, 2 (William S. Comanor ed., 2004) [hereinafter Comanor, Review of Current Policies].
[8]. Carole Chambers, supra note 3, at 17.
[9]. See Irwin Garfinkel, Assuring Child Support—An Extension of Social Security 18 (1992) [hereinafter Garfinkel, Assuring Child Support]. According to the author, the current divorce rates and the growing rate of out of wedlock births support this claim. Another commentator notes that with one out of every four children being born out of wedlock, the problem is only getting worse. The commentator provides some sobering statistics, such as 25% of custodial parents who were not married at the time of their children’s birth obtained child support orders and 75% of custodial parents who were married to non-custodial parents at the time of their children’s births received child support orders. See Simone Spence, Deadbeats: What Responsible Parents Need to Know 15 (2001).
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