How To Fix The Economy With Child Support Reform
When I watch the news regarding taxing the rich more and the poor less or the 99% vs. the 1% or Wall Street vs. Main Street, I realized the only way to find a resolution to the problem for both sides is to find common ground. But, how do you do that when one person is living check to check and the other person is responsible for providing that very person with the check? The equation alone creates the fundamental difference and problem. So, I began to search the entire Earth looking for common ground between the two entities and when I came up short on Earth…I began to search the galaxy until I began to look at pictures of my children and then it hit me; no matter how rich or poor you are we all have one thing in common…CHILDREN and if the individual doesn’t have any of their own they have a relative or friend that does! The commonality of children not only transcends race, politically affiliation and economic circumstances, but it transcends gender too and that is where the tax break argument should start. Do you really think the rich and/or poor non-custodial parents of this great nation that send out a lump sum of money each month to take care of a child they only get to see on weekends for 4 hours a pop would ever argue against providing those same individuals with a tax break, and, before you even think about if it will even make a dent in our current economic circumstance…there are millions of us out there. According to the U.S. Census Bureau, in 2008 there were 13.7 million parents in the United States who had custody of 21.8 million children under 21, while the other parent lived somewhere else. Of those 13.7 million parents, 7.4 million (2.5% of the entire U.S. population in 2008) had a child support agreement or court order in place to receive monetary help from the noncustodial parent who lived somewhere else. Translation: There are enough non-custodial parents to silence the tax break battle between Republicans and Democrats because the ones affected by it are: Republicans and Democrats!
So I began to assess ways our politicians can provide tax breaks for a select group of people both rich and poor that will provide economic stimulus without bankrupting our nation.
All child support payments should be mandatorily withdrawn directly from your paycheck and assessed before taxes. In New York State, child support payments are withdrawn after taxes, which means the individual paying support is taxed on a higher amount resulting in less take home pay and that amount is reduced further because the support is then withdrawn from what is left after taxes. This results in less available discretionary funds to be placed back into the economy for economic growth. If Child Support was withdrawn before taxes this would result in being taxed on a lower amount, which would increase the amount of funds left on an individual’s paycheck after taxes and additional money in the pockets of Americans that need it and would put it back in the economy. We already do this with transportation/parking costs not to mention, the government will arrest, revoke passport/driving privileges and adversely affect the credit of an individual for not paying child support, so it should be the government responsibility to that same individual to ensure the best interests of the child are met as well as do whatever possible to prevent the individual from failing in a system it created and enforces.
Now, I know what you are thinking…what about the individuals that do not get paid with a paycheck and own businesses….I am glad you asked! Those individuals will be required to pay their Child Support under the current guideline in the state he/she lives, but he/she will be able to list the custodial parent as an employee within their business and receive the same tax breaks any business would receive for hiring someone. By law, the non-custodial parent is also required to provide health insurance for the child they are required to pay support for, so listing the custodial parent as a tax-exempt employee will increase company savings and could result in hiring an additional worker and/or increase revenue to be place back in the economy under the Hiring Incentives to Restore Employment (HIRE) Act for businesses.
Individuals required to pay Child Support should have the option of how that support should be administered to the custodial parent. Option #1 is to remain in the current system in which funds are transferred into the account of the custodial parent and the funds are not regulated or monitored and disbursed at the discretion of the custodial parent. Option #2 would be for the non-custodial parent to pay a monthly fee to a credit card company for a Child Support Credit Card. The sole responsibility of the Credit Card Company is to track expenses through approved vendors selected by both the custodial parent and the non-custodial parent. If the card is used by a vendor not listed and/or approved by both parties the transaction is declined. For example, if Best Buy is not listed as an approved vendor the card will be declined at the point of service.
So, how does this help our economy….I am glad you asked. The Credit Card companies are making money off the fees for utilizing the card, resulting in increased revenue and hiring workers to service the division. The government and lawyers make money because if the parents can’t agree on a vendor the services of the both will be needed to moderate the dispute. The vendors will have an assured customer and will not need to worry about the custodial parent not being able to pay for services related to the child because he/she used that money to buy another item. The non-custodial parent has a feeling of empowerment since he/she is involved with what the money is utilized for. The non-custodial parent can also use the transaction records to defense against custodial parents requesting support increases when they are not warranted (i.e., Why do you need an extra $200 per month if the expenses associated with the child have not increased?). In cases of emergency, a set amount of cash can be withdrawn from the card via an ATM on a monthly basis.
Since Child Support guidelines are regulated at the State level, the federal government can implement federal tax reform by implementing tax guidelines which state that all tax events related to the child resulting from Child Support payments (i.e., claiming child on taxes, child care costs, healthcare costs, mortgage interest, etc.) should be claimed by both parents on alternating years (even year for custodial parent…odd year for non-custodial parent). Since the government does not allow for both parents to claim the child, but requires the child to be supported; the same would be for claiming the child on each parent’s taxes in alternate years. If the custodial parent, who is receiving support, is approved for a mortgage and one of the reasons that individual was approved for the mortgage is because Child Support payments were listed as income; the non-custodial parent should be able to claim that mortgage interest based on what percentage the child support was used to determine the loan. For example, mortgage interest paid for the year is $1,000.00 and Child Support accounted for 15% of the income to expense ratio equation the bank utilized to grant the loan. The non-custodial parent should be able to claim $150.00 (15% of $1,000.00) on his/her taxes. By law, the financial institution approving the loan would be required to notify the non-custodial parent if his/her Child Support payments are listed as income.
For instances, in which, the home was purchased prior to the birth of the child and to unwed parents this tax break would not be applicable. For divorced/separated individuals, the full amount of mortgage interest will be alternated year to year since it would be impossible to determine if either parent would have qualified for the home without each other. As it stands now, the custodial parent gets the claim the child, claim mortgage interest, child care costs, health care costs and the non-custodial parent is excluded from participating in any of those tax benefits. By modifying the current guidelines the custodial parent will be able to continue receiving support, which is currently tax free, and the non-custodial can still reap the tax benefits that are associated with having a child.
For individuals that make over $250,000 a year and pay over $25,000 a year in Child Support, the tax benefits will be set to what they received under the Bush Era Tax Breaks. The idea for this is that the individual paying the amount of support is creating economic stimulus through his/her Child Support payments (i.e., high level child care, high level place of residence, financial planning, etc.) instead of hoarding wealth, which is the case for a substantial portion of wealthy Americans.