A second major problem is that the means-tested welfare system actively penalizes low-income parents who do marry. All means-tested welfare programs are designed so that a family’s benefits are reduced as earnings rise. In practice, this means that, if a low-income single mother marries an employed father, her welfare benefits will generally be substantially reduced. The mother can maximize welfare by remaining unmarried and keeping the father’s income “off the books.”
For example, a single mother with two children who earns $15,000 per year would generally receive around $5,200 per year of food stamp benefits. However, if she marries a father with the same earnings level, her food stamps would be cut to zero. A single mother receiving benefits from Section 8 or public housing would receive a subsidy worth on average around $11,000 per year if she was not employed, but if she marries a man earning $20,000 per year, these benefits would be cut nearly in half. Both food stamps and housing programs provide very real financial incentives for couples to remain separate and unmarried.
A positive first step in this incremental process would be to reform the EITC. For the most part, the EITC provides refundable tax credits (i.e., cash benefits) to low-income parents who have no federal income tax liability. The EITC is superior to all other means-tested welfare programs because parents must work in order to be eligible for benefits. In contrast to other welfare programs, the EITC has slightly different benefit schedules for married couples and single parents. These mitigate, but do not eliminate the anti-marriage incentives provided by the program. Policymakers should build on the strengths of the EITC by toughening its work standards, preventing fraud, and further reducing its marriage penalties.[9] A properly reformed EITC could begin to offset the marriage penalties in other welfare programs.
By contrast, increasing the EITC for unmarried fathers who do not support their children is a bad policy that intensifies the anti-marriage incentives within the welfare system. Such a policy would increase overall welfare benefits for parents who do not marry and increase the benefits lost when the couple does marry.