Part of Real World Divorce: web edition | Kindle edition
Most of these hold true for the typical U.S. state.
Children of the same parent will have different cash values depending on the order in which that parent gets sued. This is because an existing child support order is generally deducted from a defendant's income when calculating the amount of child support in a new lawsuit. Consider a New York married couple with three children. The wife goes away for a few weeks to help a sick relative. The husband goes to the neighborhood bar, drinks too much, and, by the time the wife returns he has gotten three women pregnant. The first woman to sue gets 17 percent of his gross income. The second woman gets 17 percent of the 83 percent remainder (14 percent). The third plaintiff gets 17 percent of 83 percent of 83 percent (about 12 percent). Roughly 43 percent of his pre-tax income will thus go to satisfy these court orders, but each extramarital child gets different amount.
[Note that, if you assume this guy pays 50 percent of his income for local, state, and federal income taxes, the defendant, his wife, and three children of the marriage will be living on the remaining 7 percent of his income.]
"Divorce litigation got turbocharged in the U.S. in the 1970s as states adopted the 'no-fault' system [first enacted in California in 1970] and as the shame of being a divorced person disappeared," explained one attorney. "It used to be that people would try to avoid being divorced for social reasons and also that they needed to convince a judge that the person they were suing had done something wrong. In response, there were substantial rewards available to divorce plaintiffs who'd suffered wrongs by their spouse. They could get property, alimony, the children, and child support. Now all of that compensation is available to people who haven't suffered any wrongs."
A business executive who learned about this book observed that the modern world has become friendlier to women seeking their fortune through romance or marriage. "A woman used to have to stay married, possibly to someone that she had never loved, in order to retain access to the money, the house, and the title," she pointed out, "but now she can get most of that from a quick marriage and a divorce." Our interviews with attorneys confirm this lay perspective, but they add that a growing number of the profiteers from a quick marriage and divorce are men. "A female medical specialist is a juicy target," one lawyer noted, "even if men are still reluctant to press for the alimony to which they might be entitled."
"I've been in the [Illinois] House of Representatives for 30 years," Mary Flowers told us in October 2014, "and I like to keep reminding legislators that they should be grateful for all of the poor people who let us create jobs." What kind of jobs? "People whose job it is not to correct a problem but to prolong it," she responded. Flowers was talking about social workers, attorneys, judges, and other government employees.
When lower income people get divorced they enter a complex world of litigation where, if they use even the cheapest private attorneys, they will spend 100 percent of their assets and income on legal fees. A judge will generally designate one parent as primary and the other as secondary. "Parental Responses to Child Support Obligations: Causal Evidence from Administrative Data" (Rossin-Slater and Wust; December 8, 2014 American Economics Association Conference) shows that the secondary parent will now substantially withdraw from assisting with day-to-day tasks. This leaves the primary parent with sole parenting responsibility and a child support order that is 1/50th what could have been obtained from a one-night encounter with a married physician.
Suppose that the secondary parent becomes unemployed and can't pay this modest amount? Taxpayer-funded lawyers, judges, clerks, prison guards, administrators, etc. will spring into action to chase after the secondary parent. They may even imprison the secondary parent (see the Post-Divorce Litigation chapter). However, if the secondary parent does not respond to being chased by becoming employable, efforts by well-paid government workers don't benefit the child support plaintiff or the child in any way.
What are the prospects that the $6+ billion bureaucracy for collecting child support will eventually get the money? "Child Support Enforcement: Incarceration As the Last Resort Penalty For Nonpayment of Support" (Carmen Solomon-Fears, Alison Smith, Carla Berry 2012; Congressional Research Service) says that because "about 70% of child support arrearages (i.e., past due child support) are owed by noncustodial parents with no reported income or income of $10,000 or less per year, the inability of low-income noncustodial parents to pay child support will likely be a constant and ongoing problem." I.e., about 70 percent of the people being chased by taxpayer-supported officials earn less than a full-time worker at minimum wage.
Nominal rather than real (inflation-adjusted) investment income is included in every state's child support formula. Consider a defendant with $2 million in premarital savings and a 2-percent real return on those savings. With inflation at 1 percent, the nominal return will be 3 percent or $60,000 per year. If inflation goes back up to a Jimmy Carter-era 10 percent, the nominal return will be 12 percent and investment income for child support purposes will be $240,000 per year, four times as high despite the fact that the real return on investment is the same. The effect of inflation in Wisconsin, for example, with its 25 percent of gross income rule for two kids, is an increase in the child support plaintiff's share of investment income from $15,000 per year up to $60,000, far exceeding the $40,000 in real return.
The value of property division can also be boosted by inflation. Consider a jurisdiction where a divorce plaintiff is entitled to a roughly 50 percent share of any appreciation in the value of premarital savings. If the real value doesn't change, but inflation is 10 percent per year, the separate property will double in nominal value over a 7-year period. A plaintiff who sues for divorce after 7 years will thus obtain 25 percent of the value of the property by collecting 50 percent of the appreciation. In a no-inflation environment, the share would be 0 rather than 25 percent.
Many states have a child support formula that is a percentage of "gross income," which is another way of saying pre-tax income. Consider the following scenario:
Defendants A and B have similar spending powers due to the fact that Defendant A must pay federal and state income tax. Yet the plaintiff suing Defendant A gets $50,000 per year while the plaintiff suing Defendant B gets $30,000 per year. (Both plaintiffs get these amounts in tax-free child support.)
In states that use gross income to calculate alimony, the cash entitlement from having been married also will depend heavily on whether litigants preferred taxable or non-taxable investments. An alimony plaintiff who invests in taxable bonds has a higher gross income and therefore a lower alimony entitlement than an alimony plaintiff who invests in tax-free bonds. An alimony defendant who invests in taxable bonds will pay more than a defendant with the same after-tax income from a portfolio of tax-free bonds.
The divorce, custody, and child support lawsuits that take up the most court time and generate the largest legal fees are ones in which litigants generally have at least some investment income. Suppose that one defendant has a portfolio weighted toward young technology companies that don't pay current dividends. The second defendant has a similar wealth and total return, but is a more conservative investor and buys stock in mature dividend-paying companies and also bonds that make regular payments. The plaintiff suing the conservative investor may collect three times as much in child support as the plaintiff suing the technology enthusiast.
How a defendant pays for housing can also have a large effect on the cash value of children and marriage. Consider Defendant 1 who has a portfolio of tax-free municipal bonds yielding $4000 per month and who uses that income to rent a house for $4000 per month. Defendant 2, on the other hand, had the same exact portfolio of investments but sold it to buy an identical house. The two defendants have exactly the same spending power, but, over an 18-year period, a Wisconsin or New York child support plaintiff with custody of two children should be able to get roughly $216,000 more out of Defendant 1. If the plaintiff were also entitled to alimony, the cash difference might increase to half a million dollars.
Attorney John Eckelberry of Colorado: "In a divorce case the court has to consider an increase in separate property. If it goes up $500,000 she is entitled to an equitable share. If it goes down $500,000 the court can just look at it as an economic circumstance. In reality the court doesn't take the loss into account. Another way to look at it is the $500,000 in appreciation has to be on a property spreadsheet but an equivalent loss cannot be placed on the property spreadsheet."
In states where a divorce plaintiff is entitled to a share of any increase in the value of a premarital asset during the marriage, random movements in asset prices can lead to large profits. Consider a plaintiff who marries a defendant with three $1 million investments. In a zero-volatility and zero-inflation environment, if she sues him for divorce after five years she gets nothing from these assets. However, suppose that the value of the investments is volatile. Asset 1 goes to zero. Asset 2 stays at $1 million. Asset 3 goes up to $2 million. Despite the fact that the three investments together are worth the same $3 million, now the plaintiff has a claim for 50 percent of the appreciation of Asset 3, a net of $500,000 (tax-free). Judson Kidd of Arkansas said "If I were representing the defendant I would argue that the losses should be figured against the profits, but it could go either way."
More than half of the plaintiffs and defendants interviewed for this book were unhappy with divorce laws and procedures in their states. Why not 50 percent happy (the winners) and 50 percent unhappy (the losers)? It turns out that the cost and delays imposed by the divorce process make even some of the winners unhappy. After subtracting costs for legal fees and various kinds of expert witnesses and mental health professionals appointed by courts, the pie from which the winner was able to feed had shrunk. Generally the winners also started out with unrealistic expectations for the likely speed and completeness of their future victory.
On the other hand, most attorneys, psychologists, and other people who got a divorce industry paycheck viewed their state's divorce system favorably. The statutes and standards were reasonable. The outcomes were generally in children's best interests and any reasonable parent should be able to see that. There would be nothing inconsistent about these positive views but for the fact that every state handles divorce completely differently.
For example, attorneys in Texas praise a statutory parenting time schedule that saves parents from expending a child's college funds litigating the child's vacation, holiday, or weekly schedule. Attorneys in other states reacted with horror to this idea, tarring it with the derisive "one-size-fits-all" brush. Attorneys arguing and a judge issuing a custom-crafted schedule was plainly much better for children.
People in states where sole physical custody and every-other-weekend visitation was the norm spoke about how children needed consistency, a stable home base, and to spend most of their time with the primary attachment parent. People in states where 60/40 or 50/50 schedules were the norm would cite "bonding theory" and that the child needed the opportunity to spend as much time as possible with each parent or, more succinctly, "Every kid has the right to two parents even if one isn't quite as good as the other."
Attorneys in states where alimony was readily obtainable until the youngest child was out of high school spoke of the inherent fairness of the stay-at-home lifestyle of the marriage being preserved. Attorneys in states where alimony is disfavored would talk about how adults should be able to work and quote judges saying "We don't like parasites."
What about the fact that the "best interests of the child" is 100 percent different when one travels two miles across a state line? If the people in State A are right, that means the divorce industry in State B is harming children every hour of every working day. How could that not engender second thoughts? Professor Alan Hawkins of Brigham Young University: "People have a hard time admitting that they are participating in a system that may be harming some children. There is a strong bias toward seeing the good that is accomplished compared to the bad."
The Final Report of the 2012 Task Force that revised the Massachusetts child support guidelines says that "over 100 submissions [from members of the public]" were received. That's in a state with nearly 7 million people and some the most lucrative child support awards in the world.
Legislators nationwide told us that the people whose salary depends on increased litigation exercised the most influence on statutes. Divorce litigators, judges, and state employees whose paycheck depends on parents coming to court and fighting were the ones who either drafted legislation and guidelines or who advised the drafters.
André Katz, an Illinois litigator who served as chairman of the 2008 Illinois Family Law Study Committee for the legislature, told us that most of the committee meetings were public but only about 50 people would show up and that, in a state where millions of children have been the subject of winner-take-all custody decisions, only "hundreds" of emails and letters had been received.
Most legislative battles in the U.S. are between Democrats and Republicans. We suspected that this would not be the case in family law due to the enormous differences between adjacent states that have otherwise similar political tendencies, e.g., between Minnesota and Wisconsin. This was confirmed by André Katz, whose committee had appointees from both parties: "The fight was not political," he noted. "You couldn't predict someone's point of view based on their party. It depended more on the sexes as well as the extent to which someone was concerned about people with lesser means."
As noted in the Rationale chapter, liberal Democrats who identify as "feminists" tend to support the traditional U.S. winner-take-all family system in which (a) the winner parent is almost always a woman, and (b) child support is explicitly designed to pay the bills of the winner parent as well as any child-related expenses.
As noted in the Post-Divorce Litigation and Utah chapters, conservatives may also support child support guidelines that are more lucrative than college/work because of a belief that it will reduce women's reliance on abortions. (In fact, we learned about quite a few abortions that seemed to have been sold as a consequence of the high net present value of child support.) Conservatives may support accompanying aggressive taxpayer-funded collection efforts because of a belief that it will reduce government spending on welfare.
At least one economist interviewed disagreed with the conservatives regarding welfare: "Who would seriously believe that someone who has been living off child support is going to jump into the workforce after an 18-year vacation? Once the defendant stops paying, the taxpayers will be picking up the tab for her housing, health insurance, food, etc." A paper by a Stanford graduate student and a Social Security Administration economist, "The Long-Term Effects of Cash Assistance" (Price and Song 2016), tends to confirm this perspective. Americans who received an experimental "guaranteed minimum income," analogous to what a successful child support plaintiff might receive, for 3-5 years in the 1970s had reduced lifetime earnings from wages. What else did they do with their boost in spending power? "... the treatment [of a guaranteed minimum income] decreased marital stability. Treatment caused black and white families to be approximately 40% more likely to split up."
Divorce laws are primarily developed by people whose income depends on litigation
A Maryland legislator explained to us that the divorce laws in Maryland were driven by legislators who are themselves successful divorce litigators and represent wealthy litigants. Delegate Kathleen Dumais was cited as an example of a legislator who both makes the laws and profits from them via fees charged to private litigants. She was a member of a 2014 Commission on Child Custody Decision Making considering possible changes to Maryland's statutes. Delegate Dumais declined our requests for an interview.
A Massachusetts attorney who'd been chief counsel for a legislative committee said "Cynthia Creem is a very powerful senator and was the Chair of the Revenue Committee. She's also a divorce lawyer." [We verified that, in addition to her work as a legislator, she hangs out a shingle as a partner in Stone, Stone & Creem.] "You're not going to see her backing any legislation that would reduce fees for divorce lawyers. And remember that a lot of other legislators are attorneys." Based on his decade of experience in the State House, what motivated legislators? "They don't care if you're frying babies. The only thing that matters is 'How will this look in the Boston Globe? How will this affect my chances of being reelected?'"
As noted in our Rationale chapter, Illinois General Assembly Representative Kelly Burke told us that the bar association (i.e., divorce litigators) and public employees involved in divorce litigation were the most influential groups in shaping divorce statutes in Illinois. André Katz told us that the bar association in Illinois "fought tooth and nail" against a 35-percent parenting time presumption in the 2014 redraft of the state's family law. "Most litigators would not support a presumption because it cuts down on the number of things that can be litigated." The 35-percent presumption was dropped and, under the new law, a custody lawsuit in Illinois will remain one in which 100 percent of the child's time is at stake rather than 30 percent. Divorce litigators in North Dakota put $60,000 into a "grass roots" organization to oppose a 2014 ballot measure that would have added a 50/50 shared parenting presumption (voters rejected it).
When the Florida Legislature tried to enact guidelines for alimony, a change that lawyers nationwide tell us reduces the length and intensity of litigation, an April 11, 2013 column in the Tallahassee Democrat said "Thomas Duggar, an attorney in Tallahassee and a member of the Florida Bar’s Family Law Section, said last week at a Tallahassee Bar Association meeting that the section has a $100,000 war chest to sway public opinion against the legislation." We were told that attorneys in Colorado and Illinois generally opposed alimony guidelines as well.
Attorneys are persuasive in general and, when arguing for preserving current legislation, are persuasive and sound well-meaning. Guidelines, presumptions, and limits reduce the uncertainty in a lawsuit and also oftentimes reduce the stakes, both factors that promote early settlement and mediation. Although lawyers spend a lot of time complaining about arbitrary, biased, and unfair rulings from judges exercising discretion, they will often argue against legislative reductions in judicial discretion by pointing out the potential for an unfair outcome in an unusual case. For example, should it be possible for a person to be married for an hour, sue for divorce, and collect 80 years of alimony? The Florida bill referenced above would have prevented that. But what if someone trips and falls during the first dance at a wedding, becomes disabled as a result of that fall, and simultaneously becomes disenchanted with the new partner? Perhaps 50/50 shared parenting is what attorneys would want if they themselves were sued for divorce, but we were given the hypothetical of parents who live a two-hour drive apart yet still within the same state. What if a shared parenting statute and a failure by the parents to negotiate an alternative resulted in the child spending four hours in the car each day during half the school weeks? (Note that attorneys in the states that actually do have 50/50 shared parenting guidelines or presumptions did not tell us about any outcomes like this.)
Assuming that the loser parent is of at least middle income, the winner parent in an American divorce or unmarried child custody dispute will earn a profit from child support. That profit will be further enhanced by tax regulations. Here's an explanation from http://www.eitc.irs.gov/:
Generally, only one person may claim all the child-related tax benefits for a child, including the dependency exemption, the child tax credit, the dependent care credit, the exclusion for dependent care benefits, head of household filing status, and the EITC.
The Internal Revenue Service considers the custodial parent, a.k.a. the winner parent, to be entitled to all of these tax benefits. Thus the winner parent will pay taxes at a lower "Head of Household" rate while the loser parent files "Single" and pays taxes at the highest possible rates. The winner parent will get a $1,000 child tax credit. The winner parent will be able to get an additional credit of up to $6,000 for day care expenses even if all of those expenses are actually paid for by the loser parent via court-ordered child support transfers.
On the lower end of the income scale, the winner parent gets the Earned Income Tax Credit (EITC).
"My clients who have won divorce lawsuits do very well with the charitable contribution deduction," said one accountant. "When they donate a child's outgrown clothing and toys to charity, they are able to claim a charitable deduction even if the stuff was paid for by the parent who lost in court." State financial disclosure statement forms include entries for "charitable contributions" (see the Massachusetts Long Form as an example; there are actually two places for including such contributions). Attorneys told us that a need to continue making charitable contributions can be used as a justification for additional child support or alimony: "You can be generous with someone else's money, just like a politician."
Most states set up their family law systems under the following assumptions:
In any family law situation where these assumptions aren't true, the typical U.S. state generates quirky results.