An Economist’s point of view
An economist looks at the cost of
raising children as a function of the
parent’s income. Such precise data and
inputs are hard to find. The only source
of such data is the consumer expenditure
surveys which have various different
objectives other than child support. The
"cost of raising children" is something
that has to arrived upon before
proceeding further to examine each
parent’s contribution towards it.
Separation of children’s expenditure is
in itself a complicated issue and is not
separable apart from probably child
care, clothing (from consumer
expenditure surveys) and schooling
expenses. Economists therefore use an
interpolation technique that takes into
account the difference in costs of a
family with children and a family
without children enjoying the same
standard of living. This marginal cost
technique requires the assumption of a
measure for standard at living. This
depends on the economist and his whims
and fancies. For example, the Rothbarth
technique takes into account only the
expenditure on adult-only goods for
calculation of the standard of living
based on the simple assumption that if
the families with and without children
end up spending an equivalent amount on
adult goods, they are assumed to enjoy
the same standard of living. Therefore,
the difference in total expenditure of a
family with children and a family
without children, keeping the
expenditure on adult goods constant
would give you the "cost of raising the
children" in financial or economic
terms.
Despite many efforts over the past few
years, no yard stick has yet been set to
measure the standard of living, because
of which none of the figures arrived at
to calculate the cost of raising
children have been accurate.
Better still is to use the percentage
technique of expressing the “cost of
raising children” as a percentage of the
total family expenditure. Percentages
will also point at the amount of
expenditure undertaken by each spouse
for family expenses. So the cost of
raising children and thus the amount of
child support could be deciphered as the
“percentage of family expenditure
further applied as a percentage of
expenditure towards the cost of raising
children” would give a more-or-less
accurate figure.
Child Support and Taxation
The issue of child support and taxation
has always been an issue for most newly
divorced non-custodial parents. However,
in relevance to current law of the land
in USA, a standard question asked by a
single non custodial parent “Is Child
Support a tax deductible expense for the
non-custodial parent?". The answer lies
with the IRS (Internal Revenue Service)
and can be summed up as below:
Child support paid by the non-custodial
parent is not deductible and the
recipient parent cannot claim it as an
income. Either the custodial parent or
the parent who provides for more than
half of the child's support is entitled
to claim exemptions for the child or
children. However, this standard IRS
stipulation can be superseded by a court
order.
Apart from claiming the child as a
dependent, nothing can be deducted from
the income for the child support
payments. By default, the custodian
parent is assumed and treated as the
parent who provides more than 50% of the
child's support. This parent can claim
the exemption for the child, provided
the other exemption tests are qualified
for. A non-custodial parent can also be
treated as the parent who provides over
50% of the child's support, if the
custodial parent signs a “Release of
Claim to Exemption for Child of Divorced
of Separated Parents “ (Form 8332), or a
substantially similar statement.
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