Divorce and Child Support Research Paper

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Child support is court-ordered financial assistance resulting from a terminated relationship between a child’s parents and paid regularly for the benefit of that child. Child support is paid by an obligor to an obligee. While the obligor may be a noncustodial parent, an increasing number of parents are interested in remaining involved in their child’s life after an annulment, divorce, dissolution of a civil union or establishment of paternity. As a result, various forms of joint custody are becoming more common. In such cases, the custodial parent with a higher income (obligor) may be required to pay child support to the other parent (obligee).

History of Child Support

Some form of the responsibility for child support was established early in the development of U.S. law. As the first 13 colonies were established, many facets of English law were adopted. Early colony law actually prevented the collection of child support from an outside party unless there was a prearranged contract with the father. The Elizabethan Poor Law of 1601, however, did allow for local towns to recover certain costs associated with caring for single mothers and their children if the mother was living in total poverty. This ideology slowly evolved as legal precedent.

By 1808, the U.S. courts had begun to establish that absent fathers could be held financially accountable for their children. In the late 19th century, financial dependency became clearly established because newly divorced American mothers and their children were nearly always living in poverty. Slowly, a child support “doctrine” emerged, and early obligors were usually required to supply food and clothing and other support directly to the parent raising the children. Cases before the Civil War (1861–65), however, required only Caucasian fathers to provide support because slavery laws prohibited black men from being considered heads of household. After the war, child support eventually became universal.

The first formal U.S. child support law was passed in 1950, requiring that state welfare agencies report to law enforcement cases when they had to provide aid to dependent children as a result of abandonment by a parent. In 1975, a formal enforcement program was mandated by the Social Security Act. In 1984, legislation created a federal Office of Support Enforcement. In 1988, after years of lobbying primarily by women’s rights advocates, the first Family Support Act was passed, formally requiring states to establish legal guidelines for child support amounts and requiring that those guidelines be reviewed every four years. These state laws have remained but are politically contentious and are often challenged by both women’s groups and fathers’ rights groups. In 1996, federal legislation led to the Personal Responsibility and Work Opportunity Reconciliation Act, which included paternity enforcement, federal and state registries, and interstate enforcement.

Models of Child Support

The Family Support Act of 1988 required states to create and use a single income-based formula or guideline for setting child support order amounts. Although states were free to adopt a model of their choice, a federal advisory panel provided recommendations for state guidelines, including (but not limited to) the following:

  • Both parents should bear legal responsibility for support of their children, with the economic responsibility divided between the parents in proportion to income.
  • The subsistence needs of each parent should be taken into consideration in setting child support, but in virtually no event should the child support obligation be set at zero.
  • The child’s basic needs must be met as a first priority, but, to the extent either parent enjoys a higher-than-subsistence-level standard of living, the child is entitled to share in the benefit of that improved standard.

States responded by adopting one of three basic models as the framework for their guidelines: the income shares model, the percentage of (obligor) income model, and the Melson formula model. Despite differences in both philosophy and calculation methods, most state models have selfsupport reserves designed to protect subsistence needs of parents, are based on parental income, take into consideration the healthcare needs of children, and have additions or adjustments for factors such as childcare costs, shared or split custody, child age, and subsequent families.

Income Shares Model

The income shares model is one of two models recommended by the 1987 federal advisory panel and is currently used by the majority of states. This model is based on the premise that a child should receive the same percentage of total parental support as he or she would have received had the family been intact. Income shares formulas take into consideration the combined income of both obligors and obligees in setting the total amount that should be allowed for raising a child, and then divide this amount in proportion to each parent’s share of total income. The models produce support amounts for both parents; the obligor is responsible for paying the amount to the obligee or IV-D social service agency and the obligee is expected to spend the amount directly on the child’s needs.

Income shares calculations add both parents’ adjusted gross incomes (AGIs), and a formulaic schedule is used to set a child support amount. The ways in which these schedules are set varies across states. After the basic award amount has been determined, factors such as childcare and healthcare costs are usually addressed either by a further reduction in the paying parent’s AGI or, more commonly, by adding to the basic award childcare and medical support costs. Finally, each parent’s share of (revised) adjusted gross total income is calculated, and the child support amount is prorated between parents according to their income shares.

The primary strength of the income shares model, particularly compared to percentage of income models, is its perceived fairness. The income shares model makes explicit the expectation that both parents contribute to maintaining a child’s standard of living. Even though the support amount calculated for an obligee is never paid directly, it serves as a reminder to both parties of the expected level of direct expenditure on the child. The other advantage of income shares calculations is that, because they are based on both parents’ incomes, it is easier to make appropriate adjustments for medical and childcare costs (regardless of which parent pays for them) and for split or shared custody. A distinguishing feature of this model is an underlying assumption that as income increases, the proportion of income spent on child support decreases.

The primary criticisms of the income shares model are that the method of setting the award is technically complicated, particularly in the way that expenditure amounts are estimated, and that the process lacks transparency. Other critics have noted the imperfections in the Consumer Expenditure Survey (the data set that underlies all expenditure estimates currently in use).

Percentage of Income Model

The percentage of income model was first developed by, and is still to a large extent associated with, the state of Wisconsin. Today, almost a dozen states use percentage of income formulas in their guidelines. Only the noncustodial parent’s income is considered when setting the level of child support.

The strength of the percentage of income model is the ease of the formula, the speed of calculation (in the most basic cases, the flat percentage is simply applied to the obligor’s AGI), and the transparency of the process to all parties. Some advocates of percentage of income models have argued that the additional steps of an income shares model in analyzing an obligee’s income are an unnecessary complication if it is understood that the obligee is already contributing to the child through direct spending.

Critics of this model attack its reliance on flat percentages. In order to make allowances for high or low obligor incomes, states must either increase complexity by creating adjustments to the formula or invite the courts to grant more deviations from guidelines. Additionally, it has been argued that the percentage of income model is unfair in the sense that it does not produce results in line with the “continuity of expenditure” philosophy of income shares in cases where parental income is unequal.

Melson Formula Model

The formula developed by Judge Elwood F. Melson of the Delaware Family Court is the most complex of any child support formula currently being used in the United States, but at the same time it accounts directly for more cost factors involved in child rearing than does any other method.

The formula, like income shares, takes into account the incomes of both parents. First, a self-support allowance is established for each parent and subtracted from actual incomes. The remaining income is summed between parents, applied to a table of cost estimates for basic child needs to get a basic support amount, which is then prorated between parents according to income shares. To this, childcare and extraordinary medical expenses are added. Finally, what is called the “standard of living allowance” is added. This is a flat percentage (based on number of children) of the parental income remaining after the self-support reserve is subtracted. The final support amount owed by the obligee is his or her fraction of the basic needs amount plus childcare and medical expenses plus the standard-of-living allowance.

The strength of this model is its ability to account directly for most of the important factors within the guideline model itself and without necessitating deviations. It also tends to produce the most consistent and predictable awards. The weakness of the model, and presumably the reason it has not been used more widely, is that it is significantly more complicated in its basic form compared to basic income shares and percentage of income models. It is also the least transparent, and thus it is used in only a few states.

Model Summary

Although the models differ in several respects, each state complies with federal requirements by following three basic mandates. First, the income of the obligor must be taken into account. That is, higher-earning obligors will have higher support orders than do lower-income obligors, all other things being equal. This supports the principle that the child should continue the same standard of living that he or she would have enjoyed if the parents were living together. This also allows for affordable obligations for noncustodial parents. Second, the federal guidelines require that the child’s health insurance be provided for in the judgment. States handle this requirement in different ways. Third, all states must have specific guidelines that indicate a specific dollar amount for all situations. Uniformity and predictability are goals, although deviations are allowable for atypical cases.

Expenditure Estimates

Estimates of the costs of raising children that have resulted in child support amount or income tables have been based on two methods.

The economist T. J. Espenshade wanted to identify an empirical measure of standard of living, since continuity of standard of living from intact to separated families is the philosophical basis for the income shares model. He used the fraction of income a family spends on food consumed at home, an economic method developed by Ernst Engel in the 19th century. Espenshade’s model assumes that food is a necessity for all households, regardless of income, and that it is equally consumed across income groups; thus, a lower fraction of total spending on food at home should reflect a higher standard of living. Espenshade demonstrated empirically that the fraction of consumption on food at home is a good (inverse) proxy for standard of living, relative to other possible consumption-based measures. Espenshade estimates what economists refer to as Engel equations of the determinants of consumption on food eaten at home as a function of family size, ages of family members, and total family consumption. He uses these estimates to determine the minimum number of dollars in total consumption that a married couple with one child, for example, would have to gain in order to have a standard of living equal to that of a couple without children. This is the measure of the marginal expenditure associated with one child. Similar calculations can be performed with single parents and differences between one and two, two and three, or three and four children.

Another way of estimating expenditures on children through changes in standard of living is called the Rothbarth method. Based on work by E. Rothbarth in 1943, these estimates of equivalent standard of living are based on differences in expenditures on adult clothing rather than food purchased at home. This method is based on the empirical observation that parents spend less money on clothing for themselves than do adults of similar age, income, and other characteristics with no children. This reduction in adult clothing expenditures presumably represents money reallocated to children. In this case, standard of living would be positively related to the fraction of consumption on clothing, and the measure would fall with more children in the household (holding income constant) and rise with more income (holding family size constant).

A 1990 study commissioned by the U.S. Department of Health and Human Services compared Rothbarth and Engel estimates and found that Engel estimates tended to be higher and have more variability, while Rothbarth estimates were lower. The authors of the study recommended that states not set their child supports above Engel estimates or below Rothbarth estimates.

The most up-to-date Rothbarth estimates are for 2005 and were developed by David Betson of Notre Dame University for use in the 2006 State        of           Oregon Child      Support Guidelines          Review. Betson analyzed married couples with and without children from 1998 to 2003 in the Consumer Expenditure Survey. The data allow for an important and necessary update to the estimates that had previously been used to set state guidelines. Betson’s estimates of fraction of net income spent on one (two, or three) child(ren) range from 26 (38, or 46) percent of incomes below $15,000 per year to 13 (19, or 22) percent of incomes above $125,000 per year. He notes that, although these percentages fall as incomes rise, the relationship between spending and income has become somewhat flatter over time.

An alternative source of expenditure data for income shares models comes from the U.S. Department of Agriculture (USDA). The USDA uses a direct method to estimate expenditures on children. The original USDA estimates are based on 1990–92 Consumer Expenditure Survey data and are adjusted to 2006 price levels using a consumer price index. Estimates produced by the USDA are broken down by six child age groups and three income groups. The percentages of expenditures on children for one (two/ three) child(ren) range from 35 (57/66) percent of incomes below $44,500 per year to 17 (28/33) percent of incomes above $74,900 per year. The study also presents a comparison of Engel, Rothbarth, USDA, and strict per capita estimates. The USDA estimates are consistently smaller than per capita estimates, slightly lower than Engel estimates, and slightly higher than Rothbarth estimates.

Bibliography:

  1. Barnow, Burt S., et al. Estimates of            Expenditures         on           Children and         Child       Support  Guidelines. Submitted to Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services, by Lewin/ICF, Washington, DC, October 1990.
  2. Ellman, M. “Fudging Failure: The Economic Analysis Used to Construct Child Support Guidelines.” University of            Chicago          Legal      Forum, v.167 (2004).
  3. Espenshade, T. J. Investing in            Children:                New        Estimates               of            Parental Expenditures. Washington, DC: Urban Institute Press, 1984.
  4. Lino, M. Expenditures on           Children by           Families,                2006. Miscellaneous Publication 1528-2006. Washington, DC: U.S. Department of Agriculture, Center for Nutrition and Policy Promotion, 2007.
  5. Morgan, L. W. “The Economics of Child Support Guidelines: A Short Examination of the ‘Cost Shares’ Model.” American Journal of            Family    Law, v.18 (Fall 2004).
  6. Rothbarth, E. “Appendix 4: Notes on a Method of Determining Equivalent Income for Families of Different Composition.” In War-Time Pattern   of            Spending               and         Saving, C. Madge, ed. Cambridge: Cambridge University Press, 1943.
  7. Smith, M., M. Kalinowski, R. Baughman, and M. Henly. New Hampshire            Child       Support  Guidelines Review          and         Recommendations. Concord: New Hampshire Department of Health and Human Services, 2009.
  8. Vehohr, J. C., D. Betson, D. Price, M. Zoller, and L. Washington. State of            Oregon  Child       Support Guidelines          Review. Submitted to Oregon State Department of Justice, Division of Child Support. Denver, CO: Policy Studies, 2006.
  9. Williams, R. Development of            Guidelines             for           Child       Support  Orders:   Advisory Panel Recommendations          and         Final       Report. Washington, DC: U.S. Department of Health and Human Services, Office of Child Support Enforcement, 1987.

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