CHILD SUPPORT REFORM
Georgia’s Child Support Guidelines:
Economic Issues, Cost-Based Awards,
and Constitutional Issues
House Bill 149
Georgia Legislative Session,
2003
Updated February 5, 2003
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R. Mark Rogers
Economic Consulting
130 Woodmont Drive
Griffin, GA30224
770-412-1059
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Georgia House Bill 149
- A Cost Shares guideline to replace current obligor-only guideline.
- The “cost shares” methodology is a systematized process that closely reflects child support award practices that existed prior to the implementation of presumptive guidelines (which are not based on rational economic foundations). Judges and lawyers that have practiced in family law prior to 1989 should find the methodology familiar, reasonable, and a sound basis for awarding child support.
- The Cost Shares methodology looks at “actual child costs,” takes into account tax benefit offsets, adjusts for shared parenting costs, and allows for additional circumstances such as alimony or extraordinary debt.
- The Cost Shares methodology is still relatively simple. The calculations are no more difficult than what about 70 percent of the states currently require.
- The financial affidavit information required is vastly less than is currently required.
- The Cost Shares guideline results in a child support award that provides for typical expenditures for children yet is affordable. The cost shares award provides for children’s needs while eliminating the incentive for parents to fight over custody and visitation shares.
- Cost Shares guidelines will place Georgia in a better position for obtaining federal child support funds. The federal funding formula places greater emphasis on affordability. Georgia taxpayers will gain from Cost Shares guidelines. There will likely be greater federal dollars than with current guidelines and there will be less money spent on court hearings for obligors thatn cannot afford excessive awards that have been made with current guidelines.
House Bill 149 is sponsored by Rep. Earl Ehrhart, 404-656-01609; co-sponsored by: Rep. Austin Scott, 404-656-0177; Rep. Wallace Sholar, 404-656-7859; and Rep. Lynn Smith, 404-656-7859. The bill is in the House Special Judiciary committee. The committee chair is Rep. Curtis Jenkins, 404-656-7857.
Background:Georgia’s Current Child Support Guidelines
The amount of the obligor's child support obligation shall be determined by multiplying the obligor's gross income per pay period by a percentage based on the number of children for whom child support is being determined. The applicable percentages of gross income to be considered by the trier of fact are:
Number of ChildrenPercentageRange of Gross Income
117 percent to 23 percent
223 percent to 28 percent
325 percent to 32 percent
429 percent to 35 percent
5 or more31 percent to 37 percent.
Application of these guidelines shall create a rebuttable presumption that the amount of the support awarded is the correct amount of support to be awarded.
Deviations allowed based on:
(1) Ages of the children;
(2) A child's extraordinary medical costs or needs in addition to accident and sickness insurance, provided that all such costs or needs shall be considered if no insurance is available;
(3) Educational costs;
(4) Day-care costs;
(5) Shared physical custody arrangements, including extended visitation;
(6) A party's other support obligations to another household;
(7) Income that should be imputed to a party because of suppression of income;
(8) In-kind income for the self-employed, such as reimbursed meals or a company car;
(9) Other support a party is providing or will be providing, such as payment of a mortgage;
(10) A party's own extraordinary needs, such as medical expenses;
(11) Extreme economic circumstances including but not limited to: (A) Unusually high debt structure; or (B) Unusually high income of either party or both parties, which shall be construed as individual gross income of over $75,000.00 per annum;
(12) Historical spending in the family for children which varies significantly from the percentage table;
(13) Considerations of the economic cost-of-living factors of the community of each party, as determined by the trier of fact;
(14) In-kind contribution of either parent;
(15) The income of the custodial parent;
(16) The cost of accident and sickness insurance coverage for dependent children included in the order;
(17) Extraordinary travel expenses to exercise visitation or shared physical custody; and
(18) Any other factor which the trier of fact deems to be required by the ends of justice.
HOWEVER, courts rarely deviate and the statute gives no guidance on how to deviate in a consistent manner for similarly situated parties. Key factors should be part of the formula.
Georgia's Child Support Guidelines Were
Designed Only for Welfare Cases—
Not General Use
Georgia's child support guidelines were taken from child support guidelines initially implemented by the state of Wisconsin for welfare cases. The underlying economic study and conditions for appropriate application of the guidelines were conducted and published by Dr. Jacques van der Gaag in 1982.[1] The guidelines were designed to be applicable only if the household had certain economic characteristics. These underlying economic characteristics of the household are:
- The household is a low-income household. For the study, the households (both parents) averaged annual gross income of $12,000 in 1982 dollars. In year 2000 dollars, this would be household income of $21,426. The underlying study specifically states that at higher incomes, the applicable percentage should decline. The study also assumed the percentage would be applied only after setting aside a self-support reserve.
- The mother is assumed to care for the children and not earn any income outside the home.
- The father is the sole income earner and the percentages applied to the father's income are based on tax law of 1982. Under the tax code in which the percentages are derived, the non-custodial parent that provided over half of the child's support would receive use of all child income tax benefits.
- The low-income characteristic also includes the fact that the guidelines were to be applied to income earners paying little or no income tax. Hence, under the appropriate low-income application, there is no need to take into account differences between gross income and net income.
- The guideline percentages were derived based on the assumption that the father is absent and that the children are with the mother 100 percent of the time.
- The guideline percentages were designed for welfare “recovery”—that is recovering from the father the welfare payment to the mother. The percentage was only to be applied up to the amount of income needed to recover the amount of the welfare payments to the custodial household.[2] There was a low ceiling on the amount of income on which the percentages would be applied.
All but a small percentage of cases before the courts have economic circumstances that diverge sharply from these assumptions—application of the guideline would not be appropriate.
Chart 1.
- Georgia’s guidelines reflect fixed percentages that vary with the number of children and are applied to obligor before-tax income.
- The guideline fixed percentage of before-tax income becomes a rising percentage on an after-tax basis since federal income tax rates rise as taxable income rises.
- No economic studies show child costs rising as a share of after-tax income.
- Economic studies actually show child costs declining as a share of after-tax income.
- Georgia’s guidelines conflict with all known studies on child costs and result in large financial windfalls for custodial parents.
- Georgia’s child support guidelines—as fixed percentages—started out as only being used for welfare cases. The fixed percentages were intended to applied only to low-income obligors (paying little or no income tax) and only after setting aside income for basic living needs. The fixed percentages were never intended by the designing economist to be applied outside of this (welfare) type of situation.
- Georgia’s presumptive guideline was enacted during a rush to comply with federal regulations or face loss of $25 million in federal funding (deadline of 1989 enacted in mid-1988; GA legislative session ended in April 1989). Also, the guideline was enacted during misleading editorials by the Atlanta Journal-Constitution that limits on the guidelines would “exempt the wealthy” from child support obligations. The editorials conflicted with all professional economic opinion. Clearly, there was a certain amount of hysteria during the legislative debate in 1989.
THE “COST SHARES” GUIDELINE—A MODEL FOR REFORM
Introduction to the Cost Shares Child Support Guideline
What sets the Cost Shares model apart from percent-of-obligor-income models and Income Shares models?
For the Cost Shares model,
Child expenditures are based on actual costs as measured by surveys. Percent-of-obligor-income and Income Shares models base child costs on indirect estimation methodologies and vastly exceed actual child costs.
Child expenditures are based largely on surveys of single-parent households rather than of intact households. Intact standard overstates income available for child support.
Child costs are offset partially by child-related tax benefits.
Both parents typically incur child costs (parenting time, medical insurance, etc.) and each parent has an equal duty to share the other parent's child costs.
The Cost Shares model has components for various major child cost categories.
Legal Principles Underlying the Cost Shares Model
Historically, under state law, judges have followed a cost-sharing approach to setting child support awards.
Percent-of-obligor-income and Income Shares guidelines do not conform to traditional legal principles.
A few court opinions have specifically stated general requirements for economically appropriate child support awards and for child support guidelines to pass constitutional muster.
Smith v. Smith, 626 P.2d 342 (Or. 1980). This opinion specifically stated that it is economically inappropriate and unjust to apply a welfare case guideline to non-welfare cases. That case then delineated how one should allocate child costs between parents.
Cases that have defined constitutionally sound child support award processes are Meltzer v. Witsberger, 480 A.2d 991 (Pa. 1984) and Conway v. Dana, 318 A.2d 324 (Pa. 1985).
These cases established several key principles.
Consistent with these traditional legal principles, the Cost Shares model:
Assumes each parent has an equal duty of support.
Treats each parent’s obligation as proportional to that parent’s share of available financial resources (income).
Explicitly takes into account direct contributions toward child costs by either parent in the determination of the child support award in order for each parent to meet a standard of equal duty of support.
Bases the table of child costs (to be allocated between the parents) on actual data on child costs rather than on indirect measures such as changes in spending on adult goods.
Treats the child-related tax benefits as negative costs—that is, as partial offsets to spending on children.
Derives a final award that is based on leaving each parent with income for each parent’s basic living needs.
Child costs are largely incurred according to parenting time shares and each parent has an equal duty to share in the other parent's child costs. Parenting time costs and parent-specific costs such as medical insurance determine each parent's total child costs.
Each parent's obligation to the other must be netted to determine which is the obligor and the payment amount.
Basic Steps in the Cost Shares Model
1)Determines Basic Child Costs for a single-parent household using an average of both parents' incomes as the income factor. The Table of Basic Child Costs has child costs for a single-parent household according to gross income.
2)Allocates Basic Child Costs between the two parents according to shares of parenting time, e.g. each parent's number of overnights with the children.
3)Adds other non-basic expenses (not in the Costs Table) when appropriate (such as child care expenses) to the parent that incurs such costs to get each parent's gross child costs.
4)Deducts from each parent's gross child costs the child-related tax benefits that each parent (but generally the custodial parent) receives to calculate each parent's net child costs.
5)Calculates how much each parent owes the other parent as that parent's share of the other parent's net child costs, based on the parents' relative incomes above a self-support level. These two numbers are netted to determine the child support award.
6)Makes sure that the obligor is left with sufficient income for the obligor's basic living needs.
Chart 2.
If one adds together the dollar value of the guideline percentage to both parents' gross income and add in the child-related tax benefits as a measure of total implied child costs, Georgia's presumptive child costs frequently exceed 75 percent of a custodial parent's net income—an absurd outcome showing how excessive awards are.
Chart 3.
Cost Shares spending figures on children are very generous as a share of custodial parent income—especially net income. Cost Shares awards are consistent with these reasonable outcomes of the total child cost as a share of net income.
Chart 43.
Cost Shares child costs, monthly. These are the costs to be shared between both parents—after deducting child-related tax benefits as a cost offset.
Cost Shares Example
Input:
Father's monthly gross income: $4,000
Mother's monthly gross income: $3,000
Two children
One child in day care, age 13 or under, monthly day care expense of $400 for mother
Father pays $75 per month for extra cost of medical insurance for the children
Mother has all of the child-related tax benefits
Mother has 75 percent of the parenting time; father, 25 percent
Cost Shares then:
1)Determines the typical amount of spending for two children with the parents' incomes,
2)Determines how much of the standard expenses and the day care "add-on" goes into each parent's expense column,
3)And then calculates how much each parent should share in the other parent's child costs.
Table 1.
Cost Shares Estimate Detail for Two Children
With a 25/75% Parenting Time Split
Cost Shares Summary Page, with Parenting Time AdjustmentsFather's / Mother's
Monthly adjusted gross income / $4,000 / $3,000
Average monthly adjusted gross income / $3,500
MONTHLY: / Combined
Standard child costs excluding child care & education: / $1,008
Less:
Med. & related insurance paid directly by father / -75
Med. & related insurance paid directly by mother / 0
Portion to be prorated by time with children: / $933
Time with children (share): / Father / Mother
25% / 75%
Father's / Mother's
Expenses / Expenses
Each parent's share of basic child costs excl. directly paid items / $233 / $700
Med. & related insurance paid directly / 75 / 0
Child-related tax benefits as cost offset[3] / 0 / -195
Child care / 0 / 400
Other add-ons / 0 / 0
Total after-tax child costs incurred / $308 / $905
Share of combined income above “self-support” level: / 59.2% / 40.8%
NETTING: / Father / Mother
Father's share of mother's expenses / $536
Mother's share of father's expenses / $126
Preliminary CASH obligation to other parent / $410 / $0
Father / Mother
Available Income for CS for Each Parent / $1,910 / $1,317
Final Cost Shares Child Support Obligation / $410 / $0
Note: Components of two-child cost estimate base total of $1,008: housing, $160; food, $286; transportation, $204; clothing, $89; health, $105; and "other," $154.
Cost Shares calculations are similar to those found in about 35 states’ guidelines.
Table 2.
Cost Shares Estimate Detail for Two Children
With a 25/75% Parenting Time Split
Example Continued
Monthly Child Cost AllocationEach Parent's Net Child Costs / Father / Mother
Before-tax child costs incurred / $308 / $1,100
Child-related tax benefits as cost offset / 0 / -195
After-tax child costs incurred / 308 / 905
Cash child support paid (+)/received (-) / +410 / -410
Each Parent's Net Child Costs / $718 / $495
Government Contribution for Child Costs / $195
Total Spending on the Child/Children / $1,408
In this example, one sees that with a cash obligation of $410 per month, $1,408 is actually spent per month on the two children. It is just that the obligor also contributes $308 directly for a total of $718 per month.
The father and government pay for $913 of the $1,408 total spending on the children. The mother only pays a net $495 per month—taking into account the day care expense.
The father covers 59.2 percent of expenses not covered by the government; the mother, 40.8 percent.
This Cost Shares example is based on a cost schedule that was updated during Fall of 2002.
Notes on Gross Income, Net Income,
and Child-Related Tax Benefits
On the next page we can see how each parent's gross incomes and after-tax incomes compare using standard deductions and exemptions.
Since Cost Shares counts the child-related tax benefits as cost offsets, we need to compare each parent's after-tax income with and without any child-related tax benefits.
On the next page, for each parent there are two columns—one with child-related tax benefits and one without. The difference in these after-tax benefits is the tax benefit offset. The annual figures are converted to monthly numbers above.
Table 3.
Cost Shares Estimate Detail for Two Children
With a 25/75% Parenting Time Split
Father with child-related tax benefits / Father without child-relatedtax benefits / Mother with child-related tax benefits / Mother without child-related
tax benefits
Monthly gross income, Fed. Adj. / $4,000 / $4,000 / $3,000 / $3,000
Annual gross income, Fed. Adj. / 48,000 / 48,000 / 36,000 / 36,000
Standard deduction / -4,700 / -4,700 / -6,900 / -4,700
Exemptions / -3,000 / -3,000 / -6,000 / -3,000
Federal taxable income / 40,300 / 40,300 / 23,100 / 28,300
Federal income tax / -7,234 / -7,234 / -2,969 / -3,994
Earned income credit / 0 / 0 / 0 / 0
Child credits / 0 / 0 / 600 / 0
Child care credits / 0 / 0 / 480 / 0
Self-employment tax / 0 / 0 / 0 / 0
Social Security tax / -2,976 / -2,976 / -2,232 / -2,232
Medicare tax / -696 / -696 / -522 / -522
State adj. Income, annual / 48,000 / 48,000 / 36,000 / 36,000
Standard deduction / -2,300 / -2,300 / -2,300 / -2,300
Exemptions / -2,700 / -2,700 / -5,400 / -2,700
State taxable income / 43,000 / 43,000 / 28,300 / 31,000
State income tax / -2,393 / -2,393 / -1,441 / -1,673
After Tax Income, Annual / $34,701 / $34,701 / $29,916 / $27,579
After-tax income is used to determine each parent’s share of net child costs. After-tax income is also used to calculate the size of the child-related tax benefits (the difference between column 1 and column 2 and between column 3 and column 4). With software or with "look up tables," these calculations are easy and “transparent” to the user.