Monday, January 27, 2014

Understanding the Indiana Child Support Guidelines - 2014 Calculation Revisions

27 January 2014

2015 Indiana Child Support Guidelines
review scheduled for public comment

The Domestic Relations Committee [DRC] of the Indiana Judicial Center is given the charge of reviewing the Indiana Child Support Guidelines every four years pursuant to federal law.[fn1] 2014 brings about the requisite passage of time to embark upon such a review. As the DRC begins the process I will attempt to provide to you relevant information in regards to the ongoing process and your opportunity to provide input. In this posting I intend to start by providing some background for you regarding the Indiana child support payment scheme and those of other jurisdictions.

Indiana uses the income shares model developed by Robert Williams. This model provides that based upon total parental income children would account for a particular portion of total family spending. From this total amount each parent is assigned a share to pay based upon the incomes of each. This appears as Line 4 on the Indiana Child Support Obligation Worksheet [CSOW]. Indiana is one of 35 states that use this model.

11 states use the percent of income method. These states take a percent of the non-custodial parent's [NCP] and provide it to the custodial parent as a direct payment to supplement the custodial parent's spending on the child. This system poses significant problems. The percent of family resources dedicated to children are not consistent across the spectrum of income levels. While a family earning about $50,000 a year may spend 20% of that on a child a family earning that will likely spend a higher percent while those earning significantly more will spend much less. Certain constants like a child's need for nutrients is not contingent upon parents' incomes. A child who's parents earn $250K per year does not eat ten times as much as those who earn $25K per year. Similar comparisons can be made with clothing, extra-curricular activities, and rides to school.

Three states use some form of the Melson formula. Melson first provides that the parent is entitled to basic needs. After the basic needs exemption a portion of income is then attributed to the needs of the child. Remaining income is subject to a standard of living adjustment – non-essential purchases.

Of the three formulas the income shares model that Indiana uses is the most popular and I feel is the best to most accurately represent spending on children across a broad spectrum. In practice though it sometimes produces absurdities that are not nearly reflective of a family's actual spending on the children. Part of the reason for this is that the data used to determine Indiana's child support payment obligations is based upon 1972 surveys by the U.S. Department of Labor. Another flaw is the per capita application of some expenses such as housing. Using the per capita method a one bedroom apartment for a parent only would attribute a cost to the parent of $500, A $600 per month two bedroom – one for a child – would attribute a cost to the child of $300. A $750 per month three bedroom – two for the children – would attribute a cost to the children of $500. But we know the parent cannot get a one bedroom for the remaining $250. The per capita method attributes too high of a cost to the children. I have written more about that in this case where a mother was living off of child support payments. The current model that Indiana uses attributes 44% of household expenditures on a per capita basis – most of that being housing.

The purpose of the income shares model is to provide the children with the same standard of living that the children would have enjoyed had the marriage remained intact[fn2]. Implicit in this standard is that the standard of living of the parents shall be reduced from what it would have been had they remained married. This standard of living dichotomy is appropriate as it is not the children that seek divorce but it is the selfish interest of adults that lead to divorce. However, the standard of living of the NCP often seems to suffer in a disparate proportion to that of the custodial parent.

Another problem encountered by William's income shares model is that it uses gross income. This creates a disparity because of taxes and savings. Lower income earners often pay no taxes and may even receive an EIC payment from the IRS. They also may spend more than they actually earn thereby incurring debt to maintain their standard of living. By contrast, high income earners[fn3] pay a substantial percent of their income to taxes and other levies while also saving at a higher rate. Rothbarth has developed a measure that uses a net income adjustment for calculating income shares.

The DRC has secured the services of Dr. David Betson, professor of economics at the University of Notre Dame, to assist in the development of a revised child support calculator. I spoke with Dr. Betson briefly about some of the problems with the current system and ways that I feel could ensure a more just application of the ICSG to achieve the stated objective of providing the children with the same standard of living that they would have enjoyed had the marriage remained intact. I will detail some of our conversation in a future posting.

1] 42USC§667(a)
2] Payton v. Payton, 847 N.E.2d 251, 253 (Ind. Ct. App. 2006).
3] Households or families with weekly gross combined incomes of $4,000 or greater are considered high income earners.

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©2008, 2014 Stuart Showalter, LLC. Permission is granted to all non-commercial entities to reproduce this article in it's entirety with credit given.

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