Journal Issue: Children and Divorce Volume 4 Number 1 Spring/Summer 1994
Child Support Guidelines: Income Shares and Percentage of Income
In response to the 1984 and 1988 federal legislation, states have adopted numerical formulas or child support guidelines for determining child support awards. All but four states have adopted variants of two models, known respectively as income shares and percentage of income, which are based on the principle of income sharing.15 This section describes the principle of income sharing and the calculation of support under these two guidelines. Also, the major differences between the two guidelines are examined, and some problem issues for both types of guidelines are discussed.16Principle of Income Sharing
Both guidelines share the same conceptual basis, which is the principle of income sharing.17 This principle is based on the theory that, by parenting a child, parents take on the responsibility to share income with that child in approximately the same proportion as they would have if the family had not separated.
The rationale for using income sharing as the basis for setting child support consists of two points. First, it is fair to both the parent and the child. It orders a parent to pay based on the parent's income and also allows the child to share in the increases, or decreases, in the parent's income just as if the parent and child lived together. Second, it allows the courts to set child support without the necessity of a review of individual costs of care. The amount of child support is based on how much the parent would share with the child if the parent and child lived together. Consequently, income sharing lends itself to the development of a general formula.Income Shares Formula
Income shares is the most widely used of the two formulas. It is used by about 33 jurisdictions. Under income shares, the income of both parents is combined, and a basic child support obligation is established using a percentage of income. The percentage of income reflects the portion of family income the given number of children would have received if the family lived together. The support obligation is 18% to 24% of net income for one child, 28% to 37% for two children, 35% to 46% for three children, and up to 46% or 61% for six children. The percentage is based on an estimate of the percentage of family income that is spent on children in two-parent households and varies according to family income level. Percentages decline as family income rises. Child care and extraordinary medical care expenditures may be added to the basic obligation, and the total child support obligation is then prorated between the parents according to their respective incomes. The noncustodial parent pays child support, and the custodial parent is assumed to spend that amount on the child.Percentage of Income Formula
The percentage of income formula is used in about 17 jurisdictions. The amount of the child support obligation is calculated based on the income of the noncustodial parent, using a percentage based on the same considerations as in income shares. The award amount for one child is 17% of noncustodial parent gross income, 25% for two children, 29% for three children, 31% for four children, and 34% for five or more children. Both child care and medical costs are included in the basic award and so are not added separately. The calculation is independent of the income level of the custodial parent. However, this does not mean that the income of the custodial parent is not considered. The custodial parent is assumed to spend as much or more on the child as the noncustodial parent; however, a payment is not calculated.A Comparison of Income Shares and Percentage of Income Guidelines
Two major differences between the income shares and the percentage of income guidelines result from the effects that increased income by each parent has on the percentage of noncustodial parent income owed in child support. Both guidelines start with the notion that noncustodial parents should share the same percentage of income with their child as they would have if they lived with the child. Yet, with the income shares formula, the percentage of income obligated to child support declines as noncustodial parent income increases; with the percentage of income formula, it remains the same at all income levels. The authors of both guidelines appealed to different economic studies on the costs of children to justify their differing recommendations.18
A recent review of the evidence commissioned by the federal government finds that the percentages in both guidelines are consistent with the large range of estimates in the economic literature on the costs of children.19 Whether the percentages should be flat or decline is a value judgment.
In addition, under the income shares formula, child support owed by the noncustodial parent declines as the custodial parent's income increases. Advocates of the income shares standard argue that ignoring the income of the custodial parent is inequitable.20 Advocates of the percentage of income standard argue that conditioning awards on the income of the custodial parent undermines the principle of income sharing.21 When the parents live together, the child benefits from the extra income if both parents work. A child in a single-parent household with two income-producing parents should enjoy the advantages of that situation as well.
(It should be noted here that state child support guidelines make special provisions for families in poverty. A discussion of how states apply child support guidelines to these families is a complex issue and beyond the scope of this article.)22