Presenting Your Case
State Uses the
Income Shares Model
Each state implements this model a little differently. A lawyer
and economist are normally needed to customize the following
for your state, as well as your case. This is a general discussion
Background material on the
Income Shares guideline can be found in:
- “Child Support Guidelines: Economic
Basis and Analysis of Alternative Approaches,” by Robert
G. Williams, Improving Child Support Practice, Volume
One, The American Bar Association, 1986.
- Development of Guidelines for Child Support
Orders, by Robert G. Williams, U.S. Department of Health
and Human Services, Office of Child Support Enforcement, September
1987. (Still available through the U.S. Department of Health
and Human Services.)
- Estimates of Expenditures on Children
and Child Support Guidelines, Lewin / ICF, submitted to
Office of the Assistant Secretary for Planning and Evaluation,
U.S. Department of Health and Human Services, October 1990.
Contrary to public perception,
Income Shares child cost tables are not directly based on actual
spending on children but on indirect estimates. Income Shares
that child costs reflect the spending necessary to restore a family’s
standard of living back to what it was before having a child or
additional child. Such indirect measures were originally developed
by economists in the mid- and late-1800s to answer the academic
question: how much income is needed for different
family types (differing numbers of adults and children) to have
the same standard of living, such as a two-adult household compared
to a two-adult-one-child household. They are known as income equivalence
measures and were never intended or designed to measure the cost
of rearing children.
Three Versions of Income Shares
There are actually three versions of Income Shares guidelines,
and each is used by different states. So the first step in analyzing
a case is determining which formula is employed by that state.
The first version was developed in the early to mid-1980s; the
in the early 1990s; and the third at the end of the 1990s and early
The first was based on a collaborative
effort between Thomas Espenshade and Robert Williams. Thomas Espenshade
is a demographer specializing in immigration issues. He received
a grant to do a one-time study on child costs. His study was published
in a book entitled, Investing in Children: New Estimates of
Parental Expenditures, the Urban Institute Press, 1984. Espenshade
estimated child costs as a share of family net income.
Williams used the net income percentages and developed cost tables
with dollar amounts to be shared between the parents at various
What was Espenshade’s definition
of child costs? He borrowed from a mid-1800s economist, Ernst Engel.
Engel did original research on the above described income equivalence
measures. His idea was to measure some basic measure of consumption
and see how the percentages consumed in families varied by the level
of income and by the number of household members. He found that
the share of income allocated to food consumption declined as income
rose. As family income rises, income is increasingly allocated to
luxury goods and to savings. Engel’s research showed that
families having children boost the percentage of income spent on
food consumption. He believed that when families of different sizes
spend the same percentage of income on food, those families are
equally well off. Engel compared how much additional income would
be needed to restore the family back to its earlier share of spending
on food, thereby restoring the family's standard of living.
In 1984, demographer Thomas Espenshade
used this Engel income equivalence methodology to estimate child
costs in a U.S. national study. As used by Policy Studies, Inc.
to develop Income Shares child support guideline cost tables, Espenshade’s
and Income Share’s first definition for child costs essential
When comparing two families
(one with children and one without children), the child cost
is the difference in total expenditures between the
two families when both consume equal proportions of their budget
The Espenshade-Engel definition
for child costs has been discredited by economists as it is heavily
dependent on children “consuming” food and non-food
items in the same proportion as adults. However, children use food
more than adults in proportion to non-food, and this skews the amount
of income needed to push the family’s share of non-food items
back up to pre-child shares. Child costs are overestimated. It also
uses only food, and seeks standard-of-living equivalence, not child
Income Shares 1990s Definition
for Child Costs
In the early 1990s, PSI asked David Betson of the University of
Notre Dame to revise the Income Shares methodology. He also used
an income equivalence approach, borrowing a technique from Erwin
Rothbarth. The Rothbarth methodology compares changes in levels
of household spending on purely adult goods to determine child costs.
The idea is that looking at pure adult goods reduces the problem
of shifts between adult and shared goods after having a child or
an additional child. For measuring child costs, Betson specifically
uses a particular bundle of adult goods to measure a household's
level of well being-this bundle being adult clothing, alcohol, and
tobacco. In other words, he replaced the food-only indirect measure
with spending in three adult-only areas and switched from shares
of consumption to levels of consumption. Because the cost tables
are based on a Betson version of Rothbarth’s earlier research,
they are sometimes referred to as Betson-Rothbarth tables.
So, what is the Betson-Rothbarth
1990s definition for child costs?
Income Shares Pre-1990s Version
of Child Costs
For intact families – ones with an additional child and ones
with no additional child – the difference in expenditures
between the two families is the child cost when both families consume
equal dollar levels of adult clothing, alcohol and tobacco. Child
costs are defined by comparing changes in consumption of adult clothing,
alcohol, and tobacco.
This definition is dependent on
the assumption that having children does not change adult preferences
for alcohol, tobacco, and adult clothing. However, common sense
tells us that after having children, there is social pressure to
reduce alcohol and tobacco consumption. This leads to overestimating
child costs, similar to the problem with the Espenshade-Engel definition.
Income Shares Definition of Child
Costs, Current Version
By the latter part of the 1990s, David Betson decided that the
broad definition of adult goods – of adult clothing, alcohol,
and tobacco – was not his favored version of the Rothbarth
methodology. There has been no explanation of how such a best
version was determined,
however, Betson conducted a broad updating of the Income Shares
methodology which was funded by the Judicial Council of California.
With this study, Betson concluded that he preferred the Rothbarth
methodology to be based on the adult goods being solely adult
and not including alcohol and tobacco. The study is entitled, Review
of Statewide Uniform Child Support Guideline, 2001, Judicial
Council of California. This version is based on intact family
as are all earlier versions of Income Shares.
Reasons Behind Income Shares’ Overstatement
of Child Costs
Any version of Income Shares leads to an overstatement of child
- Non-recognition of a budget constraint (phantom
or non-existent income is needed to restore the family standard
of living to pre-child status).That is, it carries the assumption
there is or must inevitably be additional income to create an
equivalent standard of living.
- The choice of household food consumption as
a target definition in the old Engel estimator version, and
the choice of adult goods’ share of consumption as a target
definition in the newer version of Income Shares.
- The use of intact families to estimate child
costs ignores the fact that when going from an intact family
to two separate households, that there is increased adult overhead
(two houses) and less money to spend on the children.
Underlying Assumptions of Income Shares Child
The household is intact.
The custodial parent cares
for the children 100 percent of the time and the non-custodial
parent has no parenting costs.
There is additional income
when a child is added to the family to bring the standard of
living back to its previous level.
Tax benefits attributable
to the children are not cost offsets; are not negative costs.
For Engel-Espenshade based
Income Shares guidelines, the best method of estimating child
costs is to compare household consumption percentages of food
(just food) before and after having an additional child.
For Betson-Rothbarth based
Income Shares guidelines the method of estimating child costs
is to compare household consumption levels of alcohol, tobacco,
and adult clothing before and after having an additional child.
For Rothbarth Income shares versions implemented after 2001,
the comparison is with just adult clothing.
To Rebut an Income Shares Presumptive
One would show or argue:
The family is no longer intact
but the cost tables assume the family is intact. Both parents
must incur adult overhead living expenses (mortgage or rent,
utilities, car, etc.) that are no longer shared, thereby reducing
funds available to spend on other goods-including goods for
There is no “phantom
income” as assumed by the income shares methodology beyond
what the parents actually earn. The guideline cost table assumption
should be rebutted because the parents do not earn what the
cost table assumes.
The child-related tax benefit
is significant and is a cost offset that should be recognized
in the child support determination. Income Shares includes the
after-tax income from the tax benefits when deriving the cost
tables but does not treat the benefits as a cost offset when
allocating the costs between the parents.
The non-custodial parent
has (n) percent of the total parenting time, while the
cost tables assume the non-custodial parent has no parenting
time. Equal duty of support standards require that the custodial
parent share the non-custodial parent’s child costs.
Adult consumption patterns
(of food in an Espenshade-Engel Income Shares state, or of alcohol,
tobacco, and adult clothing in a Betson-Rothbarth Income Shares
state, or just adult clothing for the most recent Rothbarth
tables) bear no relationship to the instant case and that a
better methodology is to examine actual expenditures on children.
One should provide an alternative
to the presumptive award. Guideline Economics offers and uses the
model to derive one that is based on appropriate economic assumptions
and principles. Show that the difference between the presumptive
award and the cost-based award (including tax benefits as cost offsets)
would provide the custodial parent with a profit of $______ above
the actual costs of raising the child(ren). Show the dramatic difference
in after-tax, after-child support income for each of the parents
for the presumptive award and for the
award, and then assert that the presumptive award is unjust and