If Your State Uses the Percentage of Obligor Income (Wisconsin) Model

This is the one type of guidelines that the federal government recommended against. A Federal Advisory Panel on Child Support reviewed several types of guidelines. It recommended that states enact either the Income Shares model or Delaware-Melson model. Both the these models received favorable recommendations since they more closely followed family spending patterns on child costs and generally took into account the self-sufficiency needs of low-income obligors. (Though even they suffer from many similar flaws, and this recommendation does not mean they actually do meet the government’s own requirements.)

From the 1987 Federal Development of Guidelines manual:

The Advisory Panel recommends that states use either the Income Shares model or Delaware-Melson formula as the basis for their child support guidelines. [page I-15].

Second, unlike some approaches [such as percent of obligor models], both the Income Shares and Melson formula count income of both parents in determining the amount of child support awards. [page I-16].

Third both the Income Shares model and the Melson formula allow for the subsistence needs of each parent. It is neither realistic nor appropriate to expect that a parent can or should pay substantial amounts of child support until providing for his or her own basic needs. [page I-16].

The Wisconsin standard is designed to act like an income tax. With only two primary parameters, gross income and number of children, the Wisconsin standard is intended to be applied automatically by employers under a statewide holding system. However, the administrative benefit of simplicity may be obtained at the price of loss of equity because it does not provide treatment for certain key factor (e.g. custodial parent income, child care expenses). Because the Wisconsin standard is designed as a constant percentage of gross income, it also has the effect of setting orders as an increasing percentage of net income as obligor income rises. This effect is contrary to the economic evidence on actual child rearing expenditures.

— Development of Guidelines for Child Support Orders, U.S. Department of Health and Human Services, September 1987, page II-126.

Origin and Original Intent of the Percent of Obligor Income Model
Obligor-only child support guidelines in the U.S. are based on those developed for the State of Wisconsin. The Wisconsin regulatory code specifically points to the origins. Chapter HSS 80 of the Wisconsin State Register, January 1987, No. 373, is entitled, “Child Support Percentage of Income Standard.” This chapter's introduction explains the alleged academic underpinnings for this particular obligor only child support model. As seen in Section HSS 80.01:

The percentage standard established in this chapter is based on an analysis of national studies, including a study done by Jacques Van der Gaag as part of the Child Support Project of the Institute for Research on Poverty, University of Wisconsin, Madison, entitled “On Measuring the Cost of Children,” which disclose the amount of income and disposable assets that parents use to raise their children. [FN1]

Wisconsin’s Guidelines Were Never Intended by the Original Researchers to Apply to Situations Other than Low Income or Low Benefits
Based on early papers providing the technical foundations for Wisconsin’s child support guidelines, the guidelines were originally developed for only welfare situations. (In research papers, the child support obligation is described as a “tax” since it was for automatic with-holding as with other taxes.) The intent was for both parents’ income to be part of the formula and that there be a maximum level of benefits (child support).[FN 2] Wisconsin’s child support guidelines originally were intended to be applied to only very limited circumstances. The concept was to exempt some income for basic living needs, to require the custodial parent to pay for any difference between guaranteed welfare benefits and what the non-custodial parent could pay, and to cap the welfare benefits at the level of welfare payments so that the “tax” (child support obligation) was regressive for the obligor (reduced as a percentage of income as income rose, providing for normal incentive to earn).

It is also well documented that the original concept of Wisconsin’s child support plan was based on a modest level of publicly guaranteed benefits to the child with the state’s objective to recovery the costs of those benefits from both parents as much as was practical. These guidelines were never intended to be extended beyond low-income situations or beyond low benefit guarantees.[FN3]

Additionally, under the tax code that existed at the time when these welfare guidelines were designed, low-income obligors had a very, very low tax rate so using gross income was a reasonable simplification. They were never intended to be applied to cases in which the obligor paid a notable amount in income taxes.  Importantly, it was assumed the mother – the custodial parent – did not have any income.  This was why the welfare guideline was obligor-only: the other parent's income could be factored in but it would be zero.

In its rush to comply with the Family Support Act of 1988, the Wisconsin legislature delegated guideline authority to the Wisconsin Department of Health and Social Services which in turn administratively chose to use welfare percentages in non-welfare cases. Essentially, Wisconsin and states adopting their guidelines for general use conflict with the underlying economic study and originally intended use, as indicated by the very study on which it is based.[FN4]  Also, a federal advisory panel recommended that only use guidelines that take into account both parents' incomes.[FN5]

The Wisconsin Guidelines Were Intended to be Applied to the Specific Circumstances of Welfare with the Following Economic Circumstances

This guideline is designed only for welfare cases and only when other additional conditions are met. To rebut the economic appropriateness of the presumptive award one need only show that the following or most of the following are not applicable to the case at hand:

• The combined gross income of the parents is $_______ and is significantly above the underlying study's assumption that the household is low income ($12,000 in combined year 1982 income, or $21,023 in year 2001 combined gross income). The household is not low income and has child spending patterns different from low income households: the child cost percentages are lower.
  
• The custodial parent earns $______ outside the home, in contrast to the underlying assumption of no income for the custodial parent.
  
• The custodial parent receives the child-related tax benefits, in contrast to the guideline assumption that the non-custodial parent receives any tax benefits.
  
• The non-custodial parent is in a relatively high tax bracket, in contrast to the underlying assumption of a low income tax burden. State the non-custodial parent's marginal tax rate (federal, state, Social Security, and Medicare).
  
• The non-custodial parent has ___ 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.
  
• The current case is not a welfare case. The percentages are not intended to be applied beyond the amount of obligor income needed for recovering a welfare payment made to the custodial parent.

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 economically inappropriate.

 

[FN1] Wisconsin, State of, Register, January 1987, No. 373, Chapter HSS 80, p. 316-1.   [RETURN]

[FN2] Institute for Research on Poverty, University of Wisconsin-Madison. "Documentation of the Methodology Underlying the Cost Estimates of the Wisconsin Child Support Program," Child Support: Technical Papers, Volume III, SR32C, Special Report Series, 1982, pp. 143-144.   [RETURN]

[FN3] Institute for Research on Poverty, University of Wisconsin-Madison. Child Support: A Demonstration of the Wisconsin Child Support Reform Program and Issue Papers, Volume II, SR32B, Special Report Series, 1981, p. 51.   [RETURN]

[FN4] Apparently, the only appeals case to address the issue of using child support guidelines designed for welfare cases in non-welfare situations was in Oregon. Although not in the context of constitutional issues, the Oregon Supreme Court in Smith v. Smith, 626 P2d 342 (1981) stated that it is not appropriate to use welfare guidelines in higher income situations, citing a long list of economic and equity reasons ( many repeated in this article).   [RETURN]

[FN5] See the recommendation of the Federal Advisory Panel on Child Support Guidelines, appointed by the U.S. House Ways & Means Committee in Robert G. Williams, Development of Guidelines for Child Support Orders, U.S. Department of Health and Human Services, Office of Child Support Enforcement, September 1987, p.I-16.   [RETURN]

[FN6] Institute for Research on Poverty, University of Wisconsin-Madison. "Documentation of the Methodology Underlying the Cost Estimates of the Wisconsin Child Support Program," Child Support: Technical Papers, Volume III, SR32C, Special Report Series, 1982, pp. 143-144.   [RETURN]