Any American with a pulse knows that 2017 was to be the first overhaul of U.S. Tax Law since 1986.  Until this week, what was circulating through Washington was an 18 page executive summary.  That changed yesterday when the House Republican Tax Policy Committee circulated a draft bill that specified exactly what changes were being proposed.

The draft bill summary merits some review because parts of it will affect most of us.  But the divorce bar was shocked to see that among those tax “loopholes” on the chopping block is the alimony deduction.

Going back to the 16th Constitutional Amendment, which allowed a federal income tax, there has almost always been a deduction to the person paying alimony on the basis that the deduction would be a corresponding income item for the person receiving the payment.  This rule has been uniform.  But, it may be changing now.  Yesterday’s draft proposal has a Section 1309.  It repeals the alimony deduction for agreements and orders entered after December 31, 2017.  What could this mean for you?  You can still make your alimony deal now, but if this law passes and goes into effect, alimony after 2017 that comes out of new agreements or new court orders will not have any transferred tax effect.

Why would Congress care?  After all, payor’s deduction from income becomes payee’s reported income.  Revenue neutral right?  Well, not quite.  Most payors are in higher marginal tax brackets, 31%, 35% and 39.6%.  A dollar of alimony costs the payor 69 cents, 65 cents or 60.4 cents, depending on the bracket.  The payees are usually in 15% or 25% brackets, so the government loses revenue because the payee is reporting the same alimony but paying a lower rate than the payor.  The Republicans say this costs the Treasury about $830 million per annum.  Eliminate the deduction and reduce the deficit or at least help pay for other tax cuts.

In real world terms suppose I enter an agreement on December 31, 2017 and agree to pay $50,000 a year in alimony for five years.  If my tax bracket is 35%, it costs me $32,500.  If my ex-spouse is in a 25% bracket, she reports the $50,000 and gets to keep $37,500 after tax.  The government effectively subsidizes $5,000 of revenue it would otherwise get but for the present scheme.  Under the proposed bill if the agreement is signed on January 1, 2018, I have no deduction and my ex has no income to report.  The payee just got a 25% increase in support based upon the same facts.

Further complicating this is the fact that for more than twenty-five years the Pennsylvania support guidelines have “assumed” that spousal support and unallocated orders of spousal and child support are fully deductible.  The tax assumptions are said to be “cooked into” the guideline numbers themselves.  If the current bill passes, there is some uncooking that needs to be done because the assumptions have now been undone.

Why devote all of this energy to what is just a first draft bill?  After all, this will have to go through many iterations and may change or be eliminated.  True enough with one exception.  2018 is an election year.  Republicans in 2016 told the world that this Congress was going to reform health care and revise the tax laws.  So far, nothing has been accomplished and most legislators will not want to be campaigning this time next year on a “look what wasn’t accomplished” platform.  So, this bill has a good chance of moving very fast and a decade’s long tradition of alimony tax law may recede into the mists of time.  Stay tuned.

The September 7 issue of TIME Magazine features our obsession with childhood sports.  The statistics tell the story.  In 2005, school age children played sports at a combined cost of about $8 billion per annum.  Today that number is about $15 billion, almost double. And, during this same period there was no increase in the population of American children.  About 73 million, then and now.  So, how about household income over the same period?  Nominally, it went from an average of $45,000 to $50,000, but if you adjust for inflation, it actually declined a little bit.

This writer’s conclusion?  Americans are spending money they don’t have on something they want and enjoy but do not need.  The cost of team sports for children is itself frightening.  Time reports these as average costs including enrollment, uniforms and lots of travel:

Lacrosse                $8,000

Ice Hockey            $7,000

Baseball/Softball  $4,000

Football                 $2,700

Soccer                    $1,500

Basketball              $1,150

This is not a sport economics blog but we see this every day in our divorce practices.  Parents fight over the logistics of these sport activities. They fight over who will pay.  They fight over whether the child belongs in the sport and, as we recently noted, whether the risk of injury exceeds the benefit.

As the cost of college rises, we also see many parents eyeing their children’s athletic skills as something they can capitalize upon in the form of athletic scholarships.  Putting money in a 529 plan is a tedious way to prepare for college.  But travel with the child’s team to Baltimore or Richmond to watch 72 hours of continuous soccer is now viewed as an “investment.”  Curiously, as time has passed, emphasis is now focusing on athletic performance at younger ages.  Time reports of colleges following “star” athletes at ages as young as 10.  Middle school is now where the talent is first evaluated.  This means, the sport and the child must be nurtured for seven years before the scholarship is awarded.  And, children are seeing repetitive motion injuries crop up more frequently because many of these sports are now scheduled “year round.”  A gifted basketball player cannot afford to risk his future by playing another sport where he could be injured, or worse-yet, his shooting and passing skills are allowed to wither.

In May, I testified before the Pennsylvania House of Representatives about some possible changes in support guidelines.  The witness before me was a Father who, together with his wife, invested heavily in a child’s future as a competitive snowboarder.  Much of this investment was borrowed using husband’s credit cards.  Shortly after it became clear that son’s snowboarding career did not have much promise, wife departed leaving husband with massive credit obligations.  Then she had the temerity to sue him for support.  He wanted relief from the support guidelines because a lot of his income was paying credit card debt associated with promoting their child’s sport.

I must confess, I did not have much sympathy for either parent.  But, as the Time article observes, modern day parents have difficulty saying “no” to their need driven kids.  What child would not want to go to Baltimore, stay in a hotel and hang with his friends while assembled to play back to back softball games on gorgeous college campuses?  Unfortunately, the psychological community is warning that in addition to premature serious sports injuries, many children and their families are starting to experience competitive sports burnout. Especially where scholarships are involved, many competitions and tournaments are mandatory because that’s where the college coaches and scouts are going to be found.  I spoke recently with a fellow lawyer whose child is still reeling from seeing that her son finished both college and his baseball driven career with nowhere to go.  His persona and all of his goals were erected around his athletic talent and now that talent no longer had value.

This is a bad cycle and one that often robs the children of their physical and emotional well-being while robbing their parents’ purse with little chance of return.  Each year about 400-500,000 high school kids play baseball, soccer and basketball.  Another 1.1 million play football.  The likelihood they will take this skill to the professional world is frighteningly small.  Baseball: 1 in 760; Football: 1 in 600; Soccer: 1 in 800; and, basketball: 1 in 1,860.  Sports have much merit. But all good things must come in moderation.