The first step in calculating child support is to determine the total base support amount. This is “based on the estimated cost of child-rearing” according to the Michigan Child Support Formula (MCSF) and represents how much the state thinks you would have spent on the children had the marriage remained intact.

The following explanation is for a standard case with no children outside of the divorced family and no low-income effects.

### Inputs:

- Total combined net income of the two parents
- Number of children (The graphs and numeric examples are based on 2 children)

### Assumptions:

As parental income rises, the percent of income that goes to child-rearing costs decreases. This is called diminishing marginal expenditures; a sound economic assumption. Why? The costs to feed, shelter and clothe a child form a much greater percent of family income when the family nets $2000 per month rather than, say, $15,000 per month.

### Misperception One:

## true or false?

The formula thinks that parents spend less on their children as income rises.

The formula thinks that parents spend less on their children as income rises. This is a misperception about the formula. The MCSF calculates that child-rearing expenditures increase with income, they just increase at a slower rate as income rises. For example, the USDA estimates the mostexpensive “liberal” diet for two 10-year-old children at approximately $520 per month.

A parent that is already spending this amount will likely not increase child food expenditures, at any income level, even in the event of a significant raise.

### Misperception Two:

The formula thinks that parents who make over $8,855 per month only spend 15% of their income on their children. This misperception, along with the first, results from a misunderstanding about the difference between overall spending and marginal spending. At $10,000 net monthly income, for example, the formula calculates that two parents spend 23.3% of net income on two children overall, not 15%. That 23.3% number excludes and medical and child-care.

At $10,000 monthly income, the marginal increase childrearing spending due to additional income is 15%, but the overall spending is 23.3% of net income. From $10,000, a $1,000 increase in total income to $11,000 results in a 15% increase in total spending. The marginal increase of 15% decreases the overall percent of income from 23.3% to 22.5%.

The marginal spending due to income is 15%, but overall child-rearing spending at $11,000 net income is 22.5%. In fact, the formula never results in only 15% of income going to child-rearing. Technically, even at near-infinite income you are still spending just over 15% according to the State of Michigan, even before medical and child care.

The first chart (fig. 1 tab) shows the state of Michigan’s calculation of the childrearing budget by income.

The blue line is the overall percent of net income spent on the children. The yellow line is the marginal percent. For example, at $6,000 and two children the state calculates that around 27% of net income goes to childrearing (the blue line) before any considerations for medical or child care. If this family has any savings, such as 401k contributions or puts any amount aside for “rainy days,” the percent of expenditures on the children is considerably higher. Also at $6,000, the state calculates that 21% of any additional income will go to the children. A $1,000 monthly raise, for example, results in $210 increased spending on the children each month. If any of that raise goes to increased savings, the amount as a percent of household expenditures is considerably higher than 21%.

The second chart (fig.2 tab) shows total spending per income level, up to $12,000 monthly net income. According to the Michigan Support Manual, this is based on the estimated cost of childrearing in an intact family. The amounts exclude all medical and child care expenses.

Even though the formula sets the marginal spending to 15% for incomes above $8,855 per month, you never get to only 15% overall childrearing spending even at near-infinite income.

According to the formula, to get to a point where you only spend 20% of total net income on your children, total family income must equal $199,680 after taxes. Other key percent points below 20% follow:

- Annual net income required to reach 19% overall child-rearing spending: $249,900 after taxes
- Annual net income required to reach 18% overall child-rearing spending: $332,800 after taxes
- Annual net income required to reach 17% overall child-rearing spending: $499,200 after taxes
- Annual net income required to reach 16% overall child-rearing spending: $998,400 after taxes
- Annual net income required to reach 15.4% overall child-rearing spending, which rounds to 15%: $2,496,000 after taxes

In other words, to reach an income and spending level at which point you are estimated to spend 15.4% of net total income on child-rearing, you must have post-tax annual income of around 2.5 million dollars and spend $1053 on two children every single day. All above numbers exclude medical and child care costs.

Pingback: Child Service Policies | The Parenting Time Offset and Michigan’s “Sum of Days Cubed”