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Diplomacy in Action

Economic Impact of Same-Sex Marriage

M.V. Lee Badgett, Ph.D., Research Director of the Williams Institute for Sexual Orientation Law and Public Policy at UCLA
New York - Teleconference, NY
June 19, 2013

11:00 A.M. EDT


MODERATOR: Good morning, everybody. Thanks for joining us on this call. Today’s topic is the economic impact of same-sex marriage, which is a very timely topic given that we’re waiting any day now for the U.S. Supreme Court to rule on the two landmark cases regarding same-sex marriage in the U.S. – Hollingsworth vs. Perry, challenging California’s Proposition 8; and the U.S. v. Windsor, challenging the Defense of Marriage Act, or DOMA.

Speaking to us today is Lee Badgett, who is the research director of the Williams Institute for Sexual Orientation Law and Public Policy at UCLA. Given that, I’m going to turn it over to Lee, and we’ll get started.

MS. BADGETT: Great. Thank you so much. I hope everyone can hear me okay. I believe Ariel distributed some copies of slides that I’ll be speaking from, mainly just so you have everything in front of you. You don’t have to worry about getting the numbers.

I have been doing research on this issue for a while, and it comes up in several different contexts, just to give you a little bit of background. In many of the court cases, including the Perry case, some of these questions have come up. In legislative context, this comes up, and whenever a new state decides to give the right to marry to same-sex couples, suddenly there are (inaudible) door at the county clerk’s office and there are florists running out of flowers and jewelers running out of wedding rings. So these questions come up in lots of different kinds of contexts, ranging from the policymaking to the kind of public sector.

So I just want to walk you through several elements of the economic impact of marriage equality for same-sex couples and then we can talk about them. The first one will be wedding spending, the second one is government budgets, and then finally, I’ll get to the end, to a discussion of implications for businesses in general.

Just to give you a little bit of context, the first substantive slide points out that there are, according to our Census Bureau, about 650,000 same-sex couples living together in the United States right now. From the research that we’ve done, it looks like, in the first three years, about half of those couples would marry when they’re given the opportunity. We have an estimate of about 100,000 couples who have already married in the 13 states that allow same-sex couples to marry. So that means there are still about 225,000, give or take, ready to marry when they have that opportunity. Some of them will wait until they can marry in their own states, but we also know that some get impatient and they will drive to other states, they’ll take buses, planes, trains, and will marry in states that are particularly close by when they have that chance.

So the first economic impact of all those marriages is pretty obvious, because weddings are expensive. An industry report in the United States suggested people – couples are spending roughly $25,000 on average last year for weddings, and that has implications for many different kinds of businesses – hotels, restaurants, florists, photographers, clothing. And in addition, really any kind of business that has some connection to tourism, because one thing we have learned from our research is that couples – same-sex couples, like different-sex couples, sometimes want to get married simply because they want to say in front of other people that they are committed to one another and want to be recognized as family and as a relationship. So they invite lots of people to their weddings.

When those people come from other states and come to Massachusetts or Washington State or Minnesota or wherever they go to get married, they – to wherever they’re getting married, they will be inviting their friends to come in who will be spending money. So all of these things can add up very quickly to – as part of the celebration of this very special day for same-sex couples.

We have – going to the next slide, we have estimated how much spending this might be on basically a state-by-state basis. After five years of marriage equality in Massachusetts, we did a study looking back at how much same-sex couples actually spent on their weddings. They didn’t spend that large average; they spent about $7,400 per wedding on average in those first five years. So we typically – when we make estimates, we take into account that lower spending. We usually estimate that about a quarter of the average will be spent by same-sex couples. But when you add it all up, it’s still quite a bit of money. So Massachusetts gained more than $111 million in the first five years from in-state couples’ weddings.

In other states that we’ve estimated prospectively – in other words, looking forward to give policymakers some sense of what the economic impact might be – we have found, of course, varying degrees of economic benefit to states. It mainly depends on how large those states are and how many same-sex couples they have. So on the smallest end of the spectrum, we have Rhode Island and Delaware, two of the most recent states. Because they have very few same-sex couples, we projected a fairly small boost to spending, but still $7 million more in spending over those three years. And then you could see on up to Washington State is the most – is the biggest state with the most same-sex couples that has recently passed same-sex marriage. And we estimated that they would see about $85 million in new spending.

If you take those 225,000 more couples who, I argued earlier, are likely to want to get married when they have the opportunity, and if you estimate that they will spend about 25 percent of that average U.S. wedding spending, that would add up to $1.4 billion in new spending. Now, I also just want to make the point that that’s a conservative estimate. It may very well be too low as couples are – take the time to plan weddings when their right is more secure. They may actually be able to spend more money. I know from my own experience it takes a lot of time to actually figure out how to do all the things that will mean that you will spend more money when you get married. So I suspect that this is a very conservative estimate, and it could, in fact, be a lot more spending than that.

So that’s the most direct and obvious kind of economic impact that we’ll see in the United States. I’ve done a similar study for Australia a couple of years ago that also showed that they would see a great deal of spending, and the first state in Australia that would see the – that first let same-sex couples get married would also see an enormous boost to spending. So this is an issue that has come up in some other countries as well.

Now I want to turn to thinking about the fiscal implications for government budgets. Of course, governments sometimes – and in the United States, our state government and federal government have programs that provide some kinds of benefits to families, whether that’s to their own employees, public employees who get healthcare benefits, for instance, for themselves and for their family members, or other kinds of public assistance or Social Security benefits. Those are types of benefits that are often discussed in the debate about same-sex marriage. Same-sex couples point to those benefits and they say, “We’re denied those benefits; that’s a harm to us.”

So some policymakers have said – and I have a little quote here from one of them – won’t it just break the bank? If this is all about benefits, then aren’t governments potentially running some risk? And what we’ve found in a long series of studies, actually over – let’s see, I’ve been doing them now for about 16 years, I guess, looking at these fiscal impacts. And what we have consistently found, and other people who have looked at this have found, is that actually, there is net savings for government budgets.

So these rights might be costly, but there are two things in particular that result in savings for states and for the federal government. One is that the support, the economic support that comes to families when they have the right to marry means that they’re probably less likely to need public assistance, cash assistance from government programs. And they will also be less likely to be eligible for those programs. And then the second piece is that some of that wedding spending that I mentioned earlier actually can generate quite a bit of money in sales tax revenue.

So in the states that we’ve looked at, and I’ve got a list on that slide – in Rhode Island, Vermont, California, Massachusetts, New Hampshire, New Jersey – and we predicted this in many different states and we’ve consistently come up with a positive affect. The Congressional Budget Office back in 2004 did a similar study for the federal government, and taking into account all those changes in spending, changes in tax revenue, also looking, in their case, at income tax revenue, they found that there would also be a net savings.

Now, this is not enough to balance the budgets of most state governments, of course, but the point is really less that this is some – an action that states and the federal government should take in order to increase, to boost the net health of the government budget as much as to say that there’s no harmful impact on state or federal governments.

And then the last point I’ll just make is that there is starting to be some research that shows that there’s some additional maybe longer-term benefits that might accrue, not just to same-sex couples and their families, but also, in larger terms, to businesses who fund health insurance benefits and to the federal government, who is increasingly – will be increasingly involved in the healthcare system. There’s evidence that same-sex couples have better health and lower costs when they have the right to marry. So in Massachusetts, a study showed that gay men at a health clinic had fewer healthcare visits and lower healthcare costs after gay marriage was legalized. And what was interesting about that study was that was not just for the men who were in couples, but also men who were not in couples.

In Europe, a study showed that sexually transmitted infections decreased in countries that had some form of legal recognition for same-sex partners. And a very recent study in California that I was a co-author of shows that marriage and domestic partnership are associated with lower psychological distress for lesbian, gay and bisexual people. So those are three early – fairly early studies that suggest that there are likely to be much longer-term implications.

The very last slide, and the last point that I want to make, is that businesses also are seeing this issue of marriage equality as something that’s relevant for them. Now, of course, they might have to cover new spouses in terms of health insurance. That’s our health insurance system in the United States: It mostly comes through employment. But they also see enormous benefits potentially to themselves of having the ability to operate in a state that gives same-sex couples the full right to marry.

In the two cases that Ariel mentioned at the beginning of the briefing, the Windsor case and the Perry case that are before the Supreme Court, two different groups of businesses filed two separate friend of the court, or amicus, briefs in those cases. And some of those businesses were quite large and well known, like Google and Apple, Verizon, Microsoft. And they made the argument that allowing same-sex couples to marry, in the Perry case, or giving married same-sex couples the same rights as married different-sex couples, in the DOMA case, would be supportive of their competitive interests, which they identify themselves as recruiting or retaining the best workers, reducing the administrative burden of the Defense of Marriage Act, where they have to program their computers to treat married same-sex couples differently, and to reduce the harm to their own employees of inequality of treatment that may be hurting their productivity.

And in both of these briefs, the businesses argued that the failure to give same-sex couples the full rights of marriage forces them as employers to violate their core principle of non-discrimination, of treating all their employees equally. And a report that I was a co-author of that came out a couple of weeks ago shows a sizable body of research that now shows that this – these claims of employers are actually borne out in the research, that employees are healthier and are more likely to stay with their employers if their employers treat them equally. And I think employers are saying to the Supreme Court that they want – that they recognize that benefit to themselves and they want to make sure that the Supreme Court is cognizant – excuse me, recognizes that fact as they make their decision.

So overall, just to recap, so these – I’ve kind of started off with the most direct benefits that are the easiest to quantify, but, as I think is clear, the benefits could in fact spread out in a much wider set of arenas, whether it’s health or employment costs, and all of those longer-term benefits are much harder to actually quantify. But we do have good research to suggest that they are, in fact, there.

So with that, I guess I will stop and entertain questions.

MODERATOR: Great. We’ll open it up for questions now. Our operator, Kira, will give you instructions on how to use the system to ask a question.

OPERATOR: Thank you. And ladies and gentlemen on the phone, if you have a question, please press * then 1. You’ll hear a tone indicating that you’ve been placed in queue, and you can remove yourself at any time by pressing the pound key. If you’re using a speakerphone, please pick up your handset before pressing the numbers. Once again, for questions, please press * then 1 at this time.

MODERATOR: And I’ll just – I’ll start off with questions while people are chiming in. Well, actually, we already have one, so I won’t do that. Kira (ph), I’ll let you take Maho Kawachi’s question.

QUESTION: Hi. Good morning. Thank you so much for taking my call. I have two questions. First, when this Census Bureau taken for this – the numbers you gave us? And the second question is: I’m curious why the same-sex couples spend less money for the marriage. Thank you.

MS. BADGETT: Those are two very good questions. The U.S. Census Bureau has – the numbers that I used here come from the 2010 census of the population, so these are actual counts. And the Census Bureau has done a lot of research to adjust their initial counts to reflect some measurement problems that they had detected. So this – the 650,000 is a rounded-up figure from the Census Bureau’s preferred count from 2010.

On the second question about why same-sex couples spend less money, that’s a good question. In Massachusetts, where we have the most direct estimate of the amount of money that they’ve spent, I think it’s possible that one reason why they spent less money was because they were in a big hurry to get married. Massachusetts was the first state to allow same-sex couples to marry. There was going to be a – what turned out to be a two-year-long debate about whether or not that right should be reversed. So I think both the excitement of the opportunity and the uncertainty about how long that opportunity would be available led couples to get married very quickly, and as I said, that might have meant that their ability to plan more elaborate ceremonies was diminished to some extent.

But I think there may also be a couple of other things, other issues at work, and that’s one reason why we tend to estimate this very conservatively. One is it’s possible same-sex couples might not have the support of their families, at least initially, in their efforts to get married, and to the extent that parents provide economic support, that might be missing in some cases. So they don’t have as much money to spend. And then the other reason is that, in many cases, these couples have been together for a long time before they have the right to marry. They might have gotten married a long time before had they had the right. And so sometimes they’ve had commitment ceremonies, for instance, or in some states they might have entered a civil union before marriage was an option. So they might just be having smaller celebrations as a result of that.

QUESTION: Thank you.

MODERATOR: Okay. If we can restate the question instructions.

OPERATOR: Once again, for questions please press * then 1 at this time.

MODERATOR: And while people are dialing in, we – I have a quick question. You mentioned several companies that had filed friends of the court briefs in support of same-sex marriage. Were there any companies that filed briefs on the other side?

MS. BADGETT: That’s a good question. Not that I know of. I didn’t hear of any. There were many briefs that were filed and I don’t recall seeing any from businesses on the other side. The concern that some people have brought forward, kind of on behalf of businesses – I haven’t really heard any businesses make this argument – is that if you have more spouses, you have more people you have to cover in healthcare benefits, and so that would be costly for employers. The employers themselves address that issue by saying there are all these benefits that go along with it.

But the other thing is that if you think about 325,000 same-sex couples total getting – wanting to get married over the first few years, as we estimate, and if you – even if you took all of the same-sex couples, for that matter, and spread them out over the millions of businesses in the United States, most businesses would not see any new same-sex couples or any new spouses of a gay or lesbian employee who would need to sign up for benefits. So the costs would be pretty well spread out and you’d have to be a pretty big business to even have a likely chance of having one of your employees marry a same-sex spouse.

So the cost angle, I think, has not been a major concern.

MODERATOR: Thank you. We have time for another question if there are any. I believe we have one more.

OPERATOR: And we’ll open back up the line of Maho Kawachi. Please (inaudible).

QUESTION: Sorry, again. So this is from the point of view of the, how do you say, the people who would like to marry. But is there – what I would like to say is in June, there are so many advertisement from the, let’s say, department stores or jewelers; they try to capture your sort of consumers, how do you say, who would like to buy.

For same-sex marriage couple, is there any sort of, how do you say, sellers who would like to sell to them, I mean, targeting those consumers? Is there – do you see any trends, like there are many retailers or any kind of sellers who would like to gain their attraction?

MS. BADGETT: Yes, there certainly are. Here in Massachusetts, for example, the – there are groups who put out wedding guides for gay couples who want to get married, and there are advertisements from big hotels, advertising their services. I had – let’s see, I believe it’s Bloomingdale’s in New York has been running ads in The New York Times even, kind of celebrating gay pride and noting their support for gay marriage. They’ve sponsored events. And those are the most obvious examples. There are lots of ads in gay and lesbian magazines and newspapers of people offering services as a wedding planner. Some of those people come from the gay community, but in many cases these are very mainstream businesses that are simply trying to attract new business.

So there definitely is a consciousness amongst the – those parts of the wedding industry or the tourism industry that this is a market that they might be able to tap into.

QUESTION: Thank you.

OPERATOR: We’ll go next to --

MS. BADGETT: Well, and actually I was just going to say too, the other thing – the other place that you see this is in the wedding registries. So lots of companies, lots of retail establishments have made it clear that they welcome same-sex couples to come in and register their weddings, whether it’s Bloomingdale’s or Williams and Sonoma. Different places, different companies like that have made that opportunity available for same-sex couples.

OPERATOR: Well go next to the line of Vanya Bellinger. Please go ahead.

QUESTION: Hi, thanks for doing this. You talked about the benefits on state level, and also companies, for same-sex couples. But there is also the question about the benefits on federal level and those tax benefits. And same-sex couples are not eligible under DOMA. Do you have any idea or some research, what would be that impact on the federal budget?

MS. BADGETT: Yes. The Congressional Budget Office looked at that. It’s been a while now. It was about nine years ago. Some things have changed since then. So they looked at the cost of offering benefits to federal employees’ same-sex partners. They looked at the cost of what the potential tax revenue implications are, which is interesting. You may have heard of the so-called marriage penalty in the U.S. federal income tax system. Some couples reduce their taxes by getting married and some couples actually increase their income taxes by getting married. It kind of depends on the relative incomes of the two people in the couple.

So the traditional kind of couple where one person works in the home, maybe taking care of the kids, and the other person is working on the labor market – that used to be a man and a woman, but now it could be two women or two men – and those more traditional-type couples, they get to average their income and sometimes they get put in a lower tax bracket, so they pay less in taxes. But then other couples, where their incomes are more similar, might actually be pushed into a higher tax bracket, so they might actually pay more in taxes.

So the federal government did some estimates taking that into account and looking at the potential impact on public assistance benefits, looking at the impact on Social Security benefits. So some of those are positive additions or positive benefits for the budget, some will actually make the budget deficit larger, but they average out so that the net effect is actually slightly positive. So it actually improves the budget situation at the federal level.

And I think one way to think about that is that for same-sex couples who have these tax burdens – the one that I think sort of – the Windsor case that’s before the Supreme Court dealt with the issue of the estate tax. And the estate tax is something that you have to actually be quite wealthy to have to pay at the federal level in the United States, and Edie Windsor and her partner’s – her wife’s estate was large when her wife died because they had an apartment that had appreciated in value, but because of that she had to pay $363,000 in estate taxes that she would not have had to pay had their marriage been recognized by the federal government. So that was obviously – that’s a very meaningful sum to her. It’s a very large number. But for the federal government, they would lose that tax revenue, but there are very few people who would end up paying that. So some of these things that seem very large, like they would be large fiscal effects, just kind of get washed out in the larger calculations.

What’s much more common – I would say the most common, costly benefit that same-sex couples don’t have comes from health insurance costs. So in the U.S., when you get health insurance through your employer, it’s not considered taxable income. It’s very valuable, but you don’t pay income taxes on it. And if you’re married to a different-sex spouse, you don’t pay income taxes on the value of the benefits that they get.

Now, this is going to be changing a little bit with the Affordable Care Act, but right now it’s very simple: Nobody pays taxes on their health insurance benefits. But if you’re married to a same-sex spouse, or if you have domestic partner benefits for a same-sex spouse, because of the Defense of Marriage Act, that is considered taxable income. And so a study that I did suggests that on average, people who are getting those benefits for a same-sex spouse or partner are paying at least $1,000 on average more in taxes than they would if their marriage was recognized.

So that’s a benefit that many people get and that for many people would be a gain from having this part of DOMA being struck down. But again, putting it all together, it’s a very small change in the revenues of the federal budget.

OPERATOR: Thank you. Next, we’ll go to the line of Allison Kingery. Please go ahead.

QUESTION: Hello. Thanks for doing this call. I just had a question. You mentioned the two briefs that the companies submitted to the Supreme Court. How much of an impact do you think that will have on the Court as they’re making their decisions in these two cases? Thank you.

MS. BADGETT: That’s a good question. It’s hard to know. I’m not a lawyer, so I’m not a Supreme Court specialist. I think in the case of DOMA, it may be more important because it kind of shows how the harms trickle down in many different ways. But I’m not entirely sure which point of law that might specifically relate to.

But I will say this: I mean, I think although the Supreme Court is supposed to take into account issues related to law, I mean, I think most people think that they are affected by larger public opinion in some generalized way, and having these businesses support the principle of marriage equality in one of the other of these two ways, for these two cases, might have some less – some more generalized effect on their opinions. It’s hard to know.

MODERATOR: Okay. I think that’s it for questions. Thank you, Lee, so much for taking time out of your schedule to give us this very interesting briefing today. I want to remind our listeners that this is part of the New York Foreign Press Center’s Pride Month reporting series on issues affecting the U.S. LGBT community, and that also includes a briefing on immigration law and the LGBT community today at 4:00 p.m., and a briefing on combating violence against LGBT individuals in the U.S., which will be next Friday at noon, both of those briefings taking place at the New York Foreign Press Center.

Thanks again.