• <div class="header-image" style="background-image: url(/live/image/gid/4/2635_V6N3_Header.rev.1522162449.jpg);">​</div><div class="header-background-color"/>

Tax Code Marriage Penalties: The New Marriage Inequality

September 12, 2015
There has been plenty of talk about marriage in the news lately. On June 26, in the landmark case of Obergefell v. Hodges, The Supreme Court decided that, “the Fourteenth Amendment requires a State to license a marriage between two people of the same sex and to recognize a marriage between two people of the same sex when their marriage was lawfully licensed and performed out-of-State.” Although the legal status of gay marriage is now protected under constitutional law, there are economic implications of this ruling that still need to be resolved.

by Marc Petrine, C’17

For instance, marriage has tax implications, which are very complicated and mean different things for different couples. Some married couples pay more taxes while others pay less. For example, under the current federal tax code, if a married couple made $300,000 ($150,000 made by each partner) then they would either pay $83, 232.50 if they filed separately or $87,039.00 if they filed together.[1]

How could this be? The Tax Code allows married couples to either file together or file separately. If they file separately, their taxes are calculated based on the individual set of marginal tax brackets laid out in the code. If they file together, then taxes are calculated based on a completely separate set of brackets. Confusingly, these brackets don’t line up, so an individual making $300,000 fits in a different set of brackets than an entire family making $300,000.[2]

Overall, this system of non-equivalent brackets punishes high-income married couples and discourages them from marrying (or at least telling the IRS they are married).

However, low income households also suffer from marriage penalties in the tax code that cannot be explained by the differences in the two different bracket systems. The Earned Income Tax Credit (EITC) causes most of the disparity between married and unmarried couples at low incomes. For example, a couple where both partners make $15,000 would lose more than $3,000 from the EITC if they married and filed jointly.[3]

In addition to paying more taxes, low income households lose a significant slice of welfare benefits from marrying. The Supplemental Nutritional Assistance Program (SNAP or Food Stamps) is one benefit that is negatively affected by marriage. A mother with two children making $15,000 who marries a partner who also makes approximately $15,000 would lose $5,200 worth of food stamp benefits.[4]

Why is the U.S. tax and social insurance system set up to punish the nation’s wealthiest and poorest for getting married? With all of the benefits that marriage gives to both the partners and the possible children in the household, shouldn’t we encourage it across the board? Why are we rewarding couples that lie to the government and claim they aren’t married or file as individuals? Congress is a big advocate for marriage and has tried to increase the benefits of marriage in the tax code, especially for the middle class. In fact, there are very large marriage bonuses for the middle class in the tax code due to the nature of the marginal tax bracket system. Yet, these benefits do not reach the poor or the rich. In some ways, this is because of the nature of our progressive tax system. In others, it is caused by the government’s desire to create equality between married and unmarried couples while also giving benefits to those who are married. In effect, this causes a segment of the population (the middle class) to benefit from marriage while the rest of the population pays for it.

The government should attempt to incentivize marriage in the tax code across the board. It is clear that marriage benefits society in some way that should be rewarded and encouraged. Married couples create more stable households for children to grow up in and in turn the children that grow up in these married households become more successful. They are more likely to be more educated and less likely to be in poverty as well.[5]

Encouraging marriage with tax incentives at all income levels will lead to a healthier, wealthier, and smarter society. This is not to say that we should punish individuals who are single or couples that haven’t tied the knot yet. They would receive no penalty. Their married neighbors would just receive a bonus. Even if you don’t find marriage to be inherently better for society than being single, it must be true that it is at least equal to being single. If married couples and individuals are equal in our minds, then they should at least be equal in the tax code as well. Whether you think marriage should be rewarded in the tax code or if it should be on equal footing with being single it is clear that marriage penalties need to be reduced across the board

The tax code can be reformed in a few key areas to create marriage bonuses across the board. Currently, the poorest Americans (households making under $50,000) and the richest Americans (those making above $250,000) are being hit by marriage penalties the worst. While the middle class is negatively affected part of the time (when they have children or when income is evenly split among spouses), in general they are usually the recipients of marriage bonuses due to the tax code.[6]

In order to combat the marriage penalties that affect the middle class and the wealthy, we must widen the tax brackets for families that file jointly so that they at least match the brackets if a couple filed individually. In effect, this would mean that the joint tax brackets would be exactly double the individual tax brackets. Congress has attempted to move in this direction but very slowly as they are worried about the unforeseen consequences of changing the brackets.[7]

To address the marriage penalties for the poor, an entirely different approach needs to be taken. As stated before, both welfare benefits and the Earned Income Tax Credit cause marriage penalties to fall on poor married couples. Already, Congress has created an EITC marriage penalty relief package which allows married households to qualify for EITC even if they make $5,000 more than an individual filer. However, this provision may expire in 2017 and it still does not erase the entire marriage penalty that some couples undergo.[8]

Furthermore, the burden that reduced food stamps and housing packages (and various other welfare programs) put on families is still not addressed. We need to add provisions in the key welfare programs like SNAP so that individuals who marry do not lose their benefits. The current system weakens new families and households and pushes them to stay separate in the eyes of the law.[9]

It is the government’s job to incentivize good behavior and many accept that marriage is a good behavior. However, even if you find this claim controversial, marriage should at least be equitable with being single in the tax code. All marriage penalties should be erased. Maybe all marriages are equal under the law now with the most recent Supreme Court decision on gay marriage. In the eyes of the tax code though, they still are not and in many ways they are worse financially than being single. Let’s allow families to enjoy being together instead of worrying about the higher taxes they owe just because they are a family. Let’s extend equality to the tax code as well and make everyone truly equal.

Bibliography

Ellwood, David T., and Isabel V. Sawhill. “Fixing the Marriage Penalty in the EITC.” Brookings Institute, 2000, 1-10. Accessed July 13, 2015. 

Huang, Chye-Ching. “What Would Congress’s Inaction Cost Working Families? Find Out.” Center on Budget and Policy Priorities. Last modified October 8, 2014. Accessed July 13, 2015. 

Pomerleau, Kyle. “Understanding the Marriage Penalty and Marriage Bonus.” Fiscal Fact, no. 464 (April 2015): 1-10. Accessed July 13, 2015. . 

Rector, Robert. “Marriage: America’s Greatest Weapon Against Child Poverty.” Backgrounder, no. 2465 (September 10, 2010): 1-16. Accessed July 13, 2015. 

Williams, Roberton. The Tax Policy Briefing Book. Washington, DC: Tax Policy Center, 2008. Accessed July 13, 2015. .

  [1] Kyle Pomerleau, “Understanding the Marriage Penalty and Marriage Bonus,”Fiscal Fact, no. 464 (April 2015): accessed July 13, 2015, 

  [2] Ibid.

  [3] Kyle Pomerleau, “Understanding the Marriage Penalty and Marriage Bonus,”

  [4] David T. Ellwood and Isabel V. Sawhill, “Fixing the Marriage Penalty in the EITC,” Brookings Institute, 2000, accessed July 13, 2015.

  [5] Robert Rector, “Marriage: America’s Greatest Weapon Against Child Poverty,” Backgrounder, no. 2465 (September 10, 2010): accessed July 13, 2015.

  [6] Kyle Pomerleau, “Understanding the Marriage Penalty and Marriage Bonus,”

  [7] Ibid.

  [8] Chye-Ching Huang, “What Would Congress’s Inaction Cost Working Families? Find Out.,” Center on Budget and Policy Priorities, last modified October 8, 2014, accessed July 13, 2015,

  [9] Kyle Pomerleau, “Understanding the Marriage Penalty and Marriage Bonus,”

Student Blog Disclaimer
  • The views expressed on the Student Blog are the author’s opinions and don’t necessarily represent the Penn Wharton Public Policy Initiative’s strategies, recommendations, or opinions.

PENN WHARTON PPI
RESOURCE SPOTLIGHT:

  • <h3>NOAA National Climatic Data Center</h3><p><img width="200" height="198" alt="" src="/live/image/gid/4/width/200/height/198/483_noaa_logo.rev.1407788692.jpg" class="lw_image lw_image483 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/200/height/198/483_noaa_logo.rev.1407788692.jpg 2x, /live/image/scale/3x/gid/4/width/200/height/198/483_noaa_logo.rev.1407788692.jpg 3x" data-max-w="954" data-max-h="945"/>NOAA’s National Climatic Data Center (NCDC) is responsible for preserving, monitoring, assessing, and providing public access to the Nation’s treasure of <strong>climate and historical weather data and information</strong>.</p><p> Quick link to home page: <a href="http://www.ncdc.noaa.gov/" target="_blank">http://www.ncdc.noaa.gov/</a></p><p> Quick link to NCDC’s climate and weather datasets, products, and various web pages and resources: <a href="http://www.ncdc.noaa.gov/data-access/quick-links" target="_blank">http://www.ncdc.noaa.gov/data-access/quick-links</a></p><p> Quick link to Text & Map Search: <a href="http://www.ncdc.noaa.gov/cdo-web/" target="_blank">http://www.ncdc.noaa.gov/cdo-web/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>MapStats</h3><p> A feature of FedStats, MapStats allows users to search for <strong>state, county, city, congressional district, or Federal judicial district data</strong> (demographic, economic, and geographic).</p><p> Quick link: <a href="http://www.fedstats.gov/mapstats/" target="_blank">http://www.fedstats.gov/mapstats/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>The Penn World Table</h3><p> The Penn World Table provides purchasing power parity and national income accounts converted to international prices for 189 countries/territories for some or all of the years 1950-2010.</p><p><a href="https://pwt.sas.upenn.edu/php_site/pwt71/pwt71_form.php" target="_blank">Quick link.</a> </p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>HUD State of the Cities Data Systems</h3><p><strong><img width="200" height="200" alt="" src="/live/image/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg" class="lw_image lw_image482 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg 2x, /live/image/scale/3x/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg 3x" data-max-w="612" data-max-h="613"/>The SOCDS provides data for individual Metropolitan Areas, Central Cities, and Suburbs.</strong> It is a portal for non-national data made available through a number of outside institutions (e.g. Census, BLS, FBI and others).</p><p> Quick link: <a href="http://www.huduser.org/portal/datasets/socds.html" target="_blank">http://www.huduser.org/portal/datasets/socds.html</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>National Bureau of Economic Research (Public Use Data Archive)</h3><p><img width="180" height="43" alt="" src="/live/image/gid/4/width/180/height/43/478_nber.rev.1407530465.jpg" class="lw_image lw_image478 lw_align_right" data-max-w="329" data-max-h="79"/>Founded in 1920, the <strong>National Bureau of Economic Research</strong> is a private, nonprofit, nonpartisan research organization dedicated to promoting a greater understanding of how the economy works. The NBER is committed to undertaking and disseminating unbiased economic research among public policymakers, business professionals, and the academic community.</p><p> Quick Link to <strong>Public Use Data Archive</strong>: <a href="http://www.nber.org/data/" target="_blank">http://www.nber.org/data/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Federal Reserve Economic Data (FRED®)</h3><p><strong><img width="180" height="79" alt="" src="/live/image/gid/4/width/180/height/79/481_fred-logo.rev.1407788243.jpg" class="lw_image lw_image481 lw_align_right" data-max-w="222" data-max-h="97"/>An online database consisting of more than 72,000 economic data time series from 54 national, international, public, and private sources.</strong> FRED®, created and maintained by Research Department at the Federal Reserve Bank of St. Louis, goes far beyond simply providing data: It combines data with a powerful mix of tools that help the user understand, interact with, display, and disseminate the data.</p><p> Quick link to data page: <a href="http://research.stlouisfed.org/fred2/tags/series" target="_blank">http://research.stlouisfed.org/fred2/tags/series</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Federal Aviation Administration: Accident & Incident Data</h3><p><img width="100" height="100" alt="" src="/live/image/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg" class="lw_image lw_image80 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg 2x, /live/image/scale/3x/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg 3x" data-max-w="550" data-max-h="550"/>The NTSB issues an accident report following each investigation. These reports are available online for reports issued since 1996, with older reports coming online soon. The reports listing is sortable by the event date, report date, city, and state.</p><p> Quick link: <a href="http://www.faa.gov/data_research/accident_incident/" target="_blank">http://www.faa.gov/data_research/accident_incident/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Internal Revenue Service: Tax Statistics</h3><p><img width="155" height="200" alt="" src="/live/image/gid/4/width/155/height/200/486_irs_logo.rev.1407789424.jpg" class="lw_image lw_image486 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/155/height/200/486_irs_logo.rev.1407789424.jpg 2x" data-max-w="463" data-max-h="596"/>Find statistics on business tax, individual tax, charitable and exempt organizations, IRS operations and budget, and income (SOI), as well as statistics by form, products, publications, papers, and other IRS data.</p><p> Quick link to <strong>Tax Statistics, where you will find a wide range of tables, articles, and data</strong> that describe and measure elements of the U.S. tax system: <a href="http://www.irs.gov/uac/Tax-Stats-2" target="_blank">http://www.irs.gov/uac/Tax-Stats-2</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>USDA Nutrition Assistance Data</h3><p><img width="180" height="124" alt="" src="/live/image/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg" class="lw_image lw_image485 lw_align_right" srcset="/live/image/scale/2x/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg 2x, /live/image/scale/3x/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg 3x" data-max-w="1233" data-max-h="850"/>Data and research regarding the following <strong>USDA Nutrition Assistance</strong> programs are available through this site:</p><ul><li>Supplemental Nutrition Assistance Program (SNAP) </li><li>Food Distribution Programs </li><li>School Meals </li><li>Women, Infants and Children </li></ul><p> Quick link: <a href="http://www.fns.usda.gov/data-and-statistics" target="_blank">http://www.fns.usda.gov/data-and-statistics</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>National Center for Education Statistics</h3><p><strong><img width="400" height="80" alt="" src="/live/image/gid/4/width/400/height/80/479_nces.rev.1407787656.jpg" class="lw_image lw_image479 lw_align_right" data-max-w="400" data-max-h="80"/>The National Center for Education Statistics (NCES) is the primary federal entity for collecting and analyzing data related to education in the U.S. and other nations.</strong> NCES is located within the U.S. Department of Education and the Institute of Education Sciences. NCES has an extensive Statistical Standards Program that consults and advises on methodological and statistical aspects involved in the design, collection, and analysis of data collections in the Center. To learn more about the NCES, <a href="http://nces.ed.gov/about/" target="_blank">click here</a>.</p><p> Quick link to NCES Data Tools: <a href="http://nces.ed.gov/datatools/index.asp?DataToolSectionID=4" target="_blank">http://nces.ed.gov/datatools/index.asp?DataToolSectionID=4</a></p><p> Quick link to Quick Tables and Figures: <a href="http://nces.ed.gov/quicktables/" target="_blank">http://nces.ed.gov/quicktables/</a></p><p> Quick link to NCES Fast Facts (Note: The primary purpose of the Fast Facts website is to provide users with concise information on a range of educational issues, from early childhood to adult learning.): <a href="http://nces.ed.gov/fastfacts/" target="_blank">http://nces.ed.gov/fastfacts/#</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>The World Bank Data (U.S.)</h3><p><img width="130" height="118" alt="" src="/live/image/gid/4/width/130/height/118/484_world-bank-logo.rev.1407788945.jpg" class="lw_image lw_image484 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/130/height/118/484_world-bank-logo.rev.1407788945.jpg 2x, /live/image/scale/3x/gid/4/width/130/height/118/484_world-bank-logo.rev.1407788945.jpg 3x" data-max-w="1406" data-max-h="1275"/>The <strong>World Bank</strong> provides World Development Indicators, Surveys, and data on Finances and Climate Change.</p><p> Quick link: <a href="http://data.worldbank.org/country/united-states" target="_blank">http://data.worldbank.org/country/united-states</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Congressional Budget Office</h3><p><img width="180" height="180" alt="" src="/live/image/gid/4/width/180/height/180/380_cbo-logo.rev.1406822035.jpg" class="lw_image lw_image380 lw_align_right" data-max-w="180" data-max-h="180"/>Since its founding in 1974, the Congressional Budget Office (CBO) has produced independent analyses of budgetary and economic issues to support the Congressional budget process.</p><p> The agency is strictly nonpartisan and conducts objective, impartial analysis, which is evident in each of the dozens of reports and hundreds of cost estimates that its economists and policy analysts produce each year. CBO does not make policy recommendations, and each report and cost estimate discloses the agency’s assumptions and methodologies. <strong>CBO provides budgetary and economic information in a variety of ways and at various points in the legislative process.</strong> Products include baseline budget projections and economic forecasts, analysis of the President’s budget, cost estimates, analysis of federal mandates, working papers, and more.</p><p> Quick link to Products page: <a href="http://www.cbo.gov/about/our-products" target="_blank">http://www.cbo.gov/about/our-products</a></p><p> Quick link to Topics: <a href="http://www.cbo.gov/topics" target="_blank">http://www.cbo.gov/topics</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>