Tax Code Marriage Penalties: The New Marriage Inequality
September 12, 2015
by Marc Petrine, Câ€™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.
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 donâ€™t line up, so an individual making $300,000 fits in a different set of brackets than an entire family making $300,000.
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.
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.
Why is the U.S. tax and social insurance system set up to punish the nationâ€™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, shouldnâ€™t we encourage it across the board? Why are we rewarding couples that lie to the government and claim they arenâ€™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 governmentâ€™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.
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 havenâ€™t tied the knot yet. They would receive no penalty. Their married neighbors would just receive a bonus. Even if you donâ€™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.
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.
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.
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.
It is the governmentâ€™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. Letâ€™s allow families to enjoy being together instead of worrying about the higher taxes they owe just because they are a family. Letâ€™s extend equality to the tax code as well and make everyone truly equal.
Ellwood, David T., and Isabel V. Sawhill. â€śFixing the Marriage Penalty in the EITC.â€ť Brookings Institute, 2000, 1-10. Accessed July 13, 2015.
Huang, Chye-Ching. â€śWhat Would Congressâ€™s Inaction Cost Working Families? Find Out.â€ť Center on Budget and Policy Priorities. Last modified October 8, 2014. Accessed July 13, 2015.
Pomerleau, Kyle. â€śUnderstanding the Marriage Penalty and Marriage Bonus.â€ť Fiscal Fact, no. 464 (April 2015): 1-10. Accessed July 13, 2015. .
Rector, Robert. â€śMarriage: Americaâ€™s Greatest Weapon Against Child Poverty.â€ť 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. .
 Kyle Pomerleau, â€śUnderstanding the Marriage Penalty and Marriage Bonus,â€ťFiscal Fact, no. 464 (April 2015): accessed July 13, 2015,
 David T. Ellwood and Isabel V. Sawhill, â€śFixing the Marriage Penalty in the EITC,â€ť Brookings Institute, 2000, accessed July 13, 2015.
 Robert Rector, â€śMarriage: Americaâ€™s Greatest Weapon Against Child Poverty,â€ť Backgrounder, no. 2465 (September 10, 2010): accessed July 13, 2015.
 Chye-Ching Huang, â€śWhat Would Congressâ€™s Inaction Cost Working Families? Find Out.,â€ť Center on Budget and Policy Priorities, last modified October 8, 2014, accessed July 13, 2015,
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