One of the tax-related debates of the 2000 Presidential campaign has centered around the so-called "marriage penalty." Because of certain quirks in the US income-tax code, some married couples may pay more in tax each year than they would have had they been single. Generally, this applies when both spouses have similar incomes. About 40% of married couples, according to the Congressional Budget Office (CBO), suffer a marriage penalty (other couples, depending on their incomes, may actually receive a bonus).

Here's an illustration, using 2000's estimated tax brackets. A husband and wife each making $50,000 per year would have a gross income-tax burden of $22,299.50, filing jointly. Were they allowed to file as individuals, they would each pay gross tax of $10,587.50, or $21,175 between the two of them. Being married, therefore, adds $1,124.50 to their tax bill each year.

Now let's say the husband makes $20,000 per year and the wife makes $80,000. Again, their joint tax burden would be $22,299.50; but were they to file as individuals, their combined tax bill would be $22,481. Therefore, this couple would receive a marriage bonus of $181.50 per year.

To tax scholars, a tax is "efficient" if it doesn't distort individual behavior. Some claim that the marriage penalty actually discourages marriage for some couples who want to avoid the additional tax burden. As such, it is inefficient and should be changed. On a more basic (and less politically contentious) level, the argument has been made that the current tax code is inequitable because it penalizes some couples and rewards others, despite the fact that they have the same total family income.

Both major-party Presidential candidates have proposed plans to reduce the marriage penalty:

  • George W. Bush proposes restoring a 10% tax deduction that was available to married couples from 1982-86. Couples would be able to deduct up to a total of $3,000 of income. The CBO estimates that this would reduce the average marriage penalty by about 25% at an annual cost (in lost federal revenues) of $12 billion. About 80% of the tax cuts would benefit households earning $50,000 per year or more.
  • Al Gore favors increasing the standard deduction for joint filers so that it is exactly twice that of single filers. This would, according to the CBO, reduce the average penalty by 6% at an annual cost of $5 billion. It would not offer tax relief to filers who itemize their deductions. About 90% of the tax cuts would benefit households earning $50,000 per year or more.

Determining which candidate's stance to favor has much to do with your individual views. Is the "marriage penalty" unfair? And if so, how much should the government be willing to do to reduce or eliminate it?

Realizing that the U.S. tax code is a spaghetti of ludicrous knots, I am left with a simple question:

Why is it apparently impossible to adjust the code to create exactly the same tax burden whether you file jointly or singly?

Whether the code jogs the tax bill up or down, it is unbalanced if it makes any adjustment based on the marriage status of the filing citizens.

And for another thing, this country got on fine until the first federal income tax when it had to pay for the Civil War (or "War Between the States" for you regionalists) and somebody forgot to repeal the damn thing. I think the war is paid for. So take away my Civil War Penalty!

Some history: the "Marriage Penalty" is political language applied after the fact. If you turn it around and look at it from the other end, it is a tax subsidy for people who are single.

Why would the government want to subsidize being single? Well, before 1969 the tax code considered a married couple to each be earning half of their total income, for purposes of tax. Because we have a progressive tax in the U.S., this meant that married couples with a combined income of $X would pay less tax than a single person earning $X, since the married couple's incomes considered individually as X/2 would fall into a lower tax bracket. So in 1969 they changed the law to try to compensate for this "singles penalty" by making the tax rates better for singles.

In fact, if you were thinking about human economic and social behavior in a sort of naive and old-fashioned way, a tax break for "single" people, ie: people living alone, makes a bit of sense anyway. Dual-income families enjoy economies of scale that single people do not: two people can share a refrigerator, the cable bill, a phone line, and so on. A single person has to do all of that on one income. Of course this is an oversimplification, for obvious reasons: single people find roommates, and married couples don't always have dual incomes. But in this light the marriage penalty is not totally unfair the way it is sometimes made out to be. As an extreme example, blind taxpayers are allowed a larger standard deduction, because of the hardships of not being sighted in a sighted world. Yet no one gets up in the senate and rails against the "sight penalty".

In any case, consider that if you have a progressive tax, and you let married couples combine their incomes in any sort of scheme, it will always be unfair to somebody, because of the way the combined income changes tax brackets. As the law is today, a couple where one person earns all the income has a tax advantage being married; it's only as their incomes become equal that it becomes a "penalty".

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