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?