Some sociologists claim that marriage improves the lives of couples and their children, yet the number of married adults in the United States has declined by more than 20 percentage points since 1960. While the reasons for this decline vary, for many, the U.S. tax code discourages marriage. Even among households with equal earnings, the tax code penalizes some marriages while others receive a bonus. Bonuses predominantly occur among married single-earner households while marriage penalties mostly occur among two-earner couples. However, marriage penalties are growing as more women are employed. These penalties could be eliminated by allowing people to choose between filing taxes jointly with their spouses or as single-earners. The existence of marriage penalties and bonuses create three socially undesirable consequences.
First, marriage penalties are regressive, leading to cohabitation among the poorest of society instead of encouraging marriage and family stability. In particular, marriage penalties are assessed against low-income families receiving the Earned Income Tax Credit, or EITC. The EITC provides tax breaks to working lower-income taxpayers based on the number of qualified children and is phased-out as household income rises. Two non-married workers receiving the EITC could actually see their after-tax income decrease if they married. For example, the phase-out of the EITC for two non-married workers with two children potentially begins at $34,180 while the EITC for the married couple begins decreasing at $22,300. Although the decision to marry shouldn't be based on money, the reality and stress of making ends meet may drive low-income workers to not marry and even drive some marriages into divorce. Whether tax policy should encourage marriage or not is open to debate. But, at the very least, the tax code should not penalize marriage.
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EXPERT COMMENTARY
Eliminate the Marriage Tax Penalty
Some sociologists claim that marriage improves the lives of couples and their children, yet the number of married adults in the United States has declined by more than 20 percentage points since 1960. While the reasons for this decline vary, for many, the U.S. tax code discourages marriage. Even among households with equal earnings, the tax code penalizes some marriages while others receive a bonus. Bonuses predominantly occur among married single-earner households while marriage penalties mostly occur among two-earner couples. However, marriage penalties are growing as more women are employed. These penalties could be eliminated by allowing people to choose between filing taxes jointly with their spouses or as single-earners. The existence of marriage penalties and bonuses create three socially undesirable consequences.
First, marriage penalties are regressive, leading to cohabitation among the poorest of society instead of encouraging marriage and family stability. In particular, marriage penalties are assessed against low-income families receiving the Earned Income Tax Credit, or EITC. The EITC provides tax breaks to working lower-income taxpayers based on the number of qualified children and is phased-out as household income rises. Two non-married workers receiving the EITC could actually see their after-tax income decrease if they married. For example, the phase-out of the EITC for two non-married workers with two children potentially begins at $34,180 while the EITC for the married couple begins decreasing at $22,300. Although the decision to marry shouldn't be based on money, the reality and stress of making ends meet may drive low-income workers to not marry and even drive some marriages into divorce. Whether tax policy should encourage marriage or not is open to debate. But, at the very least, the tax code should not penalize marriage.
Continue Reading
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