While I’m on the topic of how your marital status shapes the way you’re affected by major federal legislation – let’s talk taxes! At the end of the year, Congress passed and the President signed a complicated tax package. In covering that news, many media reports mentioned the so-called “marriage penalty.” So let’s get that out of the way first. The Congressional Research Service says
“At all but the lowest and very highest income levels, singles pay higher taxes than married couples. The analysis of the marriage penalty indicates that marriage penalties have largely been eliminated for those without children throughout the middle-income range, but this change has inevitably expanded marriage bonuses. Marriage penalties remain at the high and low income levels and could also apply to those with children, where the penalty or bonus is not very well defined. But by and large, the current system is likely to encourage rather than discourage marriage and favors married couples over singles.”
This CRS report is a brand new update of the 2004 report that was the basis for AtMP’ s original tax policy analysis. If you value this kind of analysis, please donate $30 so I can purchase the new report, read the full detail and update our materials!
Speaking of details, did you know that 56% of taxpayers are unmarried? Due to our lower incomes (simplistically speaking), we paid 27% of all taxes after credits. (I calculated these 2008 figures from IRS data)
The fact that so many unmarried people have relatively low incomes means that we really got the short end of the stick in December’s big tax package. Our friend Shawn Fremstad does a great job of explaining how
some 51 million taxpayers will see their taxes go up in 2011. The vast majority of them—40 million tax units—are low-wage workers with incomes below $35,000. Low-income workers are the only income group that will lose income this year compared to 2010 under the deal.
I agree with Shawn’s suggested solution of “an increase in the EITC for low-wage workers without children.” The EITC, or Earned Income Tax Credit, is often called the U.S.’s biggest anti-poverty program (right up there with Social Security). The excessive impact of marital status on EITC is one policy area where complete ideological opposites can find common ground. I even find myself agreeing with Sam Brownback (and that’s REALLY funny!)
By the way, if you’re thrilled at the thought of further researching marital status & EITC, this student paper from Colgate University has a very nice bibliography and lit review.
The joint return (and special rates for married taxpayers) should be abolished as an incoherent penalty and subsidy of marriage. Joint filing is indefensible as a component of a progressive tax system. Marriage has many benefits, but the benefit most deserving of support is marriage’s connection with parenting. The contemporary reality is that parenting will occur outside of marriage, and parenting has high social benefits and high private costs. Although increased refundable child credits would be the most progressive method of implementing a parenting subsidy, simply retaining head of household status seems more likely.
I couldn’t bring myself to read all of Kornhauser‘s latest article. There’s no debating this, and I choose to see it as a call to action (whether or not that’s what she intended):
The nature of family, marriage, and religion are also important issues in America and the tax debates about the marital unit are an important area in which they are expressed. Consequently, congressional actions and rhetoric regarding the marital unit and marriage penalty—even if primarily symbolic — reaffirm a national commitment to marriage as instrumental to American democracy and tacitly acknowledge a similar importance of religion (which supports marriage).