Marriage Tax Penalty / Marriage Tax Bonus and Other Marriage Bonuses -- How Singles and Unmarrieds Are Discriminated Against (and where in some cases marrieds are discriminated against) ( mr-index.html )

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Contents Of This Site


Index and Summary (this page) -- mr-index.html

MarriageTaxPenalty.xlsx Excel Workbook -- This workbook shows the marriage bonus / penalty for several years including 2000, 2004, 2017, and 2018 as a function of combined gross income and of the ratio of earnings of the two partners / spouses. These show much larger tables (more income levels, more columns) than the ones in this document. They also show the marriage penalty / bonus as a percentage of combined gross income, and as a percentage of the tax that the married couple pays.

The year 2000 was before the Bush tax cuts. Studies by the Congressional Budget Office found a net marriage bonus of $10.3 Billion in their main "Basic Model" of tax-savvy collaborating couples, and a $49 billion marriage bonus in their alternative "Divorce Model". In contrast, the Treasury Department found a relatively small $1.6 Billion net marriage penalty in their main scenario that compared a married couple to a tax savvy collaborating unmarried couple. However, the vast majority of singles are not part of a live-together tax savvy collaborating couple, so such a study is irrelevant to the situation of most unmarrieds/singles. And this is before the Bush and Trump large expansion of married couples' tax brackets and standard deduction relative to singles.

2004 is after the Bush tax cuts which reduced the frequency and size of marriage penalties and increased the frequency and size of marriage bonuses, resulting in an overall increase in the net marriage bonus (which on the flipside is the net singles' penalty). This was done by increasing the married's standard deduction and the width of the married's 10% and 15% tax brackets relative to those of singles. Treasury researches found a net marriage bonus of $30 billion in 2004 [7]. This net marriage bonus averages $577/couple ($772 / couple in 2018 dollars ) -- a marriage subsidy paid for by singles.

2017 is very similar to 2004 (after inflation adjustments), we include it because it is very recent and the last year before the Trump / Republican Tax Cuts and Jobs Act (TCJA) tax cuts take effect, except for a few minor special provisions that were made retroactive to 2017.

2018 is the first year the TCJA takes full effect. It greatly expanded the the net marriage bonus (which on the flipside is the net singles' penalty) for three tax brackets above the 12% tax bracket (formerly the 15% tax bracket). Now, except for some low-income people affected by the Earned Income Credit, the marriage bonus / singles penalty is almost universal up to combined adjusted gross incomes of $624,100.

Abbreviations

MFJ - Married Filing Jointly
EIC - Earned Income Credit,   Earned Income Tax Credit




Table of Contents


A. Late 1990's Studies of Marriage Penalties and Bonuses by the Congressional Budget Office (CBO) and the Treasury Department Office of Tax Assessment (OTA)

B. The Bush Tax Cuts and Changes Increased Marriage Bonuses and Reduce Marriage Penalties

B.1. Expansion of the 15% tax bracket width (and new 10% bracket width) for Married Filing Jointly To Double the Singles' Width

B.2. Standard deduction for Married Filing Jointly Increased To Double That Of Singles

B.3. Overall net marriage bonuses (which are net overall singles penalties) occur even when bracket widths and standard deductions for MFJ's are less than 2 times those of singles

B.4. Earned Income Credit (EIC) (also known as the Earned Income Tax Credit or EITC)

B.5. Treasury researchers' study of the impact of the Bush Tax Changes

C. The Trump Tax Cuts and Jobs Act (TCJA) further increased bonuses and reduced marriage penalties

D. Tables that illustrate how marriage bonuses and penalties changed between 2000 (before the Bush tax cuts) and 2018 - (after the Bush and Trump tax cuts)

D.1. Important Assumption Made In The Below Table:

D.2. Two People are Always Compared to Two People. Also Terminology: "unmarried" "single" and all that

D.3. Examples or Marriage bonuses and penalties, or equivalently, singles' penalties and bonuses

E. On top of all this, there are many other ways that marrieds benefit in the tax code and benefit programs

F. It's not hopeless

Appendix A - Expansion of the 15% tax bracket width (and new 10% bracket width) for Married Filing Jointly To Double the Singles' Width During 2001-2003

Sources and Footnotes





A. Late 1990's Studies of Marriage Penalties and Bonuses by the Congressional Budget Office (CBO) and the Treasury Department Office of Tax Assessment (OTA)

Several studies by the Congressional Budget Office (CBO) and the Treasury Department Office of Tax Assessment (OTA) have found that while many married couples pay a tax penalty "the marriage penalty" or "the marriage tax penalty", and even larger number of married couples get a marriage bonus (pay less taxes than they would if they were two singles).

According to the Congressional Budget Office (CBO) 1999 study's Basic Model, 52% of MFJ (Married Filing Jointly) couples received a marriage bonus (in that they paid LESS in basic federal income taxes than they would if unmarried). While 43% paid a marriage penalty (paid MORE in basic federal income taxes than they would if unmarried). And the average marriage bonus ($1,600), exceeded the average marriage penalty ($1,480). The net marriage bonus -- the total of all marriage bonuses less the total of all marriage penalties -- was $10.3 billion.

The CBO studies compared a married couple -- filing MFJ (married filing jointly) -- to the same couple but unmarried and filing as two singles, or as head(s) of households when children are involved.

In the Basic Model above, an unmarried couple using a tax-minimizing strategy is being compared to a married couple.

In an alternative study, the Divorce Model, the CBO compared married couples to unmarried couples that did not collaborate at all to reduce their taxes. Using that assumption, they came up with a 49.0 B$ net marriage bonus.

Realize that the Divorce Model doesn't just apply to non-communicating divorced couples. It also fits the situation of the vast majority of singles who have no one to legally collaborate with for tax-reduction purposes.

To express these 1999 amounts in 2018 dollars, multiply by about 1.5.

The 1999 Treasury Department's Office of Tax Assessment (OTA) Study found a slight net marriage penalty of $1.6 billion. They assumed the unmarrieds were very tax-savvy collaborating couples (which doesn't fit the vast majority of unmarried/single people).

All of the above is per the CBO and Treasury OTA studies, which are summarized and discussed in the March 2001 Congressional Research Service report [1]. These studies all included the Earned Income Credit and the child tax credits.

But the politicians and the media mostly presented only one side of it -- the side about those half of affected married couples that paid a marriage tax penalty. Seldom mentioned were the half of affected married couples that were getting bonuses. From what we have read and heard, anyway.

It's important to understand that the flip side of a marriage bonus is a singles' penalty. If two singles can pay less taxes by getting married, then they are being penalized for being single.

In this work, singles tax penalties are the negative of marriage tax penalties. For example, a $300 marriage penalty is the same thing as a $300 singles' bonus. And a $300 marriage bonus is the same thing as a $300 singles' penalty. We often switch from one way of expressing it to the other way, depending on the context.

Basic federal income taxes - what we mean by the basic federal income tax structure is just the part that generated all of the "marriage tax penalty" controversy -- the part about where some married couples (filing jointly) pay a penalty because the width of tax brackets for marrieds was not double that of singles, and the standard deduction for married couples (filing jointly) was not double that of singles. Also the Earned Income Credit is considered part of the basic income tax structure, and is included in all of the studies reported on this web page.

The basic federal income tax in this document does not include the various other marriage income tax benefits such as the IRA contribution rules that allow a married person with no earned income to contribute to an IRA (can't do that if you're single), and allowing a married person to inherit an IRA from a deceased spouse without having to take required minimum IRA distributions before age 70 1/2. (A non-spouse inheritor must begin taking IRA distributions in the year following the original owner's death, regardless of age). Nor of course does the "basic federal income tax" cover the discriminatory estate tax.

B. The Bush Tax Cuts and Changes Increased Marriage Bonuses and Reduced Marriage Penalties

B.1. Expansion of the 15% tax bracket width (and new 10% bracket width) for Married Filing Jointly To Double the Singles' Width

Legislative changes in 2001 and 2003 (generally known as the "Bush tax cuts") reduced marriage penalties and increased marriage bonuses -- thereby increasing the net overall marriage bonus further than what the above cited CBO and Treasury OTA studies in aggregate found. For the most part, these marriage penalty/bonus changes didn't take effect until 2003 (the one small exception was that a new 10% tax bracket was carved out from the bottom quarter of the 15% tax bracket in 2001, and the width of that 10% tax bracket was made twice as wide for MFJ's as for singles).

The 2001 and 2003 legislative changes reduced marriage penalties and increased marriage bonuses by increasing the ratio of the married filing jointly (MFJ) 15% tax bracket income width from 1.67 times as wide as the singles' tax bracket income width to 2.00 times the singles' tax bracket income width. (As mentioned above, additionally the legislation carved out a 10% tax bracket from the bottom quarter of the 15% tax bracket, and that new bracket too is 2 times as wide for MFJ's as for singles)

As a result, along with the MFJ standard deduction being double that of singles (see below), there is is no marriage penalty for anyone in the 15% and below tax brackets (the majority of filers) in the basic income tax structure. With the exception of some of those who are affected by the earned income tax credit (see below on the earned income credit).

In terms of adjusted gross income, the top of the 15% bracket in 2004 was $49,506 for singles and $99,012 for MFJ's when expressed in 2018 dollars.

Even above the 15% tax bracket, no MFJ couple, even those with exactly equal incomes (the worst case for marriage penalties) has a marriage penalty until the MFJ income exceeds the top end of the 25% tax bracket -- the first tax bracket above the 15% bracket. In 2004, that first occurs at a joint income level of $133,150 ($178,155 when expressed in 2018 dollars). These income levels are over 3 times the median household income, so a large majority of the population was not (and is not) subjected to marriage penalties in the basic rate-and-brackets tax structure. Again with the exception of some who are impacted by the earned income credit.

Details are in Appendix A.

(Looking ahead a bit, as we will see shortly, the Trump / Republican tax cuts expanded several more MFJ income tax bracket widths such that the high income threshold for when marriage penalties appear in the basic federal tax structure is $624,000 in 2018 -- several times higher than in 2004-2017).

B.2. Standard deduction for Married Filing Jointly Increased To Double That Of Singles

The legislation also increased the standard deduction for MFJ's from 1.67 times the single's standard deduction (S.D.) to double the single's standard deduction (this first took effect in 2003):


         Singles              MFJ                    Ratio of MFJ S.D.
Year     Standard Deduction   Standard Deduction     To Singles S.D.
====     ==================   ==================     ================
2000      $4,400               $7,350                 7350/4400 = 1.67
2004      $4,850               $9,700                 9700/4850 = 2.00

The complete tax tables, standard deductions, and exemptions for singles and MFJ's for 2000 and 2004 and other years is in MarriageTaxPenalty.xlsx Excel Workbook as well as the IRS documents at the links [5], [6].

[5] and [6] are the links to the 2000 and 2004 tax tables.

B.3. Overall net marriage bonuses (which are overall net singles penalties) occur even when bracket widths and standard deductions for MFJ's are less than 2 times those of singles

The key thing to realize from the studies mentioned so far is that it does NOT require that MFJ tax bracket income widths and standard deductions to be twice as large for MFJ's as for singles in order for there to be a net marriage tax bonus (which is a net singles tax penalty).

It was found to be the case even in the late 1990s and 2000 -- when the 15% tax bracket widths and standard deductions for MFJ's were only 1.67 times that of singles -- that there was a net marriage bonus (singles penalty) in the CBO studies -- $10.3 Billion and $49.0 Billion in the Basic and Divorce models respectively. (However, there was a relatively small net marriage penalty of $1.6 Billion in the Treasury OTA 1999 study where the singles being compared to were a tax-savvy collaborating couple. But it is fair to say that on average, these studies came up with a net marriage bonus).

And the ratio of MFJ tax bracket income widths to singles tax bracket income widths were even less than 1.67 for tax brackets above the 15% tax bracket in the late 1990s and 2000, and yet the overall net marriage bonuses occurred.

As demonstrated by these studies, it is a myth that dollar amounts for MFJ's must be double that of singles in order for there not to be a net marriage penalty. In small part that is true -- in order that not even one married couple end up paying a tax penalty (paying more in taxes than they would as singles). But in that situation (all bracket widths and deduction limits etc. for MFJ's being double those for singles), almost all married couples (those with unequal incomes) would be getting a marriage tax bonus (which means their income-equivalent singles would be paying higher taxes -- a singles penalty)

However, the media and politicians presented the Bush tax changes as getting rid of -- or reducing -- the marriage penalty -- and almost never telling the truth that the net marriage bonus (and net singles penalty) was being expanded. At least from what we have read and heard.

B.4. Earned Income Credit (EIC)

(also known as the Earned Income Tax Credit or EITC)

We should clarify that although the marriage tax penalty has been eliminated in the basic income tax structure in the 10% and 15% brackets (and even up to the top of the MFJ's 25% tax bracket), we've also stated that there are exceptions for some of those affected by the Earned Income Credit. In fact a considerable number of low-income people who qualify for the Earned Income Credit do face an overall marriage penalty, as the Earned Income Credit formula has a heavy marriage penalty bias.

The Earned Income Credit is not much of a factor when there are no children (its a maximum of $390 in 2004), but it is a big factor for those with children -- for example a maximum of $4300 in 2004 with two or more children. In 2018 the maximum credit is $5,716 with two children and $6,431 with three or more children).

The Earned Income Tax Credit is included in all studies and results cited on the web page, in the MarriageTaxPenalty.xlsx Excel Workbook, and in the tables below.

B.5. Treasury researchers' study of the impact of the Bush Tax Changes

According to a Congressional Research Service 2016 report (Gravelle) [7]

Treasury researchers did a subsequent study using the standard assumption for the effects of the 2001 tax cut and for 2004 income levels [8]. As before, they essentially found a penalty (of $3.7 billion) without the 2001 tax cut, but found a $30 billion bonus with 2003 tax law (which included explicit marriage relief provisions and other provisions such as rate reductions). About 60% of couples have bonuses, and 23% have penalties (while some have no effect). ...

Given the shift away from penalties and toward bonuses in 2001, it seems clear that the current situation is characterized by bonuses rather than penalties

So this study finds a shift from a 3.7 B$ marriage penalty to a $30 billion marriage bonus, a shift of about $33.7 billion due to the Bush tax changes.

To put the $30 billion marriage bonus (subsidy) in perspective:

In 2004, there were 52.0 million married filing jointly couples [9]. Averaging the net overall marriage subsidy of $30 billion over these 52.0 million couples comes to an average $577 / couple ( $772 / couple in 2018 dollars [10] ) .

In 2004, there were 77.7 million single filers including heads of households [9]. Averaging the net overall marriage subsidy of 30 B$ over these 77.7 million singles comes to an average penalty of $386 / single ( $516 / single in 2018 dollars [10] )

C. The Trump Tax Cuts (TCJA) further increased bonuses and reduced marriage penalties

The Bush tax cuts expanded the 15% tax bracket income width for MFJ's from 1.67 times as wide for MFJ's as for singles to twice as wide. It also carved out a 10% tax bracket from the lower quarter of the 15% tax bracket -- it too was made twice as wide for MFJ's as for singles. With the result that there were a total of 7 tax brackets, with 2 of them being twice as wide for MFJ's as for singles.

Additionally the standard deduction was increased for MFJ's from 1.67 times that of single's to twice as large.

The Trump / Republican Congress Tax Cuts and Jobs Act of 2017 (passed and signed into law in December 2017, but mostly first taking effect in 2018), expanded another three tax brackets to be 2 times as wide for MFJ's as for singles. With the result that 5 of the 7 tax brackets are now twice as wide for MFJ's as for singles.

As mentioned above, leaving aside the earned income credit, there are no marriage penalties in the basic tax structure until combined gross income reaches about $624,000. For those earning roughly equal incomes, there is neither a marriage penalty or bonus. For those with unequal incomes, marriage bonuses prevail.

D. Tables that illustrate how marriage bonuses and penalties changed between 2000 (before the Bush tax cuts) and 2018 - (after the Bush and Trump tax cuts)

It's important to understand that the flip side of a marriage bonus is a singles' penalty. If two singles can pay less taxes by getting married, then they are being penalized for being single.

In this work, singles tax penalties are the negative of marriage tax penalties. For example, a $300 marriage penalty is the same thing as a $300 singles' bonus. And a $300 marriage bonus is the same thing as a $300 singles' penalty. We often switch from one way of expressing it to the other way, depending on the context.

D.1. Important Assumptions Made In The Below Table:

# Standard Deduction Taken. (If itemized deductions, smaller singles penalties and larger singles bonuses would occur)

# No Children -- The examples all assume no children.

# The EIC (Earned Income Credit) IS included -- we only mention this because many similar expositions of the marriage penalty issue neglect it. The EIC generally adds a marriage penalty component that overcomes the overall marriage bonus of the rest of the tax code at lower income levels in combination with higher level of income equality between the two people.

# Two people are always being compared to two people -- two unmarried people are compared to a married couple. The two unmarried people are two independent singles, who are totally independent of each other, and don't even know each other. The only way they are a "pair", is that we are adding up their income and adding up the taxes they pay and comparing those sums to what a married couple with the same combined income would pay in taxes

D.2. Two People are Always Compared to Two People. Also Terminology: "unmarried" "single" and all that

The below tables ALWAYS compares two people to two people -- two unmarried people compared to a married couple. One can think of it as comparing what an unmarried couple would pay in taxes (the sum of the two people's tax payments combined), with what a married couple jointly pay in taxes when filing as MFJ (married filing jointly).

However, realize that when we talk of an unmarried couple, or a pair of unmarried people, or a pair of singles, we are not generally talking about an unmarried couple living together that collaborates on their taxes in ways to minimize the taxes they pay jointly.

Examples of such tax-reducing collaboration including assigning the mortgage payments to one or the other -- even if they jointly and equally own the home.

Another example is assigning all (or some) of the children to one or the other for deductions and refundable credit purposes -- even if they are both the biological parents of the children.

We use the words single, singles, unmarried and unmarried couple interchangably. In the tables below there is no difference -- on taxes we assume all of the above file independently as singles.

To clear any confusion, we will look at choosing one or the other and rewriting everything to either use "single(s)" or "unmarried(s)" consistently throughout.

For the tables below, we will likely choose "single(s)" and "pair of singles" to make clear that the two single (or unmarried) people are totally independent of each other as far as taxes, and the only "pairing" is that of an observer summing up their incomes and the taxes they pay. Expect to also see "singles pair" as a shorter way of saying "pair of singles" -- again both phrases denote two totally independent singles for tax purposes. And we will likely be replacing "couple" with "pair".

In the below, we are comparing the combined sum of what two independent non-collaborating singles pay in taxes, and comparing that to what they would pay in taxes if they met each other and got married and filed taxes Married Filing Jointly.

Realize that is different than what the CBO and Treasury Department studies described above did -- they compared the combined taxes that a tax-savvy collaborating unmarried couple pays in taxes to what a married couple pays in taxes. (Exception: The CBO's Divorce Model). In describing their work, we are pretty much forced to use the words "unmarried couple" since there is no phrase "singles couple", and even if there was, or a variation of it like "couple of singles", it would sound like two independent singles when in fact they are a couple collaborating to reduce their taxes (again with the exception of the CBO Divorce Model, which like us, assumed two independent non-collaborating singles).

Also realize that this is not the singles penalty that Dr. Lily Kahng writes about, which is mostly due to the progressive income tax structure, rather than due to marital status or any other kind of "couple" status. In our progressive tax structure, higher incomes pay taxes at higher rates, and that mostly accounts for why, for example, that a single making $80,000 pays a lot more in taxes than two people do in sum total who make $80,000 -- whether they are married, a live-together unmarried couple, or simply two independent singles.

Instead, we have chosen to focus exclusively on the part of the singles' penalty (or bonus) / marriage bonus (or penalty) that is caused by marital status.

D.3. Examples of Marriage bonuses and penalties, or equivalently, singles' penalties and bonuses

Two variables most affect marriage bonuses and penalties -- (a) the combined income of the two people, and (b) the degree of inequality between the two people's income.

Those with the highest degree of income inequality -- where one of the two people of the pair makes almost all, or all of the pair's income -- have the highest level of marriage bonus. That's because as two singles, the high-earning one tends to be in a high tax bracket, and that high tax rate usually more than offsets that the lower earner / no earner is in a low tax bracket or not paying any taxes, or even getting an Earned Income Credit (EIC) subsidy. Whereas if married filing jointly, their joint income would put them in a modest tax bracket.

At the other end of the spectrum are when the two people have the same, or nearly the same income as each other. Then as singles, both tend to end up in the same modest tax bracket -- similarly to or the same as the tax bracket they would be in if they were married and filing MFJ. This equality-of-income case, or near equality-of-income case, results in the least favorable scenario for marriage -- the lowest marriage bonus or highest marriage penalties.

(To be clear - an MFJ couple only declares their joint income on taxes, and so the degree of inequality between the two spouses' incomes does not at all affect their taxes. The MFJ couple pays the same taxes whether the higher-earning spouse earns all of their joint income, half of it, or anywhere in between.

It's only when the MFJ couple are compared to two singles making the same individual incomes as the spouses that taxes are affected by the income inequality between the two people -- the combined taxes of the singles will almost always be higher when their incomes are most unequal.)

In the table below, and throughout this worksheet, the level of income equality is measured by the variable "Person 1's Gross Income as % of Combined Income", and it ranges from 0% to 50%. Person 1 is always the lowest earning of the two people, so by this definition, Person 1 can never make more than 50% of the combined income.

If Person 1's gross income is 0%, then Person 2 earns all the income, and we have the highest level of income inequality between the two people. In this case, Person 1's Gross Income as % of Combined Gross Income is 0%.

At the other extreme, if Person 1's gross income is 50% of the combined income, then both people must be making the same amount of money. E.g. if their combined income is $60,000, and Person 1 is making 50% of that income, then Person 1 must be making $30,000 and Person 2 must also be making $30,000.

Here is a sample of the singles' tax penalty that an pair of singles paid in the year 2000 (Table 1), and will pay in the year 2018 (Table 2),. Negative numbers, which are red numbers in parenthesis, are singles' tax bonuses (and also marriage penalties).

The below is our work, from the marriageTaxPenalty.xlsx Excel spreadsheet. It is not from the CBO or the Treasury Department.

It has been checked against marriage tax calculators at many points like the Tax Policy Center's marriage tax calculator [11], and various other regular tax calculators ranging from bankrate.com's to TurboTax [12]


        Table 1 - Singles Tax Penalty, 2000              
        By Combined Income and by Percentage of Combined Income 
        That The Lower-Earning Person Earns
        (Inflation Adjusted to Year 2018 Dollars)

Percent of Combined                                                                                                  
Income That Lower-
Earning Person Earns:  0%     10%     20%     30%     40%     50%   || AVERAGE 
                     ======  ======  =====  ======  ======  ======  || =======
         Combined                                                   ||
         Income    | <-------------- Singles' Tax Penalty -----------------> |
          20,000      1266    813     359    (190)   (702)   (956)  ||   98      
          40,000      1266    359    (452)   (569)   (319)   (319)  ||  (6)
          60,000      2683    542    (569)   (319)   (319)   (319)  ||  283
          80,000      5283   2524    1617     577    (319)   (319)  || 1560
         120,000      6206   2451    1017    (543)  (2103)  (2247)  ||  797 
          Negative numbers, shown in red ()'s, represent marriage penalties, not singles' penalties
          1.468 <--Inflation Factor Being Used (converts 2000 dollars to 2018 dollars)

        Table 2 - Singles Tax Penalty, 2018              
        By Combined Income and by Percentage of Combined Income 
        That The Lower-Earning Person Earns
        (Inflation Adjusted to Year 2018 Dollars)

Percent of Combined                                                                                                  
Income That Lower-
Earning Person Earns:  0%     10%     20%     30%     40%     50%   || AVERAGE 
                     ======  ======  =====  ======  ======  ======  || =======
         Combined                                                   ||
         Income    | <-------------- Singles' Tax Penalty -----------------> |
          20,000       873    520     167    (286)   (698)   (734)  || (26)      
          40,000      1570    783      90    (122)     50     ---   ||  395
          60,000      2561    780     (61)     71     ---     ---   ||  558
          80,000      4561   2281    1441     530     ---     ---   || 1469
         120,000      7211   4079    2700    1470     270     ---   || 2622 
          Negative numbers, shown in red ()'s, represent marriage penalties, not singles' penalties
          Dashes indicate neither bonuses nor penalties (i.e. zero bonus and zero penalty)
          1.000 <--Inflation Factor Being Used (converts 2018 dollars to 2018 dollars)

Referring to Table 2 just above, here are a couple of examples to clarify how to read the tables. The penalty/bonus number referred to in the two examples is underlined in Table 2.

Example 1: In 2018 (Table 2), if a pair of singles has a combined gross income of $20,000, and the lower earning person earns 10% of that amount, then that pair pays a singles tax penalty of $520. In other words, they pay $520 higher taxes than if they were married. This is a marriage tax bonus as well as a singles' tax penalty

Example 2: In 2018 (Table 2), if a pair of singles has a combined gross income of $20,000, and the lower earning person earns 40% of that amount, then that pair gets a singles tax bonus of $698. (Red numbers in ()'s indicate single tax bonuses). In other words, they would pay $698 higher taxes if they married. This singles' tax bonus is also a marriage penalty.

At the right side, under the "Average" heading, is the simple average of the 6 data points shown to the left of each on each row. For example, in Table 2, for a combined income of $20,000, the average of $873, 520, 167, (286), (698), and (734) is ($26), meaning, on average, those with a combined income of $20,000 have a singles tax bonus of $26.

This "average" assumes that income inequality between the two people are uniformly distributed (i.e. that there are as many people where the lower-earning person earns 0% of the combined income as there are where the lower-earner earns 10% of the combined income as there are where the lower-earner earns 20% of the combined income, etc.). Undoubtedly that's not true, but finding statistics on the real distribution would likely be impossible. We consider the "Average" just as an indicator and a way to help somewhat consolidate a massive amount of information.

Comparing Table 1 (the year 2000) and Table 2 (the year 2018), both inflation-adjusted to 2018 dollars: One can see that the Bush and Trump tax changes almost eliminated the marriage penalties in the income range shown, and substantially added to most of the singles' penalties.

One notable exception is at the low income end, where at the $20,000 combined gross income level, the average singles penalty went from $98 in 2000 to a negative $26 in 2018 -- in other words from a singles' penalty of $98 to a singles' bonus of $26. This is due to changes in the Earned Income Credit (EIC).

In 2000, the EIC income levels and amounts were exactly the same for a single as for a MFJ filing jointly -- very unfair to MFJ's who got half the EIC on a per-person basis as did their single counterparts. Since then, the EIC was made more generous to MFJ's (by widening their eligible income range), but on average they still get less on a per-person basis than their single counterparts.

COMBINED INCOME in the above tables is the Combined Adjusted Gross Income, not the Combined Taxable Income. For people whose sole income is wage or salary income, their Adjusted Gross Income equals their wage or salary income.

TAXABLE INCOME, on the other hand, is the Adjusted Gross Income (AGI) less the standard deduction and less exemptions (for those who take the standard deduction). In 2017, a single with no children has a standard deduction + exemptions totaling $10,400. So if that single has a $50,400 AGI, his/her Taxable Income is $50,400 - 10,400 = $40,000.

(In 2018 there are no exemptions but there is a $12,000 standard deduction for singles and a $24,000 standard deduction for MFJ couples. For MFJ couples without children, the sum of the standard deduction + exemptions is $20,800 in 2017, and $24,000 in 2018).

It is the Taxable Income that one uses to enter the tax tables and compute taxes. (Many pundits don't know the difference and gleefully enter the tax tables using the wage/salary income and consequently come up with a tax that is much higher than the correct amount).

GROSS INCOME and ADJUSTED GROSS INCOME -- In this work, we use the two terms interchangeably, i.e. that gross income and adjusted gross income are the same. The phrase "adjusted gross income" is often used because it is a tax form term with a more precise meaning than just "gross income", but here on this page it makes no difference.

Inflation adjustment -- Note that the tables above have been inflation-adjusted to 2018 dollars -- so that they can be compared to each other, and so that the amounts shown are more relevant to readers reading this in 2018 or a few years since then. It would be very misleading to compare incomes and marriage penalties in 2000 to 2018 without an inflation adjustment. In that incomes and buying power are nearly 1.5 times larger in 2018 than 2000. Please see [10] for the inflation adjustment factors.

One can adjust the inflation factors to one's desire in MarriageTaxPenalty.xlsx. For example, to show the year 2000's marriage penalties / bonuses without any inflation adjustment, go to sheet 2000 in MarriageTaxPenalty.xlsx and change the inflation factor to 1.0000 in the cell with the pink border around it (It's in a column A cell near the top of 2000 Table 1A). THEN HIT THE F9 KEY.

As a reminder, much larger versions of the above tables are available in the MarriageTaxPenalty.xlsx Excel Workbook. i.e. more income levels, and more columns. They also show the marriage penalty / bonus as a percentage of combined gross income, and as a percentage of the tax that the married couple pays. And there are individual worksheets for the years 2000, 2004, 2017, and 2018.

Another observation is that the largest singles penalties are when there is the largest inequality between the two people's income. When a pair of people have widely different incomes, they tend to pay a large singles penalty (together paying more taxes as a pair of singles than they would as a married couple).

And when two people have incomes that are moderately unequal or the same, they tend to have a lower singles' penalty or even get a singles bonus, particularly in 2000.

In 2018 the singles bonuses are pretty much gone below a combined gross income of $624,000, with the exception of some at the $60,000 and below combined income level who are affected by the Earned Income Credit (especially at the lowest incomes). Still, the largest singles penalties are paid by pairs of singles with highly unequal incomes; and the lowest singles penalties (or largest singles bonuses) are paid (or received) by pairs with the least income inequality.

The highest singles penalties are when the lowest earner of the pair has zero income. The lowest singles penalties (or highest singles bonuses) are when the two earners have equal incomes.

E. On top of all this, there are many other ways that marrieds benefit in the tax code and benefit programs

Seldom mentioned by the media are the many ways that marrieds benefited in the federal income tax code OTHER THAN THE *BASIC* INCOME TAX, such as IRAs (for example, a non-earning spouse can contribute to an IRA as long as the other spouse has sufficient earned income; whereas a non-earning unmarried partner cannot).

And when a spouse passes, the other spouse does not have to begin taking IRA required minimum distributions until age 70 1/2. But when a single person passes, his/her partner or other heir must begin taking distributions beginning the following year, regardless of age.

Or the estate tax (when one spouse dies, the surviving spouse pays no estate tax no matter how large the estate; and a married couple can pass on twice as much of their estate tax free to their children or other heirs than an unmarried couple can).

Or benefit programs like Social Security and Medicare -- where a non-working spouse can qualify for both programs based on the working spouse's earnings. Even if divorced (as long as was married for 10 years or more). But not so a single person.

In the case of Social Security, while both spouses are alive, the spouse with less lifetime earnings gets the LARGER of two benefits -- a benefit based on his or her earnings record, or one-half of the benefits based on the higher-earning spouse's earnings record. And when the higher-earner spouse passes away, the surviving spouse gets 100% of what the higher earner would get if still alive.

The private sector generally speaking also gives breaks to married couples that they don't give to unmarried couples or singles, such as a discounts on health insurance. (And to add insult to injury, when an employer does allow an employee to add an unmarried partner to the health plan, the federal government taxes that benefit as income; but it's a tax-free benefit for a spouse).

Automobile insuranse rates and some other kinds of insurance are also less for married people.

These are only a few of the many ways married couples are advantaged in taxes and benefits over singles. For more, please see [13]

F. It's not hopeless

Look, it's not hopeless. Back in 1948-1969, the tax code was as skewed towards marrieds as it is now, maybe more so (back then ALL married tax brackets were double the width of the corresponding singles tax brackets, now "only" the first five are).

But a group called the War Widows Of America, led by Vivien Kellems and actress Gloria Swanson pointed out the unfairness of it, and the relatively large female-to-male ratio of young adults that existed after World War II -- meaning that not all women could marry.

They were aided by a sympathetic media. Congress was shamed into correcting the situation and bringing about rough overall marriage tax neutrality that we have enjoyed until 2003 (albeit a crude form of neutrality where almost as many married couples paid a penalty as got a bonus).

But this time (2001 to present) the media was on the opposite side. Our advocacy groups were astonishingly silent. There was no pressure brought to bear on the media and the politicians to rethink the so-called "marriage penalty relief". It was a brilliant propaganda trick.

Still, even a simple act like a short email can make a significant difference. Minnesota Public Radio was using the phrase "marriage penalty relief" in its newscasts and news stories. One of us dropped a short email explaining that it was a misleading half-truth propaganda phrase because it left out the marriage bonus expansion part of it -- bonuses paid for by singles.

Amazingly, the next day, and thereafter, they stopped saying "marriage penalty relief" and instead used the phrase "lower rates for married couples".

Look at that Table 2 above again. Do you really think that is anything but outrageous (on top of the all the other tax and benefit provisions that singles suffer and is not reflected in the above table) ??????

While some singles may be rich and carefree, singles are predominantly female and many are elderly (especially elderly females with statistically little prospect of marriage). Many singles are single because they have mental health issues (at nearly 2 times the rate of marrieds), are low income, have disabilities, and so on. Many also have children. These are people who do not deserve to be punished with a larger portion of this nation's tax burden in order to pay for new and expanded marriage bonuses of people more fortunate than themselves.

The percentage of females unmatched by males is greater than the male/female gap was in Vivien Kellems’ time. According to the 2010 Census data of the civilian noninstitutionalized population plus some military [14], in the 25-and-over age group, there are 107.6 women for every 100 men. Amongst the elderly (age 65 and over) the female to male ratio is an astonishing 130 women for every 100 men. Almost 40% of women over 65 are widows, and once they pass age 65, only 2% of widows remarry. Nearly 57% of elderly women are unmarried (of these elderly unmarried women, only 8.1% have never been married, so it's not like they are anti-marriage militants). And these women are paying for marriage tax bonuses for others!

Even amongst the non-elderly, there is a bit of a man shortage -- in the age 25 through age 64 age group, there are 102.8 women to every 100 men.

In just the last 20 years rights have been gained that were not thought possible before that. Legal gay marriage (who would have ever thought that would happen 20 years ago). Now transgenders are starting to get some rights and recognition -- before a few years ago, they were a barely talked about or thought about, and were regarded as just some weird subset of "the gay thing" somewhere. The election of a black president, and on top of that he had a scary "not real American" name -- Barack HUSSEIN OBAMA. Self-employed people being able to buy and afford something besides a junk health insurance plan, regardless of pre-existing conditions. Legal marijuana. Several states recognize the right for terminally ill people to have a dignified death without agonizing suffering to the bitter end.

If you won't fight for your rights, please think about at least fighting for the rights of the poor and unfortunate who are disproportionately single. And for basic fairness.


Appendix A - Expansion of the 15% tax bracket width (and new 10% bracket width) for Married Filing Jointly To Double the Singles' Width During 2001-2003

This appendix is here to explain and document some of the numbers used in the main part of this page above. Probably very few readers will be interested in this level of detail, or need to know about it. So feel free to skip it.

Legislative changes in 2001 and 2003 (generally known as the "Bush tax cuts") reduced marriage penalties and increased marriage bonuses -- thereby increasing the net overall marriage bonus further than what the above cited CBO and Treasury OTA studies in aggregate found.

For the most part, these marriage penalty/bonus changes didn't take effect until 2003 (the one small exception was that a new 10% tax bracket was carved out from the bottom quarter of the 15% tax bracket in 2001, and the width of that 10% tax bracket was made twice as wide for MFJ's as for singles).

In the below, we use 2004 since it is the first year after the Bush marriage-penalty-affecting changes took full effect in 2003. (We could have used 2003 just as well).

What is described below for 2004 as far as marriage penalties and bonuses also closely fit the situation in 2005 through 2017. We'll discuss the 2018 changes later.

The 2001 and 2003 legislative changes reduced marriage penalties and increased marriage bonuses by increasing the ratio of the married filing jointly (MFJ) 15% tax bracket income width from 1.67 times as wide as the singles' tax bracket income width to 2.00 times the singles' tax bracket income width. (As mentioned above, additionally the legislation carved out a 10% tax bracket from the bottom quarter of the 15% tax bracket, and that new bracket too is 2.00 times as wide for MFJ's as for singles) :


      Tax   Single               MFJ                    Ratio of MFJ TI width
Year  Rate  Taxable income       Taxable income         to Single TI width  
====  ====  =================    ===================    =====================
2000: 15%    $0 to $26,250        $0 to $43,850          43,850/26,250 = 1.67


2004: 10%    $0 to $7,150         $0 to $14,300          14,300/7,150 = 2.00  

      15%    $7,150 to $29,050    $14,300 to $58,100     (58,100-14,300)/(29,050-7,150) = 2.00
                                                          Also, 58,100/29,050 = 2.00

In the above, MFJ is "Married Filing Jointly" and "TI" is Taxable Income.

These incomes don't look that large, but realize that the above are 2000 and 2004 numbers. Expressed in 2018 dollars, they are 1.468 times the 2000 numbers and 1.338 times the 2004 numbers shown above, according to the Bureau of Labor Statistic's CPI Calculator.

Also realize that taxable income is gross income less the standard (or itemized) deductions and less the exemptions. So for people taking the standard deduction and claiming the personal exemption, the taxable incomes above correspond to substantially larger equivalent adjusted gross incomes. (If they took itemized deductions, the equivalent adjusted gross incomes would be increased even further).

For example, in year 2000, the top of the 15% tax brackets is $26,250 taxable income for singles and $43,850 taxable income for MFJ's. Add the standard deduction (SD) and Exemptions ($2,800 per person) to get the corresponding AGI (adjusted gross income). Then multiply by 1.468 to adjust it to 2018 dollars:


Top of the 15% Tax Bracket:
===========================
      === Year 2000 =====   
      Single        MFJ  
      $26,250     $43,850  TI (Taxable income, top of 15% tax bracket)
  +   $ 4,400     $ 7,350  SD (Standard Deduction)
  +   $ 2,800     $ 5,600  Exemptions
      -------     -------  --------------
  =   $33,450     $56,800  Equivalent AGI (Adjusted Gross Income) = TI + SD + Exemptions
  X     1.468       1.468  Multiplier to convert to 2018 dollars [10]
      -------     -------
  =   $49,105     $83,382  Inflation-Adjusted Equivalent AGI (2018 dollars)

So in 2000, the top of the 15% tax bracket -- when converted to an equivalent adjusted gross income
and expressed in 2018 dollars -- is $49,105 for singles and $83,382 for MFJ's.

For 2004, the equivalent top of the 15% tax bracket numbers are: 

      === Year 2004 ===== 
      Single        MFJ  
      $29,050     $58,100  TI (Taxable income, top of 15% tax bracket)
  +   $ 4,850     $ 9,700  SD (Standard Deduction)
  +   $ 3,100     $ 6,200  Exemptions
      -------     -------  --------------
  =   $37,000     $74,000  Equivalent AGI (Adjusted Gross Income) = TI + SD + Exemptions
  X     1.338       1.338  Multiplier to convert to 2018 dollars [10]
      -------     -------
  =   $49,506     $99,012  Inflation-Adjusted Equivalent AGI (2018 dollars)

The point of the above is that the top of the 15% tax bracket are fairly large incomes (considerably above the median for single and married households respectively). Most tax filers were then, and are now in the 15% or below tax brackets. (12% or below in 2018).

Along with the MFJ standard deduction being double that of singles (see below), there is is no marriage penalty for anyone in the 15% and below tax brackets (the majority of filers) in the basic income tax structure. With the exception of some of those who are affected by the earned income tax credit.

Even above the 15% tax bracket, no MFJ couple, even those with exactly equal incomes (the worst case for marriage penalties) has a marriage penalty until the MFJ income exceeds the top end of the 25% tax bracket -- the first tax bracket above the 15% bracket. In 2004, that first occurs at a joint income level of $133,150 ($178,155 when expressed in 2018 dollars).

These income levels are over 3 times the median household income, so a large majority of the population was not (and is not) subjected to marriage penalties in the basic rate-and-brackets tax structure. Again with the exception of some who are impacted by the earned income credit.

As bad as all that is, the Trump / Republican tax cuts expanded several more MFJ income tax bracket widths such that the high income threshold for when marriage penalties appear in the basic federal tax structure is $624,000 in 2018 -- several times higher than in 2004-2017).

Sources and Footnotes

[1] Congressional Research Service RL30800 (March 2001), : The Federal Income Tax and the Treatment of Married Couples: Background and Analysis - A Congressional Research Service report explains why it is impossible to have strict marriage tax neutrality (where no couples pay penalties or receive bonuses). It reports on two CBO (Congressional Budget Office) studies, 1997 [2] and 1998 [3], that found that under the two scenarios examined, that there was a net overall marriage BONUS -- more married couples got bonuses than paid penalties, and the average bonus exceeded the average penalty. In the 1998 CBO study (actually an update of the 1997 study), they found a net overall marriage bonus of $10.3 billion in their Basic Model and $49 billion in their Divorce Model.
     The Congressional Research Service report also discusses a 1999 Treasury Department Office of Tax Analysis Study [4] found a slight ($1.6 Billion) net overall marriage PENALTY, assuming a great deal of collaboration and effort and tax savviness on the part of the unmarried couples to reduce their taxes. (Keep in mind a single person without a live-in partner would not legally have the opportunity to do this kind of tax-reducing collaboration)
https://www.everycrsreport.com/reports/RL30800.html

[2] Congressional Budget Office (CBO) June 1997 study simulating the 1996 tax year: "For Better or For Worse: Marriage and the Federal Income Tax" : https://www.cbo.gov/sites/default/files/105th-congress-1997-1998/reports/marriage.pdf

[3] Congressional Budget Office (CBO) 9/18/98 2-page memorandum updating marriage penalty and bonus numbers to the 1999 tax year: “Updated Estimates of Marriage Penalties and Bonuses. Memorandum dated September 18, 1998” : https://web.archive.org/web/20030516063918/http://www.taxpolicycenter.org/TaxFacts/papers/cbo_marriage_update.pdf

[4] U.S. Treasury Department Office of Tax Analysis (OTA) 1998 and 1999 reports: Nicholas Bull, Janet Holtzblatt, James R. Nunns, and Robert Rebelein, “Assessing Marriage Penalties and Bonuses,”Proceedings of the 91st Annual Conference of the National Tax Association, 1998, pp. 327-340.
. . # An updated version of this paper is published as Office of Tax Analysis, Defining and Measuring Marriage Penalties and Bonuses, Paper 82, November 1999 :
https://www.treasury.gov/resource-center/tax-policy/tax-analysis/Documents/WP-82.pdf

[5] 2000 Tax Tables, standard deduction and exemptions
. . # Tax Tables: p. 71 of the 1040 Instructions for 2000 :
https://www.irs.gov/pub/irs-prior/i1040--2000.pdf
. . # Standard deduction and exemptions: in above instructions, also on Form 1040 : https://www.irs.gov/pub/irs-prior/f1040--2000.pdf

[6] 2004 Tax Tables and Rates
. . # Tax Tables: p. 76 of the 1040 Instructions for 2004 :
https://www.irs.gov/pub/irs-prior/i1040--2004.pdf
. . # Standard deduction and exemptions: in above instructions, also on Form 1040 : https://www.irs.gov/pub/irs-prior/f1040--2004.pdf

[7] (CRS 2016) Congressional Research Service - Federal Income Tax Treatment of the Family, Jane G. Gravelle, 11/23/16 : https://fas.org/sgp/crs/misc/RL33755.pdf

[8] Robert Gillette, Janet Holtzblatt, and Emily Y. Yin, “Marriage Penalties and Bonuses: A Longer Term, Proceeding of the National Tax Association,” 2004, Washington, DC, National Tax Association, pp. 468-478.
. . We have found a number of citations to this study online, but we haven't found this study online. So we haven't seen it. We are reliant on Gravelle's CRS 2016
[7] description of it.

[9] Statistics on number of tax filers by filing status in 2004: “Table 1.2--2004, Individual Income Tax, All Returns: Adjusted Gross Income, Exemptions, Deductions, and Tax Items, by Size of Adjusted Gross Income and by Marital Status” : https://www.irs.gov/pub/irs-soi/04in12ms.xls

[10] Bureau of Labor Statistics CPI Calculator (CPI-U) : https://www.bls.gov/data/inflation_calculator.htm
. . CPI-U is what has been used to adjust the tax brackets until 2018 (when they began using chained CPI). We don't know if they use January of each year, we suspect they use some average of the 12 months. But anyway, we use January CPI numbers for the inflation adjustments
. . $1,000.00 in January 2000 = $1,097.16 in January 2004, $1,438.62 in January 2017, and $1,468.41 in January 2018
. . So, to represent everything in 2018 dollars:
. . . The 2000 inflation factor is: 1468.41/1000.00 = 1.468
. . . The 2004 inflation factor is: 1468.41/1097.16 = 1.33837 = 1.338
. . . The 2017 inflation factor is: 1468.41/1438.62 = 1.02071 = 1.021
. . . The 2018 inflation factor is: 1468.41/1468.41 = 1.000

[11] Tax Policy Center's Marriage Tax Calculator : http://taxpolicycenter.org/taxfacts/marriagepenaltycalculator.cfm
. . As of this writing (4/18/18), it is applicable to 2016 and 2017. There is no 2018 marriage tax calculator yet

[12] Some regular tax calculators
. . # BankRate.com :
www.bankrate.com/calculators/tax-planning/1040-form-tax-calculator.aspx
. . # 1040.com : https://www.1040.com/tax-tools/tax-estimator/

[13] The High Cost of Being Single in America, or the financial consequences of marital status discrimination, by Thomas F. Coleman (founder of Unamarried America) http://www.unmarriedamerica.org/cost-discrimination.htm -- Lists the many ways singles / unmarrieds are discriminated against -- in the tax code, in regard to government benefits such as Social Security, and in the private sector such as medical and auto insurance. (As far as the tax code, since this was written, it has gotten much better for marrieds and much worse for singles)

[14] Source of 2010 Census data: https://www2.census.gov/programs-surveys/demo/tables/age-and-sex/2010/age-sex-composition/2010gender_table10.xls It is the "civilian noninstitutionalized population plus armed forces living off post or with their families on post". Bizzare. Don't they have data covering everybody? What about the nursing home population, which by the way is overwhelmingly female, and if included, would certainly make the female to male ratio of the elderly population even larger than 130 to 100.
. . # Source of the "Once they pass age 65, only 2% of widows remarry" -- U.S. News and World Report June 2, 2003
. . # More Census tables: https://www.census.gov/data/tables/2010/demo/age-and-sex/2010-age-sex-composition.html