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)

Changed 3/11/07     This page's URL: http://www.green5.org/mr-index.html

Corrections? Comments? Emale me: jalars(atsign)compuserve.com
yes, emale is deliberatly mis-spelled to fool spammers' email address harvesters. And in the email address, replace the (atsign) with @

Contents Of This Site


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

MarriageTaxPenalty.xls Excel Workbook -- This workbook shows the marriage bonus / penalty for several years including 1999, 2002, and 2004 through 2007 as a function of combined gross income and of the ratio of earnings of the two partners / spouses.

A Few Quick External Links


ATMP - Alternative to Marriage Project (www.unmarried.org) -- This is the only organization that now advocates for singles' and marrieds' rights in the U.S. that I know of, other than Unmarried America below.

ATMP-TALK email list -- Alternatives To Marriage Email list (low frequency maybe 40 messages / month). Sorry, no archive that you can browse.

Unmarried America, American Association of Single People (www.unmarriedAmerica.com) There is a vast library of articles at this web site, and a weekly article.

Congressional Research Service RL30800: The Federal Income Tax and the Treatment of Married Couples: Background and Analysis - A Congressional Research Service report that explains why it is impossible to have strict marriage tax neutrality (where no couples pay penalties or receive bonuses)

Cost-discriminaton.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

Taxing Singles Meetup.com Web Site (taxSingles.meetup.com) -- Status is uncertain as meetup.com demands a fee from the group leader of $228/year. Hopefully the message board http://taxsingles.meetup.com/boards/ will remain in effect.

For more on taxes as they affect singles, search the www.unmarried.org web site by going to Google and typing into the search box what's inside the square brackets: [site:www.unmarried.org taxes]

Summary


This site is under construction. There are many injustices in the U.S. and in the world that are greater than discrimination against singles. What bothers me most however is when there is a lot of deliberately created misinformation. The greatest mis-information in recent years in U.S. politics, aside from Social Security (myth: "its all paid for until 2041 at least") is the notion that there is, or was until 2003, an overall Marriage Tax Penalty.

This page supplements the discussion of federal income taxes at http://www.unmarried.org/federal-income-taxes.html. If this link doesn't work, Go to unmarried.org and click on Current Issues.

According to the above page, based on a Treasury Department study, in 2004 nearly 30 million U.S. couples enjoyed marriage bonuses totaling $49 billion (their average bonus that year was $1,691) while nearly 18 million couples suffered marriage penalties totaling $19.1 billion (average penalty $1,056).

In other words, married couples getting a marriage bonus outnumber those that pay a marriage penalty by a 30 million to 18 million (a 1.67 to 1 ratio), while the average marriage bonus exceeds the average marriage penalty by $1,691 to 1,056 (a 1.60 to 1 ratio).

What is not at the above unmarried.org link but discussed below are the tax tables showing the size of the marriage bonus or penalty as a function of the joint income of the couple and the relative incomes of the spouses / partners.

I expect also I will add to this page a discussion of the great and successful war that Vivien Kellems and Gloria Swanson and the War Widows Of America waged in 1969 to get the tax code changed from one where previously almost all pairs of people paid more taxes as singles than as marrieds, to one where at least some pairs of people (generally those with nearly equal income) where better off as singles, though most pairs were still better off married as far as taxes. (This situation later improved for singles in subsequent years with the rise in the number of women working and their relative incomes -- a situation that leads to smaller marriage bonuses and larger marriage penalties).

Anyway, as far as the basics of this issue, it is true that prior to 2003, most married couples were not affected by marriage tax penalties or bonuses in basic federal income taxes. So this issue continues to affect only a minority of married couples.

I will use the term "affected" married couples to designate those married couples that get either a basic federal income tax marriage bonus or pay a basic federal income tax marriage penalty (when compared to what they would pay in basic federal income taxes if they were unmarried living together).

Of those married couples who were affected by either a bonus or penalty -- slightly less than half of these married couples paid a marriage tax penalty in that they paid MORE in basic federal income taxes than they would if unmarried. But a little more than half of affected married couples received a bonus (paid LESS in basic federal income taxes than they would if unmarried). And the average bonus was only a little more than the average penalty, so that the basic federal income tax was overall almost marriage neutral, albeit in a crude way -- in effect married couples whose spouses had somewhat equal incomes were subsidizing married couples whose spouses had substantially unequal incomes. All of this per the March 2001 Congressional Research Service report [1].

But the politicians and the media 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. And even less mentioned was that the proposed solutions (of which one was enacted into law in 2001, 2003, and 2004 in stages) eliminated the marriage tax penalty (in the 10% and 15% brackets anyway) by greatly increasing the number of married couples who get bonuses, and by greatly increasing the average married bonus.

(I should clarify that although the marriage tax penalty has been eliminated in the 10% and 15% brackets, this doesn't mean that some low-income tax-payers don't face a marriage penalty. In fact a lot of low-income people who qualify for the Earned Income Credit (aka Earned Income Tax 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 $399 in 2005), but it is a big factor for those with children -- for example a maximum of $4400 in 2005 with two or more children.).

Also seldom mentioned were the many ways that marrieds benefited in the federal income tax code OTHER THAN THE *BASIC* INCOME TAX, such as IRAs (a non-earning spouse can contribute to an IRA as long as the other spouse has sufficient earned income).

(What I mean by the BASIC federal income tax 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. The BASIC federal income tax in this document does not include the various other marriage income tax benefits such as the IRA contribution rules mentioned in the previous paragraph.)

Also rarely mentioned by the media or politicians were other parts of the federal tax code that benefits marrieds such as the estate tax (when one spouse dies, the surviving spouse pays no estate tax no matter how large the estate).

Also rarely mentioned was that mosts states' income taxes have a large overall marriage tax bonus.

Also rarely mentioned was the many ways singles are discriminated against in the private sector -- for example medical insurance (e.g. most employer-provided health care plans charge a much discounted premium to add coverage for a spouse) and auto insurance. Even when the employer provides coverage for a domestic partner at the same rate as for a spouse, the federal government taxes the employer-paid subsidy for the domestic partner (but not for the spouse).

Yes, I will link to more information on some of these. For now, for the best overall summary, see www.singlesrights.com/Cost-discriminaton.htm. It is missing a few, such as non-earning spouse IRA conributions. But it has many more than are listed in this article including a comprehensive discussion of how Social Security greatly discriminates against singles / unmarrieds.

My Email To ATMP Explaining how the Marriage Tax Penalty Became an Almost Universal Marriage Tax Bonus


A few years ago (2001 and 2003) you heard a lot about the marriage tax penalty and how people were being penalized for getting married and how this was some perverse quirk in the tax code that somehow never got fixed and an obvious injustice and all that. You heard that not only from the right-wing but also from the mainstream media.

Probably none of us here think that a married couple should pay higher taxes than two singles with the same incomes. So naturally, being fair-minded and good people, we unmarrieds went along with correcting this terrible injustice that married people were suffering.

Well, we got handed a sack of bull.

From 1969 until 2003, of the minority of married couples affected by these bonus / penalty issues, slightly more than half of affected married couples got a bonus, and about half of affected married couples paid a penalty, and the average bonus was only a little more than the average penalty. So overall, the pre-2003 situation was almost overall marriage neutral (actually I understand that most studies found a small overall marriage bonus of a few billion dollars). It was unfortunate that some married couples got bonuses and some married couples paid penalties, but that is mathematically unavoidable in an overall marriage-neutral tax system where higher incomes are taxed at higher rates and which also allows married couples to pool their incomes and file jointly [1].

Well in 2001, 2003, and 2004, legislation was passed and signed that eliminated, beginning in 2003, the marriage penalty through the top of the 15% tax bracket. This sounds like a great step forward in tax fairness, and virtually every politician and every media report presented it that way.

What they didn't say is that along with marriage penalty elimination, most married couples who previously suffered penalties now get substantial bonuses. And those approximately half of married couples who previously got bonuses now get bigger bonuses.

These bonuses are of course paid for by single people.

Below is the marriage bonus / singles' tax penalty at a few selected levels of combined income (combined income is the combined income of two singles if unmarried and of the two spouses if married). The percentages on the top row indicate the percent of the combined income that person #1 -- the lower-earning person -- earns. 50% means that the "lower-earning" person earns 50% of the combined income (meaning the two people earn the same income, i.e. full income equality).


........Singles.Tax.Penalty,.2004..............
........By.Combined.Income.and.by.Percentage.of.
........Combined.Income.that.Person.#1.Earns
...................................................
..............0%.....10%....20%.....30%.....40%.....50%..
..........======..======..=====..======..======..======
Combined
Income....|<---------.Singles'.Tax.Penalty.----------->|
.$20,000...$1040...$740....$440....$195......$0......$0
.$50,000...$2850..$1600....$555......$5......$0......$0.
.$80,000...$5301..$3255...$2100...$1300....$500......$0.
$120,000...$6501..$3546...$1831....$271......$0......$0..
$140,000...$6896..$3581...$1706....$386....($35)..($206).
$200,000...$8888..$3738....$438...($427)..($976)..($976)

--------------- HTML VERSION OF ABOVE TABLE -------------
Singles Tax Penalty, 2004
By Combined Income,
And by Percentage of Combined Income that Person #1 Earns
Percent of Combined Income
That Person #1 Earns: 
0%10%20%30%40%50%
COMBINED INCOME --v   <----------------- Singles' Tax Penalty ---------------->
$20,000$1040$740$440$195$0$0
$50,000$2850$1600$555$5$0$0
$80,000$5301$3255$2100$1300$500$0
$120,000$6501$3546$1831$271$0$0
$140,000$6896$3581$1706$386($35)($206)
$200,000$8888$3738$438($427)($976)($976)

--------------- END HTML VERSION OF TABLE -------------

Important Assumption Made In Above 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 no children assumption results in the biggest singles penalties and the smallest singles bonuses.

# No EIC (Earned Income Credit) -- In reality, individuals and couples without children can qualify for an earned income credit of up to $399 in 2005. This is a maximum. The amount a low income individual or couple can qualify for is generally less. Anyway, these worksheets do not include any EIC credit. Including it would change the results of these worksheets very little (again given that no children are assumed).

(But If children were assumed, then the Earned Income Credit (EIC) would be very considerable -- In 2005: a maximum of $2662 with one child and a maximum of $4400 with two or more children. The EIC almost always creates a SINGLES BONUS COMPONENT that is sometimes enough to overcome the SINGLES PENALTY BIAS of the basic tax structure (standard deviation and widths of tax brackets) for low and modest income taxpayers.)

Ignore the dots in the plain text version of the above table -- they are just to keep mail reformatters from screwing up the alignment of the table by for example compressing several consecutive spaces into one. However, it might still be misaligned unless you view it with a fixed width font such as Courier. (Try copy and pasting it in Wordpad or Word and then make the font Courier. Or if it comes to you as an HTML page, do a View Source. (LATER: The above proper HTML version of the above table doesn't have any of these formatting issues. Its the plain text version that is a problem. I've retained the plain text version in case you want to use it in a plain text email).

Anyway, for example, if the Combined Income is $20,000 and Person #1 earns nothing (meaning Person #2 earned it all), then the unmarried couple pays $1040 more in taxes than the married couple. (That's a lot for such a low income -- the unmarried couple pays $1450 in income taxes while the married couple pays $410 in income taxes! i.e. the unmarried couple pays over 3 times as much income taxes. The $410 and $1450 is not shown in the above table; only the difference $1040, is shown in the above table).

If the Combined Income is $20,000 and Person #1 earns 20% of the combined income (i.e. $4,000), then the unmarried couple pays $440 more in taxes than the married couple. (The unmarried couple pays $850 in income taxes while the married couple pays $410 in income taxes i.e. the unmarried couple pays over 2 times as much income taxes. The $410 and $850 is not shown in the above table; only the difference $440, is shown in the above table).

If the Combined Income is $20,000 and Person #1 earns 40% or more of the combined income (8,000 or more), then the unmarried couple pays $0 more in taxes than the married couple.

Parenthesis indicate negative numbers -- negative numbers indicate an unmarried bonus / married penalty. Yes, high income married couples with "somewhat" equal incomes suffer a marriage penalty. That's because the marriage penalty was eliminated through the top of the 15% bracket, but still exists for tax brackets higher than 15% (and when incomes are "somewhat" equal). But it turns out that a married couple must have a large amount of income above the 15% bracket before incurring the penalty (and "somewhat" equal incomes).

I find there is no marriage penalty until combined income reaches $140,000 and then it is very minor ($35 at 40% and $206 at 50%, see above table). Even at $200,000 (see above table), it is relatively minor for married couples with nearly equal income ($427 at 30% and $976 at 40% and 50%), and is far far less than the bonuses that $200,000 income married couples enjoy when one spouse is not earning or earning only 10% of the total income ($8888 and $3738 respectively -- see above table).

See the MarriageTaxPenalty.xls spreadsheet for where these numbers came from. (It also has marriage tax bonus / penalty calculations for 1999 and 2002 -- both these years are prior to the 2001-2004 marriage-tax-penalty relief law changes going into effect.)

In 2011, the 2001-2004 tax cuts and tax "reform" legislation expire, and we return to the tax code that existed in early 2001 -- that means a return to rough marriage tax neutrality. But any day, Congress may vote to make the 2001-2004 legislation permanent, i.e. so that this "reform" continues in 2011 and thereafter. Our Congress critters and the media need to hear that we are opposed to the continuation of singles / unmarrieds bearing such a disproportionate share of the tax burden.

Realize that the singles tax penalty described above is only a small part of the total tax picture. For many decades and including the present, singles have paid a penalty in many other ways (inheritance, estate tax, IRAs, Social Security ... see www.unmarriedamerica.org/cost-discrimination.htm ). So even though some unmarried couples with nearly equal incomes before 2001 were enjoying a bonus in the basic income tax, they were getting screwed in many other parts of the tax code and in government benefits.

And this doesn't include private sector discrimination such as medical insurance and auto insurance.

Anyway, I thought you should know.

Look, its not hopeless. Back in 1948-1969, the tax code was as skewed towards marrieds as it is now, maybe more so (I think back then all married tax brackets were double the width of the corresponding singles tax brackets, not just the 10% and 15% brackets).

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.

But this time (2001-2004) 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. I 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 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, are unattractive, 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.

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

Jim Larson
Its not a democracy if we're being lied to
Majoritarian tyranny is still tyranny

[1] For a Congressional Research Service report that explains why it is impossible to have strict marriage tax neutrality (where no couples pay penalties or receive bonuses) see: Congressional Research Service RL30800: The Federal Income Tax and the Treatment of Married Couples: Background and Analysis, Updated March 23, 2001