Married With Taxes

Everyone hates the marriage tax. But is the cure worse than the disease?


Like millions of other married couples, when my wife and I stood before our families and friends, we pledged to be true to each other in good times and bad, for better and for worse and for richer and for poorer. Yet as the times got better and we got richer, the federal government made us poorer at least poorer than we would have been if we'd continued to live in sin.

We're not alone. In 1996, the last year it checked, the Congressional Budget Office estimated that 42 percent of married couples paid an average "marriage tax penalty" of $1,400.

This deeply offends Republicans, whose hatred of taxes is matched only by their love of marriage. After years of effort, congressional Republicans, with the help of some Democrats, finally passed a relief bill last week, known inside the Beltway as the Marriage Tax Elimination Act, designed to correct this bit of perceived inequality. But couples shouldn't start spending their refunds yet; not only has President Clinton (who's demonstrated a cavalier attitude toward both marriage and taxes) promised a veto, but the legislation doesn't really even solve the problem.

Republicans frame the issue as a simple one of fairness. "The fact that married couples pay more simply because they're married is simply immoral," says Bill Archer (R-Texas), chairman of the tax-writing Ways and Means Committee. "It is unfair. It is unjust." But fairness often depends on where one stands. Is it fair, moral and just for a single person to pay more in taxes than a married couple with the same household income?

The marriage-tax penalty is the result of America's progressive tax code, which is based on a simple premise: The more you make, the more you pay. When you combine this with standard deductions and tax brackets that aren't double for couples what they are for singles, and you've got your marriage penalty which typically falls on middle-income, two-earner couples. (Single folks get to deduct $4,400 as a matter of course; married couples, even if they both work, get a combined deduction in the neighborhood of seven grand. Ditto for tax brackets: Single workers are knocked out of the 15 percent rate at $26,250, while married workers can only earn $43,850, less than twice as much, together and still pay that amount.)

The bill sitting on Clinton's desk addresses both of these issues, doubling the standard deduction for couples immediately and increasing the maximum threshold of the 15 percent tax bracket for marrieds to $52,500 over five years to twice what single people are allowed to earn.

Sounds fair enough, right? Maybe not. Just listen to Bruce Bartlett, senior fellow at the National Center for Policy Analysis, a Dallas-based think tank that generally takes a Republican-friendly stance on economic issues: "There is really kind of a scandal with this Republican so-called marriage-penalty bill because it doesn't really do anything about the marriage penalty." Bartlett is no lover of taxes. But he's also no lover of using the tax code for social engineering. According to Bartlett, the problem can be eliminated by giving couples the choice of filing either singly or jointly. This increases tax complexity; theoretically, couples will have to fill out three returns to figure out which method benefits them most. And it raises other troubling issues who gets to deduct the interest on the house, for example. But it addresses the core problem.

The Marriage Tax Elimination Act, meanwhile, favors married couples over singles, something many argue is already the case. After all, while currently 42 percent of married couples pay a penalty for their nuptuals, 51 percent come out ahead. Ironically, those who currently receive a bonus under the current system generally have constructed the very sorts of families social conservatives favor: single-earner couples where the wife stays home.

This was exactly my situation when I got married. Because my wife was in graduate school, we actually sent less money to Washington being married than when we were shacking up. I was able to plant my income in the portion of the 15 percent tax bracket she wasn't using. (We went from getting a bonus to paying a penalty when my wife went to work.)

There are other inconsistencies as well, which should come as no surprise because we're dealing with politicians who often don't think past the next sound bite. Ironically, in 1997 the supposedly family-friendly Republican Congress actually added a host of marriage penalties to the tax code, even as they railed against their unfairness. (The most hilarious is the Republican married-parenthood penalty: Single mothers or fathers can claim the $500 per child tax credit so long as their incomes don't exceed $75,000, while married couples can claim the credit so long as their incomes don't exceed $110,000.)

I'm married and will gladly take the tax relief, even if, like Bartlett, I'd prefer a more pure approach such as simply cutting marginal rates for everybody. Whether Congress' change in the code is fair or not is a subjective judgment I leave to you. I long ago quit looking for fairness, consistency or even logic from Washington.