Marriage penalty

The marriage penalty in the United States refers to the higher taxes required from some married couples, where spouses are making approximately the same taxable income, filing one tax return ("married filing jointly") than for the same two people filing two separate tax returns (as single, not "married filing separately"). The percentage of couples affected has varied over the years, depending on shifts in tax rates.

The source of this increase in taxes has its roots in the progressive tax-rate structure in income-tax laws, that is, a higher income pays a higher rate of tax. In such a context income averaging is advantageous to the taxpayer. E.g. two persons, one making $80,000 and the other making $20,000 in a particular year, will pay a larger combined tax than they would if both had an income of $50,000 in the same year.

In the U.S., income averaging (i.e., the "married filing jointly" status) is advantageous to a married couple with disparate incomes. To compensate for this somewhat, the U.S. provides a higher tax bracket for the averaged income of a married couple. While income averaging might still benefit a married couple with a stay-at-home spouse, such averaging would cause a married couple with roughly equal personal incomes to pay more total tax than they would as two single persons.

Occasionally, this "marriage penalty" has become a campaign issue for various candidates and there have been piecemeal laws enacted to reduce it, none completely successfully.

Origin and actions to eliminate

The marriage penalty originated in 1969, when Congress tried to equalize what was then an advantage for couples, as compared to single taxpayers.

In 1996, forty-two percent of married taxpayers paid more because they were filing jointly than they would have if they had remained single, according to a 1997 Congressional Budget Office analysis. The average penalty was $1,380. Several pieces of legislation have been passed since the late nineties to do away with these penalties. For example, the Economic Growth and Tax Relief Reconciliation Act of 2001 introduced section 1(f)(8) to the Internal Revenue Code, which mitigates the marriage penalty effect in the lower tax brackets. Section 1(f)(8) adjusts the ceiling of the 15-percent tax bracket for joint return filers relative to the ceiling of the 15-percent tax bracket for unmarried spouses. The Jobs and Growth Tax Relief Reconciliation Act of 2003 accelerated the benefit to joint return filers by eliminating the marriage penalty for 2003 and 2004 and the Working Families Tax Relief Act of 2004 extended the benefit to 2005-2007. Therefore, the marriage penalty in the lower tax brackets will be eliminated through 2010. Unless reauthorized by Congress, however, the marriage penalty will return in 2011. However, through passing those pieces of legislation, the tax system is now such that couples with disparate incomes will pay less tax than they would have paid as two single taxpayers.

See also

External links

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