The REAL Defense of Marriage Act—Income Taxes and the “Marriage Penalty”

For all the talk about defending marriage as a sacred institution between one man and one woman in the news these days, no one seems to be talking about the third party involved in every marriage in this country… the Internal Revenue Service. Yes, the marriage penalty is alive and well in the United States of America, and it seems ironic that some are so focused on preserving the sanctity of marriage, only to tax the holy hell out of you when you do it.

To be fair, the so-called “marriage penalty” (well-known enough that we had an entire section on it in my individual tax course in college, and to have its own Wikipedia page) has changed somewhat since I’ve been a practicing CPA. It used to be even easier to see, because standard deductions were X amount for single individuals filing, and something less than two times X for married couples.  That was changed in 2004, and now the standard deduction is $5,950 for singles and $11,900 for married couples (for 2012).

But the real marriage penalty comes in the basic structure of our tax code as a “progressive” tax. This means that, as your income goes up, your tax bracket goes up as well. Take a very simple example:  Imagine that Jane makes $75,000 per year, and so does Mary.  As individuals filing taxes, they pay 15% on the first $35,350 of their income, then 25% on the rest.  That would be a total tax for each person of $14,780.  Now, imagine that Jane and Mary live in a state that values every human being’s right to marriage, and decide to tie the knot.  The next year, their family has a combined income of $150,000.  As married couples, they use a different tax table, and suddenly they are in the 28% tax bracket, rather than the 25%.  Their combined taxes are $29,779, an increase of $219 over the amount it would be if they filed individually.  (Note that the marriage penalty increases as each person earns more.  If Jane and Mary both made $50,000 instead of $75,000, their taxes would be equal to the single rate.  The marriage penalty is also eliminated if one partner makes substantially more than the other.)

There’s another facet to the marriage penalty, and that comes for our older married couples who are drawing Social Security benefits. Generally, if Social Security is your only source of income, none of the benefits are taxable. However, if you have other income outside Social Security (such as a part-time job or investment income), some of your Social Security benefits may be taxable. In order to calculate this, the IRS publishes “base lines” that you compare your income against. The income baseline for single persons is $25,000; the baseline for married couples is $32,000. In other words, staying unmarried keeps you from having to pay taxes on an extra $18,000 in income.

Obviously, our tax system was put into place at a time when society looked a lot different—and, in that time where one spouse worked and one stayed home with the family, the marriage penalty was actually a marriage bonus. But that’s not the way the world works today.  If marriage is important enough to introduce a constitutional amendment preserving it, maybe it should also be important enough to keep the lawfully wedded from paying more than their cohabitating counterparts.