issues2000

What's the "marriage penalty"?




Anonymous asked this question on 7/21/2000:

I've been reading the articles in the post on the House voting for reduction in "Marriage Penalty" Tax, and the Senate approving the Tax Cut for Married couples, can you give me your point of view on this issue, the economic theory at play and what you think the impact would be?



madpol gave this response on 7/21/2000:

To be an expert on the IRS code, you would have to devote your entire life to it. But I can give you a brief overview.

When the tax code was initially set up, the assumption was that married women didn't work or made a little extra money from small businesses. So, married couples with two incomes were put in a higher bracket in the belief that two income families either represented a husband trying to hide income, or immigrants who wouldn't notice the extra tax. Basically it works by treating both spouses income as a single income.

With the reemergence of the Social Right during the McCarthy era, the penalty was increased as a way of keeping women at home.

Since the 1970's, when two income families became the rule rather than the exception, the "Marriage penalty" became a political issue, and has been ever since.

One loophole is that, if you are divorced at any time during the year, you can file as a single taxpayer for the full year. In the higher brackets, the savings can become substantial A small number of yuppies of Yuppies get divorced every year, take the tax savings, remarry and go on vacation for their annual "honeymoon."

I think that reform is long overdue and could cut divorce stats. Yuppie loopholers notwithstanding, most divorces involve economic issues and anything that puts even a little extra money into the pockets of married couples could help a lot of families stay together.

But that's just the tip of the iceberg. We need to simplify the IRS code, both to eliminate loopholes and to enable the average taxpayer to understand it.

That would put a lot of lawyers out of work, but many could be retrained for honest jobs.



JesseGordon responded:

...


Return to index