Abstract

http://ssrn.com/abstract=1344431
 
 

Citations (1)



 
 

Footnotes (219)



 


 



To Have and To Hold: What Does Love (of Money) Have to do with Joint Tax Filing?


Stephanie Hunter McMahon


University of Cincinnati - College of Law

February 16, 2009

Nevada Law Journal, Forthcoming

Abstract:     
Wealthy taxpayers have always attempted to reduce their federal income taxes. Before 1948, one popular method was to shift income between spouses so that more of a husband’s income could be reported by, and taxed to, his lower-income, and thus lower tax bracket, wife. In 1948 Congress removed married couples’ incentive to engage in this tax avoidance behavior by adding nationalized income-splitting to the joint return. This effectively gave those filing joint returns tax brackets that were twice as wide as those of single taxpayers, and, as a result, married couples with a single or primary income-earner paid relatively less income tax than their single counterparts. Today there is debate over returning to an individual-based income tax system, similar to that which operated before 1948. Evaluating that proposal, this paper first explores the development of the income-splitting joint return to evaluate the potential costs and consequences of a return to an individual system. Individual-filing incentivized avoidance behavior, reducing the progressiveness of the income tax while giving tax advantages to those who engaged in tax-planning and an increased relative tax burden to those who did not. Second, the paper considers the prospect of the Internal Revenue Service reining in a renewal of this type of tax avoidance today. Returning to a system of individual filing will increase complexity in the tax code and add incentives and opportunities for tax avoidance at a time when the IRS is already struggling under the burden of non-compliance. Finally, in case practical concerns are not persuasive enough, this paper examines how best to evaluate married couples’ ability to pay taxes on a theoretical basis. Calculations on a unitary basis, it contends, remain more accurate for comparing married taxpayers to other taxpayers and it is that comparison, between couples as opposed to within couples, which reflects relative abilities to pay. As a result of these considerations, this paper concludes that joint filing remains the best filing unit.

Number of Pages in PDF File: 38

Keywords: income tax, marriage penalty, tax avoidance

working papers series





Download This Paper

Date posted: February 20, 2009 ; Last revised: July 7, 2010

Suggested Citation

McMahon, Stephanie Hunter, To Have and To Hold: What Does Love (of Money) Have to do with Joint Tax Filing? (February 16, 2009). Nevada Law Journal, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1344431 or http://dx.doi.org/10.2139/ssrn.1344431

Contact Information

Stephanie Hunter McMahon (Contact Author)
University of Cincinnati - College of Law ( email )
P.O. Box 210040
Cincinnati, OH 45221-0040
United States
513-556-4206 (Phone)
513-556-1236 (Fax)
Feedback to SSRN


Paper statistics
Abstract Views: 1,547
Downloads: 194
Download Rank: 91,824
Citations:  1
Footnotes:  219

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo7 in 0.281 seconds