Wedding Bell Blues: The Income Tax Consequences of Legalizing Same-Sex Marriage

Abstract:     
Recently, gay and lesbian couples have gone to court to force the government to allow same-sex couples to marry. Largely unnoticed during the debates surrounding same-sex marriages are their economic consequences, including the impact on government tax collections. It is well-known that a couple's joint income tax burden can change with marriage. Many couples, especially two-earner couples with similar incomes, pay a marriage tax because their taxes when married are more than their combined tax liabilities as single filers. This feature of the income tax suggests that legalizing same-sex marriages would increase income tax revenues, because gay and lesbian households are thought to consist primarily of two-earner couples. In this paper we estimate the income tax effects of allowing same-sex couples to marry. We use estimates on the size of homosexual relationships, the percent who would marry if same-sex marriage becomes legal, and the average incomes of these couples, in order to generate estimates of the revenue impact. Our calculations indicate that legalizing these marriages would lead to an annual increase in federal government income taxes of between $0.3 billion and $1.3 billion, with the likely impact toward the higher range of the estimates.

Keywords: Marriage Tax, same-sex marriage, individual income tax

Accepted Paper Series