A Practical Solution to the Marriage Penalty

Abstract:     

The marriage penalty in the federal income tax continues to persist despite universal condemnation of it. This article proposes a novel way to eliminate the marriage penalty: to create another tax filing status for dual-income couples that earn an amount within a particular percentage of each other. This filing status would be the same as the current married filing status, except that it would offer double the rates of single filers because it accommodates two incomes.

This approach represents a break from the status quo of separating single taxpayers from married ones without considering that in reality there are two types of married couples: one-income couples and two-income couples. This approach is also different from previously proposed solutions that require married couples to file as single individuals or that ignore marital status for tax reasons.

Adding another filing status for only two-income married couples is a practical solution to the marriage penalty that causes the least upheaval to the general legal framework because it continues to treat spouses as a single economic unit. It has the additional attribute of no longer penalizing a significant subset of women who work and marry, as well as same-sex couples. Finally, high divorce rates, the decrease in alimony awards, and cohabitation as a substitute for marriage all support a solution to the marriage penalty, particularly one that is consistent with the general framework of treating households as a single economic unit.

Number of Pages in PDF File: 43

Keywords: tax, marriage penalty