Should Divorce Be More Taxing? Structuring Tax Reduction to Reduce Inequality

Indiana Journal of Law and Social Equality, vol. 3, Article 4, Spring 2015

U of Cincinnati Public Law Research Paper No. 12-14

54 Pages Posted: 9 Sep 2015 Last revised: 20 Oct 2015

Date Written: 2015

Abstract

Current law makes divorce a time for minimizing some couples’ taxes. The group who benefit from the reduction are unlikely to be those in greatest financial need following divorce. Existing divorce-related taxation focuses on shifting the tax burden between spouses, the implicit and explicit elections that enable this shifting, and the classification of who should be entitled to this tax reduction. This article argues that Congress should focus tax reduction on those with minimal resources following divorce to ensure an equitable distribution of the nation’s tax burden. This article proposes an alternative tax regime more consistent with mitigating inequality. Instead of maximizing collective tax reduction, tax reduction should be targeted to lower-income spouses with a tax credit and custodians of children with retention of child-based tax benefits. Through its discussion of divorce-related taxation, this case study highlights that Congress should be wary of viewing tax reduction as an end on its own but should focus greater attention on the structure of the reduction.

Keywords: tax, divorce

JEL Classification: K34

Suggested Citation

McMahon, Stephanie Hunter, Should Divorce Be More Taxing? Structuring Tax Reduction to Reduce Inequality (2015). Indiana Journal of Law and Social Equality, vol. 3, Article 4, Spring 2015, U of Cincinnati Public Law Research Paper No. 12-14, Available at SSRN: https://ssrn.com/abstract=2657595

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)

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