Paul L. Caron

Thursday, April 8, 2021

Cain: The Unfairness Of The Marriage Tax Penalty

Pat Cain (Santa Clara), The Unfairness of the Marriage Tax Penalty:

Wisconsin Republican U.S. Representative Glenn Grothman recently criticized the Covid-19 relief bill by pointing to the marriage penalty that is embedded in the earned income tax credit, the EITC. He then inexplicably used the penalty in the Democratic-backed bill to take a swipe at the Black Lives Matter movement, claiming they did not honor the traditional married family. Representative Grothman is just wrong about the BLM point. The group seeks to value all families, and there are many in all of our communities that do not fit the traditional married family model. On the other hand Representative Grothman is absolutely correct about the problem of the marriage penalty in our tax code.

Still, it doesn’t seem fair to lay the blame at the feet of the Democrats or attribute the problem to the Covid-19 relief bill, as though that is the law that created the problem. The marriage penalty has been lurking throughout the Internal Revenue Code for some time. Both Democrat and Republican administrations have contributed to the problem. Both parties have, at times, taken a stab at reducing the problem. But so far no one has succeeded. ...

How to Remedy the Marriage Penalty Problem

My bottom line point is this: Marriage should not penalize any taxpayer under our tax laws. Congress should stop treating two married taxpayers, both earning income, as a single taxpayer. That is, in large part, what creates these built-in marriage penalties. The Biden Covid-19 relief bill does not create marriage penalties. Far from it. That bill treats individuals as individuals. Each individual making under $75,000 is entitled to a $1400 stimulus check. If you are married to someone making under $75,000 you and your spouse each get a check. You are not treated as one.

The problem of the marriage penalty is not attributable to the Biden bill. It is attributed to the tax code and it is time to fix that inequity. No taxpayer should face higher taxes solely because he or she marries another taxpayer. The U.S. is one of only a handful of developed countries that uses a joint tax return. Canada never has. The U.K. abolished its joint return in 1990. We should do the same and end the marriage penalty. But even if we don’t abolish the joint return, there are places in the tax code where we can end the penalty that is created by treating two taxpayers married to each other as one. (I call that “tax coverture.”) We could calculate the EITC without aggregating spousal income. We could determine how much of social security payments should be taxed on the basis of the income of the recipient rather than aggregating the recipient’s income with that of a spouse. We could allow each spouse to deduct up to $10,000 of state income taxes. That would be a start.

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