All in the name of fixing the "marriage penalty" in the federal tax code, some good people in Washington are about to make a bad mistake. The marriage penalty is triggered when two people get married and their joint income pushes them into a higher tax bracket than they were in (or one of them was in) before. As a result, the couple pays more in taxes than the two of them together would have paid if they had remained single. To correct this inequity, over 200 members of the House of Representatives, including the Republican leadership, are proposing to allow married couples to file their returns either singly, as if they were unrelated individuals, or jointly, whichever results in the lower tax burden. Many consistent champions of marriage and family have endorsed this proposal, introduced by Republicans Jerry Weller of Illinois and David McIntosh of Indiana. Even Dr. Laura Schlessinger spent a recent radio show touting the scheme.
It is a terrible idea. Yes, it would eliminate the marriage penalty. But it would also increase regressivity in the tax code by easing the tax burden on comparatively affluent couples. Moreover, because it would reduce the tax burden on two-earner couples while leaving everyone else's burden the same, it would further penalize parents who stay home.
There is a way, however, to use the federal tax code to strengthen the institution of marriage and even to help revive civil society. It's called income splitting. It has been proposed in the Senate by Republican Connie Mack of Florida and others. It would cost more money than "single filing," now steamrolling through the House, but it has the advantage of being a good idea.
Under income splitting, a married couple at tax time would add up their income and divide by two, so that effectively each spouse would be taxed on half. This would apply to both two-earner and single-earner couples. Thus, if one spouse earned $20,000 and the other $30,000, each would report a taxable income of $50,000 "split" in two, or $25,000, to be taxed at the basic rate. And if one spouse earned $50,000 and the other nothing, the tax result would be the same.
This may sound like a mere technical matter, but it's not. Permitting married couples to split their income would amount to a far-reaching reform in favor of marriage, family time, and community life. It would replace the marriage penalty with a financial incentive for marriage and an equally clear disincentive for divorce. And it would be just.
To be just, the tax code should treat married couples in a way that corresponds to the reality of the marriage relationship. This is the heart of the matter. Far better than our current tax code, and far better than the Weller-McIntosh single-filing proposal, income splitting reflects the economic truth of marriage.
Typically, married people are not autonomous economic actors. Quite the contrary. In the economic sphere as in other areas of life, married people cooperate, trade off, give freely to each other, and specialize according to talent and inclination in order to achieve better results for the household. In short, the basic reality of marriage is that two become one. Legal notions like community properly and the equal division of assets following divorce recognize this fact. So would income splitting for tax purposes.
For more than three decades, the notion that the family is the social unit to be taxed has been weakening, as inflation has slashed the value of the dependent exemption. (The Single-Filing proposal would further the conceptual shift away from taxation of families and toward individuals.) One result of this trend has been an increase in the share of the tax burden falling on married couples with children. Another result, more subtle but more damaging, is a tax code based largely on a fiction; the belief that there is little meaningful economic difference between a married person and an unmarried person. Income splitting would serve as a corrective to that fiction. It not only would increase the fairness of our tax code but also would clarify our vision of marriage.
Finally, income splitting would permit couples to erect a buffer against the encroachment of the marketplace into family life. By rewarding couples for sharing their income for tax purposes, and by treating both partners as equal taxpayers, income splitting would better recognize the contribution of married people who are not in the labor force. In a society where the roles of worker and consumer increasingly usurp, our time and attention and put pressure on the roles of spouse, parent, and neighbor, think of income splitting as a small blow for the sphere of intimacy and nurture, a modest encouragement to the unpaid work of parenthood and civil society.
Think of it also, if you wish, as a women's issue, since most of the parents who choose to leave the labor force to raise children, manage households, and contribute to their communities are women. Permitting income splitting would say to these people: You matter.
There are three arguments against income splitting. One is that it constitutes a special benefit for marriage. Well, of course it does; that's the whole point. The second is that it represents the abandonment of the idea that government ought to tax, indirectly, the unpaid labor of spouses. Again, perfectly true; that is an intention of the reform.
The third objection is that income splitting would cost too much. It would cost a lot: probably $30-35 billion a year in lost tax revenues. (The joint-filing proposal would cost the Treasury about $18 billion per year.) Especially if income splitting were combined with more generous dependent exemptions and credits (we favor doubling the personal exemption to $5,000 and the child tax credit to $1,000), it would probably require large spending cuts or revenue increases.
This third objection is likely to be decisive. Consider the choice now facing members of Congress: on the one hand, a tax cut for relatively affluent two-earner couples that would "fix" the marriage penalty without costing too much; on the other hand, a more substantive and far-reaching shift in the way we tax, and therefore value, the non-market bonds of marriage and community. Unfortunately, without a much fuller national debate on this subject, Congress is likely to follow the path of least yuppie resistance. But it's the wrong path for the country.
Allan C. Carlson is president of the Howard Center on Family, Religion, and Society in Rockford, Illinois. David Blankenhorn is president of the Institute for American Values in New York City.
Back to Top | Previous | Next
Institute for American Values