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The Congressional Budget Office recently conducted a detailed study of how the federal tax code treats marriage. The study's guiding premise is that the tax code now divides married couples into two categories: those receiving a marriage ``bonus" and those receiving a marriage ``penalty." According to the study, about half of all couples now receive a bonus, paying an waverage of $1,300 less in total yearly taxes tahn they would have if they had remained single. Conversely, more than 40 ercent of couples now endure a penalty. Jsut by getting married, these couples pay an average of $1,400 more in total taxes than they would have if they had filed as single individuals. The typical marriage penalty victim is a two-earner couple. The typical bonus beneficiary is a one-earner couple. One solution to this inequity is to cut taxes for two-earner couples until the tax code no longer punishes them for having gotten married. This is the implicit recommendation of the CBO study. It's also the main goal of the ``Marriage Tax Elimination Act," recently introduced in the U.S. House of Representatives by Republicans Jerry Weller of Illinois and David McIntosh of Indiana. Under Weller-MacIntosh, couples could choose to file their returns singly, as if they were unrelated individuals, or jointly, whichever would result in the lower tax burden. This reform would eliminate the marriage penalty. Sound like a good idea? In my view, it's a terrible idea. By lowering taxes for comparatively affluent couples, it would increase regressivity in the tax code. By cutting the tax burden on two-earner couples while leaving everyone else's burden the same, it would further shift the economic incentives against parents who leave the labor force to be at home with children. Finally, by encouraging married couples to file separate returns, this proposal would be inconsistent with the basic reality of the marriage relationship. A much better idea is called income splitting. Under this proposal, a married couple at tax time could add up their total income and divide by two, so that effectively each spouse would be taxed on half. Income splitting would also eliminate the marriage penalty, but without any of the harmful side effects of Weller-McIntosh. Sound like a good idea? Actually my goal here is not to persuade you that income splitting is a better policy than the option of separate filing. My goal is to suggest that choosing the question - defining the terms of the inquiry - often pre-ordains the answer. The entire CBO study is based on one question: Regarding taxes, does getting married make a couple worse off, or better off, than they were as two unrelated individuals? Certainly this is a valid question. But is it the only question? The CBO assumes that individual filing represents the basic standard of fairness. Accordingly, any tax outcome for a married couple that differs from individual filing must necessarily be classified as either a ``penalty" or a ``bonus." Yet this way of framing the problem makes it impossible to recognize the underlying issue at stake. Should the tax code recognize the institution of marriage - or should it in effect only recognize individuals? That is the core question. By assuming individual filing as its standard of fairness - its sole criterion for determining whether someone is getting a ``penalty" or ``bonus" - the CBO implicitly suggests that the question does not exist. We are merely presented with the study's unexamined assumption in this area as the starting point for analysis. The rest is detail. Besides serving as an example of flawed research methodology, this way of thinking about taxes and marriage also seem culturally diagnostic in a larger sense. Is it becoming increasingly impossible for us, regarding taxes or anything else, to think about our society as anything other than a collection of autonomous individuals? Back to Top | Next | Previous
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Institute for American Values |
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