Updated: 11/17/2010 9:00 AM ET|
The myth of the marriage penalty
The benifits include:
- Workplace health and pension benefits coverage. Though some companies offer health coverage to domestic partners, this benefit is typically taxable as income. When spouses are covered, the benefit is tax-free.
- Social Security retirement and survivor benefits. A husband or wife is entitled to one-half of the spouse's Social Security benefits and to additional benefits in the event of death.
- Lower insurance rates. Married people usually get a discount on auto insurance and may pay less for other types of insurance.
- Automatic inheritance rights. Die without a will, and your spouse gets your stuff. In many states, the surviving spouse has a legal right to at least one-third to one-half of your estate.
- Preferential estate-tax treatment. The richer you are, the better the deal this is. Essentially, estates worth more than a certain amount are subject to estate taxes -- if you don't die in 2010. After taking a year off, thanks to tussles in Washington, the estate tax returns in 2011 on inheritance above $1 million. But this exemption amount doesn't apply to married people: You can leave an unlimited amount to a spouse without generating a penny of estate tax. In certain states, this benefit is multiplied by special capital-gains-tax treatment for homes and other assets held by married couples as community property.
A penalty still on the books
One marriage penalty that remains has to do with Social Security taxes and working spouses, particularly women.
The Social Security Administration says 62% of the women over age 62 who receive benefits do so based on their husband's work records, rather than their own. A little more than half of these women didn't earn enough to qualify for payments based on their own work records. The rest opted to take half of their husbands' benefits because those checks were larger than the ones the spouses could qualify for based on their own earnings.
Now, in one very real sense, these women are better off married because they benefit from their husbands' larger Social Security checks.
In another sense, they're severely penalized because all the Social Security taxes they contributed over the years essentially yield no additional benefit. They'd get the same payments if they'd never worked and paid into Social Security.
This is no small potatoes. Social Security taxes now eat up 6.2% of every worker's paycheck, up to an annual maximum of $6,622 on earnings of $106,800 in 2010, while employers contribute an equal amount.
As more women work and earn better salaries, the proportion claiming benefits based on a spouse's record may decline somewhat. But because men still earn more on average than women, this phenomenon certainly won't disappear. Given the precarious state of Social Security and political realities, this is one marriage penalty that's likely to persist.
Liz Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "The 10 Commandments of Money: Survive and Thrive in the New Economy" (find it on Bing). Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. Join the conversation and send in your financial questions on Liz Weston's Facebook fan page.
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An incredibly stupid article written bya n incredibly stupid person.
Obviously, anyone can write a 'financial' column these days.
The break even point is about $137k for couples who both have relativevly equal incomes.
Those making more are penalized by the tax code for being married.
Obama also talks of higher rates for singles making $200K and couples making $250K. Again the marriage penalty as it should be $400K for marrieds.
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