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Why we're stuck with the marriage penalty

Despite the marriage bonus most couples see at tax time, some upper- and lower-income people pay more taxes because they're married. Here's why.

By Money Staff Mar 13, 2014 12:06PM

This post comes from Allison Linn at partner site CNBC.

CNBC on MSN MoneySome wealthy and low-income married couples are losing out at tax time, but experts say eliminating the so-called marriage penalty is more complicated than you might think.

Bride and groom © Image Source, Getty Images"It's just impossible to get rid of it with the tax system that we've got," said Roberton Williams, senior fellow at the Tax Policy Center think tank.

That's because the U.S. tax system is progressive, meaning that people pay more taxes as their incomes go up, and also factors in whether people are married or single when it comes to filing taxes.

Williams suspects that more couples get a marriage bonus than a marriage penalty, meaning that their overall tax bill is lower because they are married. But he said there's no question that some people would have a lower tax bill if they were single instead of married.

And despite an effort in the early 2000s to decrease the group of people subject to the marriage penalty, some couples are still caught by it.

At this point, researchers say those are mainly high-income couples with similar earnings who are bumped into higher tax brackets because of their joint earnings, or lower-income couples who lose out on tax benefits and other social assistance once they combine incomes.

'Classic liberal/conservative compromise'

The current state of the marriage penalty is, like so much of the tax code, the result of years of back-and-forth wrangling over who should pay how much in taxes, and why.

In the early days of the tax code, everyone filed their taxes separately so no one got a benefit or penalty from being married.

Then, in certain states that allowed for community property, the few couples who had to pay taxes at that time were able to split their incomes, creating a marriage bonus.

By the late 1940s, Congress created the option of filing a joint return, which allowed many couples to enjoy a marriage bonus.

Williams said that led to complaints from war widows who said that they were suffering from a tax penalty because they didn't have a spouse.

Since then, lawmakers have spent decades tinkering with the tax code to try to find compromises for married, singled, divorced and widowed taxpayers.

Many believe it's unlikely that the marriage penalty will go away completely.

"This has been a classic liberal/conservative compromise," said Eugene Steuerle, a senior fellow at the Urban Institute who has written extensively about tax policy.

Steuerle said he's found that left-leaning politicians like the progressive element of the system, which means that people who make more money have a higher tax rate, while conservatives like the fact that certain tax breaks and benefit programs phase out as incomes go up, saving the government money.

"The people who want to get rid of the marriage tax penalty tend to be the progressive people, and they don't want to get rid of the progressive tax system," said Pat Cain, a professor of tax law at Santa Clara University in California.

'More to marriage than dollars and cents'

Williams said there's no evidence that the marriage penalty affects people's decision to get married, although it might affect the timing. For example, a couple may wait a year or two to get married so they have a little more time without the penalty, or wed in January instead of December to avoid one year of paying it.

But he said most people seem to eventually get married if they were planning to.

"It's certainly the case that there's more to marriage than just dollars and cents," he said.

Steuerle said he also hasn't seen any data to suggest that taxes or other government policies are driving broader societal changes, such as the increase in out-of-wedlock births and the decline in marriage rates. Still, he said, "It's not clear that it's a great idea to reinforce that with the tax and welfare system."

Some same-sex spouses will be getting a bonus or paying penalty for the first time this year, because this is the first tax season that the Internal Revenue Service is recognizing those unions. Cain said tax implications are not keeping same-sex couples she knows from getting married in states where it is legal.

"Most of the people I know say it's the price of equality," she said. "We get to get discriminated against in the tax system just like opposite sex couples."

More from CNBC


Mar 13, 2014 5:27PM
They talk about laws favoring the rich. I was married in 1977. Middle Class both of use. Being married cost thousands of dollars more in taxes. While if you do not marry and have children. I have to support them with my taxes. This reverse taxation to encourages illegitimate births. Which leads to troubled children. Which costs more to society.
Mar 13, 2014 6:23PM
We just need a flat tax.  Poor people need to pay into the system just like more motivated people do.
Mar 14, 2014 8:51AM

Why I can’t catch up

Every time I make a little money the government steals 20-30% of it away from me to give away to other countries, lazy Americans and illegals. If my wife and I work longer or work extra, the government hits us with the marriage penalty. If my wife and I work longer or work extra the government penalizes me for saving in a Roth. If I do well in the market, the government hits me with the AMT. My income is nowhere near $250,000. The only hope for this Republic is true Libertarianism.

Mar 13, 2014 7:26PM

There is a reason its called the "marriage penalty". Look at excemptions. For individuals vs. couples, it's never doubled for couples. Being married does indeed cost couples much more than individuals. If two working spouces filed individually, they would save thousands of dollars. Above the 10% and 15% tax brackets, the marriage penalty begins to kick in real time. At the 25% tax bracket, married couples pay more. For single filers, the 25% tax bracket hits at $82,250.00. For married couples, the 25% tax hits at less than double the $82,500.00 instead at $137,050.00. It gets worse at higher brackets (28%, 35%, and 39.5%).


Mar 14, 2014 8:17AM
Now I understand why a single elderly person who is lucky enough to meet their significant other does not ever remarry. I've known some to just live together maybe just as some early baby boomers generation did back in the 60's and 70's during the peace and flowers movement. I know of one person who would lose her widows pension if she were to remarry so her and her significant other just co-habitat together. Another senior couple I know, who are not sixty-five yet, are just living together for tax purposes and claim to be common law married. I am seeing more and more senior citizens choosing that road to save from losing a lot of their benefits. I know of another couple who could have saved thousands of dollars on medical expenses had they divorced but, stayed together. Her medical expenses would have been paid that way. His wife was afraid he might leave her while she was battling cancer which he never did and was with her until her death. He was trying to avoid losing all his life savings that way. Sadly, that is the reality of trying to live in this society that penalizes you for being married.
Mar 13, 2014 9:43PM
Single people with no kids, should pay the least.  The more kids you have, the more you should pay.  The ones that are leaving the biggest footprint are paying the least.
Mar 14, 2014 8:22AM

I just want to comment on not paying federal taxes, being LOW INCOME, having children & getting thousands of $$ back at tax time. WHY, WHY, WHY?????!

My daughter didn't pay one red cent to federal taxes. We saw her W-2. She has one child & is low income. $20,000 a year, low income apartment all utilities included, food stamps & of course medical paid for by the state oh yeah child care paid for by the state.

She got back $4,500 from the feds.

My husband & I both work. Paid well over $8,000 in taxes for the year & had to sweat it out that we wouldn't have to PAY. We did have to pay the state of Oregon even tho we took out as much as we possibly could for deductions. We had to pay them over $800!

Mar 13, 2014 5:34PM
And you want me to believe it can't be fixed? Next impossible feat please.... Obama can resolve the national debt..... ole laughing, lying, big eared Obama!
Mar 14, 2014 8:52AM

Taxes on wages (in any form – flat or progressive) are the greatest evil of our American Republic. When government is free to steal from you, there are no limits to waste and abuse in government. If a person chooses to work extra hours or two jobs in order to better provide for themselves or their family, they should not be penalized, but that is what happens. The more you make by working harder and longer, the more money is stolen from you, and given to those who spend their lives living off the hard work of others.

The revenue the government needs to provide legitimate constitutional services should be obtained primarily from a national sales tax instead of a tax on wages. All would pay based on consumption, the more you spend the more you pay. The more luxury you surround yourself with, the more you pay. Your choice. A national sales tax system would capture money spent by criminals and by illegal aliens who currently pay near zero in taxes. There would of course need to be exemptions: Cars (already have a federal excise tax) Primary Residence/Rental Properties (vacation homes would be subject to tax/rental profit would be taxed) Fresh Food (Preprocessed foods and prepared meals would be taxed – only fresh/fresh frozen/canned goods would be exempt) Insurance Premiums, Health Care & Certified Education.

Adding another layer of tax to a business would not be fair. Businesses would need to be compensated by keeping a portion of the tax to cover the expense of collection and reporting. A percentage of .20 to .05 would be fair.

Mar 14, 2014 9:19AM
Sure would like to post on another NBC story on how much Americans approve Obama care. but they have no open thread on that; instead BS about this kind of distractions.
Mar 14, 2014 10:03AM
As regards the article, that was then . . . this is now.  And, now, the simple fact is that the US Government is so desperate to get tax money wherever and whenever it can, there is absolutely no chance they will do anything that reduces the tax revenue stream.  The "marriage penalty" is here to stay.
Mar 14, 2014 10:24AM
Pro Obummer mouth piece MSN has removed most comment sections on politics, obummer and obummercare.  Silence the people, take away their conversation!!!!
Mar 14, 2014 8:35AM

A lot more is taken from my paycheck since my divorce, and I don't get refunds back. I don't think it has any more to do with penalties than not. It's just taken in different ways depending on marital status and income.. The IRS will get what they want one way or another.

Mar 14, 2014 6:07AM
By Government standards , " it's hell if you do and hell if you do not " .
Mar 13, 2014 10:08PM
Have your spouse committed, then claim the spouse as a dependent.  It's worked four times for me.
Mar 14, 2014 4:21PM
Democrats incent dumbazzes for making stupid decisions. It how they maintain their base.
Mar 13, 2014 5:29PM
Basically, if the two incomes are within 10% of each other, it's a PENALTY, so remaining unmarried is actually cheaper. There have been couples who divorced every December and remarried every January just to file their taxes as SINGLE and avoid the penalty.
Mar 14, 2014 10:17AM
Here's an idea.  Tax everyone as an individual to simplify the tax code.  It discriminates more against the unmarried as the thresholds are lower and there are fewer deductions. Then you can also truly have religious freedom as well as polygamy can be allowed to as the only thing that will be needed is people will need to designate a beneficiary in the event of a death.  Because insurance companies would tailor policies to those groups and divorces would be handled the same way.
Mar 25, 2014 10:58AM
The marriage penalty is to discourage marriage between normal people.
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