---

---

Opinion Editorial
Monday, August 3, 1998
Social Security's Marriage Penalty	The so-called marriage penalty in the tax code has been a major topic of discussion in Congress for some time. This problem arises when a two-earner couple pays more federal income taxes by filing jointly than they would pay if each spouse were allowed to pay taxes as a single earner. Republican leaders have vowed that if there is a tax bill this year, reduction of the marriage penalty will be a top priority. Less well known is the fact that the Social Security system also imposes a marriage penalty. Because of the way the benefit formula is structured, a two-earner couple will receive less benefits than a single-earner couple. The problem arises mainly from what is known as the "duel entitlement" rule. Under this provision of the Social Security law, retired couples do not receive two benefit checks even if both spouses worked and would be entitled to benefits based on their own earnings history. Basically, the couple receive one benefit based on whichever spouse had the higher lifetime income. Thus, as in the case of the income tax marriage penalty, a two-earner couple would increase their income by getting divorced. Another aspect of the Social Security marriage penalty is that the system provides higher benefits for single-earner couples. The reason is that a non-working spouse in effect gets credit for part of her husband's earnings. Thus a single-earner couple receive benefits based on 150 percent of their actual earnings, a bonus denied to two-earner couples. A recent study from the Rand Corporation calculates the implicit transfer among various classes of retirees of the same age with the same earnings history to see what the impact is. Single males do much worse than single females because their life expectancies are lower; consequently, they draw less lifetime benefits (see figure). And two-earner couples do far worse than single earner couples. As with the income tax marriage penalty, the problem is worst where the husband and wife had the same income (the two-earner couple). In the case where one spouse earned 50 percent of the other spouse (the 1.5 earner couple), the penalty is much reduced. The effect of all this is to impose a large implicit tax on working women, which reduces their incentive to work and remain in the labor force. The best solution would be to move toward a Social Security system based on individual accounts, where benefits are a function of one's contributions, not one's marital status. Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, August 3, 1998. Home |  Support Us |  All Issues |  Social Security Debate Central |  Contact Us