The Marriage Penalty

Policy Backgrounders | Taxes

No. 145
Monday, February 09, 1998
by Bruce Bartlett


Introduction

A marriage penalty results when a married couple pay more taxes by filing jointly than they would pay if each spouse could file as a single person. A couple face the marriage penalty only when both spouses have earned income. Single-earner couples never pay a penalty and in fact always get a bonus from the Tax Code, paying less taxes than they would pay as singles.

Source of the Penalty: Progressive Tax Rates. The marriage penalty fundamentally results from progressivity of the Tax Code.1 This can be seen in Table I, which presents the federal income tax schedule for 1998. It shows how marginal income tax rates rise from 15 percent to 39.6 percent. The earnings of the secondary worker (the lower-paid spouse) in effect come on top of the primary earner's. Thus a secondary worker may find that his or her earnings push the couple's total income into a higher tax bracket, resulting in a marginal rate higher than the secondary worker would pay if taxed as a single.

Table I - Individual Income Tax Rates for 1998

"A couple may either get a tax bonus or a tax penalty on the same total income, depending on what the income split is between husband and wife."

To see how this works, consider a husband with taxable income of $25,000 per year. Under both the single and joint tax schedules, he would pay 15 percent tax on that income. However, if his wife also makes $25,000, only the first $17,350 of her income would be taxed at 15 percent. The remaining $7,650 of her income would be taxed at 28 percent, because it puts the couple's total income above the $42,350 ceiling for the 15 percent bracket. Thus the couple would pay 13 percent more tax on that income (the difference between 15 percent and 28 percent) than the wife would if she were single. This couple's marriage penalty would be $994 per year.

Penalties and Bonuses. As Table II indicates, a couple may either get a tax bonus or pay a tax penalty on the same total income, depending on what the income split is between husband and wife. The couple in the earlier example paid the maximum marriage penalty on their $50,000 joint income because each spouse earned half the income. However, if one spouse earned substantially less than the other, the couple could have received a marriage bonus.

Table II - Marriage Penalties (-) and Bonuses (%2B)%2C 1998
  • If the husband earned $40,000 per year while the wife earned $10,000, instead of paying a penalty of $994 per year they would have received a bonus of $910.
  • That is, they would pay $910 less in taxes as a couple filing jointly than they would pay if each were taxed as a single.

The marriage penalty is most likely to apply to couples whose incomes are roughly equal. As Table II indicates, no couple with equal incomes or incomes within 10 percent of each other receive a marriage bonus and most receive penalties. As noted earlier, no single-earner couples pay a marriage penalty and virtually all, regardless of income, receive a bonus.

Of course the data in Table II are hypothetical. They assume that all income is earned and that couples have no deductions other than the personal exemption and the standard deduction. In real life, people's incomes and deductions are more complicated. To get an idea of how marriage penalties and bonuses affect real people, the Congressional Budget Office (CBO) looked at Internal Revenue Service and Census data. The CBO found that the highest proportion of marriage penalties occurred when the higher-earning spouse made between $20,000 and $75,000 per year. As shown in Figure I, couples with incomes above and below these levels were more likely to receive a tax bonus for being married.

Figure I - Percent of Couples with Marriage Penalty%2FBonus

"Black couples are more likely to suffer a marriage penalty, while whites are more likely to receive a marriage bonus."

Impact on Black Families. Thus we see that marriage penalties are most likely to have an impact on couples with middle incomes whose incomes are roughly equal. Professor Dorothy Brown of the University of Cincinnati College of Law has argued that these two factors mean that blacks are more likely to suffer a marriage penalty, while whites are more likely to receive a marriage bonus.2 The reason is that among married couples, black women are more likely to work than white women. Furthermore, working black women on average provide a higher percentage of the couple's total income than working white women. According to a 1990 study by the U.S. Commission on Civil Rights:3

  • Seventy-five percent of black women work full-time, whereas only 62 percent of white women do.
  • Working black women contribute 40 percent of family earnings, while working white women contribute just 29 percent.

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