NCPA - National Center for Policy Analysis

Marriage Tax Relief

February 7, 2000

Last week, the House Ways & Means Committee passed a bill to relieve the marriage penalty that results when a two-earner couple pays more federal income tax by filing jointly than if each spouse were taxed as a single.

  • According to a recent Treasury Department study, 25 million couples paid a penalty last year for being married, 48 percent of all joint filers.
  • Collectively, they paid $28 billion more because of the marriage penalty, averaging $1,141 per couple.

The marriage penalty results mainly from steeply progressive tax rates. In effect, the lower-paid spouse is taxed at the higher-paid spouse's marginal tax rate.

Other provisions of the Tax Code that also give rise to a marriage penalty are the standard deduction and the Earned Income Tax Credit (EITC). It is estimated that more than 60 different provisions of the Tax Code cause tax liability to vary with marital status.

Bill Clinton has proposed raising the standard deduction for couples from $7,350 to twice the $4,400 given to singles -- eliminating about 10 percent of the total marriage penalty. Almost half the benefits would accrue to couples suffering no marriage penalty whatsoever, and the tax penalty on singles would increase $6.5 billion -- meaning they will pay more taxes than couples with the same income.

The Ways & Means bill would raise the standard deduction for couples, and adjust tax brackets and the EITC. Predictably, the Treasury Department and Citizens for Tax Justice, a liberal group, attacked it as a give-away to the rich.

A couple in which each spouse earns $40,000 per year may be rich to the Treasury and CTJ, but it is doubtful that the couple feels this way.

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, February 7, 2000.

 

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