NCPA - National Center for Policy Analysis

Impact Of The Marriage Penalty

February 12, 1999

Simply put, higher tax rates kick in at lower income levels for married couples than for cohabiting singles. That's the nature of the marriage penalty -- it causes approximately 21 million American couples to pay an average extra tax bill of $1,400.

The Heritage Foundation's Daniel J. Mitchell is of the opinion that only a flat tax can end the marriage penalty -- and that is not in the political cards at this point. So he is suggesting four short-term solutions that would help alleviate the tax pains of married couples.

  • Letting couples choose whether to file individual returns -- as nine states and the District of Columbia already permit -- would result in an annual tax cut of about $30 billion, even though couples would have to figure their taxes both ways to determine which would produce a saving.
  • Requiring couples to file individual returns would take care of the marriage penalty -- but taxes on couples with non-working spouses would go up, because the standard deduction would be only $4,250 for a family with one wage earner versus more than $7,000 now.
  • Give second earners deductions or credits worth perhaps 10 percent of the earnings of the lower-income spouse.
  • Raise the standard deduction for married couples to double the level for single filers -- a move which would cut taxes by more than $25 billion annually.

Mitchell recommends the last option. The tax code allowed single taxpayers a deduction of $4,250 in 1998. A marriage-neutral tax code therefore would allow married couples to protect $8,500 of their income with the standard deduction; instead, married couples are allowed to deduct only $7,100.

Source: Daniel J. Mitchell, "How To Fix The Marriage Penalty In The Tax Code," Backgrounder No. 1250, February 8, 1999, Heritage Foundation, 214 Massachusetts Avenue, N.E., Washington, D.C. 20002, (202) 546-4400, and "The Marriage Penalty Is a Tax on Love," Investor's Business Daily, February 12, 1999.


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