NCPA - National Center for Policy Analysis

Cost of Two-Earner Couples is High

May 27, 2003

Two-earner couples pay for the second job with taxes that are far beyond the well-known "marriage penalty," according to economists Jagadeesh Gokhale and Laurence J. Kotlikoff.

The National Center for Policy Analysis study shows that the second worker in a working couple faces a gigantic lifetime tax rate. That lifetime tax rate is higher than the highest federal income tax rate of 38.6 percent. This happens because the second earner basically pays twice for lifetime benefits.

The study is another indication that conventional approaches to tax policy are often misleading. Until legislators of both parties take a systemic view of taxation and benefits, the usual claims of wounds and gains will remain largely meaningless.

Here are some major findings from the study:

  • A spouse whose husband (or wife) earns $60,000 a year faces lifetime marginal net tax rates of more than 50 percent for earnings that range from $10,000 to $40,000.
  • A two-earner couple in which each person earns $30,000 faces a lifetime loss of Social Security benefits -- the loss has a current value of $56,829.

A woman with a husband who earns only $20,000 a year faces an extraordinary lifetime tax burden if she opts to work.

  • She loses Social Security benefits, Medicaid and other programs by working.
  • If she earns $10,000 a year, her lifetime marginal tax rate is 121.6 percent.
  • The rate declines to 80.6 percent if she earns $20,000 and 66.4 percent if she earns $30,000.

Source: Scott Burns, "Wedded to even more tax," Dallas Morning News, May 25, 2003; based upon Jagadeesh Gokhale Laurence J. Kotlikoff, "Does It Pay Both Spouses to Work?" Policy Report No. 260, May 14, 2003, National Center for Policy Analysis.

For study text


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