NCPA - National Center for Policy Analysis

Heritage Foundation: Tax Penalties On Marriage

April 6, 2001

A marriage penalty occurs when the total tax paid by a married couple exceeds the sum they would pay if each filed as a single taxpayer. There are many marriage penalties in the federal tax code, and because of the steady growth in the number of dual-earner families, more couples are affected each year.

  • In 1995, the Congressional Budget Office estimated that 42 percent of all couples suffered the penalty, and this year, the estimate is over 43 percent.
  • Couples are more likely to be affected by the marriage penalty when they both work and the second earner contributes at least 30 percent of total income.
  • In 1998, for the first time since the Census Bureau began recording such information, the majority of married couples with children were dual earners.

Heritage Foundation analyst Rea S. Hederman, Jr. gives some examples of how two married workers are penalized, when compared to two individual workers filing separately:

  • For tax year 2000, the standard deduction is $7,350 for a couple filing jointly and $4,400 for single filers ($8,800 for two individuals filing separately); thus a couple filing jointly would pay taxes on the $1,450 difference -- creating a tax penalty of over $217.50 at the 15 percent tax rate.
  • While single filers would enter the 28 percent bracket at $26,250 of taxable income (or $52,500 for two individuals with that income), a married couple pays the 28 percent marginal tax rate at $43,850, and must pay a penalty of $1,124.50 more.

Many elements of the tax code, such as personal exemptions, and some deductions and credits, are eliminated as income rises. Married taxpayers also pay higher federal income taxes because the phase-out rates of several of these provisions are not twice those for single filers.

Source: Rea S. Hederman, Jr., "Why Congress Should Renew Its Efforts To End The Marriage Penalty," Backgrounder No. 1424, March 28, 2001, Heritage Foundation, 214 Massachusetts Avenue, N.E., Washington, D.C. 20002, (202) 546-4400.


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