Taxes & Changing Family Structure
December 5, 2000
In 1998, for the first time since the Census Bureau began recording fertility information, families with children in which both the husband and wife work became the majority of all married-couple families. Fifty-one percent were in this category, compared with only 33 percent in 1976. Moreover, 55 percent of these dual-income couples had annual incomes of $50,000 and over, compared to 40 percent of the single-income couples.
The tax code has not kept step with the changing composition of families, many of whom have moved into tax brackets once reserved only for the "rich." For example:
- The threshold for entering the top 25 percent of all taxpayers -- who pay about 83 percent of all income taxes -- is $50,607.
- Based on Bureau of Labor Statistics earnings surveys, a married couple consisting of an average-paid kindergarten teacher and an entry-level firefighter would easily find themselves within the top 25 percent of taxpayers.
- Should the teacher become an assistant principal and the firefighter become an assistant fire chief, their combined income of $97,106 would easily put them in the top 10 percent of all taxpayers (those earning $83,200 or more).
- They would not be far from the $114,729 threshold that would put them into the top 5 percent.
Most of these families would consider themselves solidly middle class, and are thus surprised to learn that they earn too much to be eligible for many proposed "targeted" tax cuts.
Source: Scott A. Hodge, "Tax Law Meets Moore's Law," Tax Features, October 2000, Tax Foundation, 1250 H Street, N.W., Washington, D.C. 20005, (202) 783-2760.
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