Over at Wisebread, Xin Lu brought up the topic of the dreaded marriage penalty. Okay, so maybe it’s not dreaded in every household, but it is in mine. Marc and I both make pretty good money, which makes us the type of couple that the marriage penalty tends to hurt the most.
I’d heard about the marriage penalty for years, of course, and learned how it works when I took a course on income tax in law school. As you already know, there are different categories of tax filers, the most common being single and married filing jointly.
Logically, you’d think that two people who get married and have a combined income of $50,000 would pay the same amount of taxes as one person who earns $50,000. But the marriage penalty doesn’t work that way. We got hit hard by the marriage penalty when we were first married and ended up owing $2,000 in taxes because of it – keep in mind that if we had remained single, we would have received refunds! This was because the standard deduction for married couples, which we were taking at the time, was not double the standard deduction for singles. Our joint income also probably pushed us into a higher tax bracket than we would have been in if we were single, but I can’t remember for sure.
President Bush’s tax cuts saved us thousands of dollars by closing the gap between the tax brackets for single people versus married couples. In other words, a single person making $50,000 and a married couple with joint income of $50,000 would be in the same tax bracket, whereas in the past, the married couple might have been in a higher tax bracket.
The Wisebread article has me more than a little concerned, since Xin Lu reports that President Obama likely favors the return of the marriage penalty. It’s not exactly a shocker, since he seems really big on the re-distribution of wealth. His plan may be limited to the very wealthy (which does not include us), but these proposals are always subject to change and I am wary. I just hope enough senators and representatives are opposed to taxing married people differently from single people and able extend at least this portion of President Bush’s tax cuts – otherwise my plans for our financial future may take a big hit.
The debate about progressive taxes is one thing – should people who make more money have to pay more in taxes? I’m not sure.
But I am sure that married people shouldn’t have to pay more taxes just because they’re married. It’s an antiquated tax from back when America was more homogenous, with almost all families consisting of a spouse who took care of the home all day and a spouse who worked outside and brought in the family’s income.
These days, of course, most families seem to have two spouses who work, and why should families where the husband and wife make the same amount of money have to pay more taxes than families where the husband and wife make disparate amounts? Or why should a couple who isn’t married but lives together pay less taxes than a couple who gets married?
What do you think of the marriage penalty?