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Valentine's Day Treat: Continued Marriage Tax Penalties

Posted By T. Elliot Gaiser On February 14, 2013 @ 11:00 am In Obamacare | Comments Disabled

Valentine’s Day is supposed to be when couples come together and celebrate their relationship, but the 13 tax increases [1] in the 2013 fiscal cliff deal unfortunately continued America’s marriage tax penalty.

For example, the new tax rates apply after the first $450,000 for a married couple. But if they were to divorce and cohabit, each could earn up $400,000 at the lower rate before the new tax rate of 39.6 percent hammers them.

And the marriage penalty doesn’t just apply at the top bracket. In fact, according to the nonpartisan Tax Foundation [2], middle-income couples also get taxed more for being married. This penalty hits families progressively harder in the 28 percent, 33 percent, and 35 percent brackets—financially penalizing the decision to get and stay married.

This is on top of what President Obama’s health care law already will do to penalize marriage. As Heritage has explained [3], by 2014, Obamacare will mean “married couples will generally receive $1,500 to $10,000 less per year in health care premium support than cohabitating couples with the same combined income.” The marriage disincentives in Obamacare are notable:

The effect is greatest on a 60-year-old couple earning about $30,000 each. Their annual marriage penalty in lost premium reimbursement could reach $10,000. Even a lower-income married couple of the same age ($15,000 each per year) would receive an annual government bonus of $4,212 if they chose to divorce and cohabit. This penalty creates a strong incentive for the affected couples to choose not to marry—or to divorce and cohabit.

The effect on people’s lives is real. These tax penalties hit the country just as the percentage of intact, married families in America has fallen to an all-time low since the first marriage penalty was instituted in 1969 [4]. Heritage’s Andrew Walker reports [5] that while nearly 80 percent of all Americans were married in 1980, only 52 percent of adults are married today. This decline in marriage correlates with sharp increases in childhood poverty, as a child raised outside of marriage is six times more likely to experience poverty during childhood [6].

Because of its profound effect on children, protecting and defending marriage truly matters to wise public policy. That’s part of the reason Heritage’s Saving the American Dream [7] plan would eliminate the marriage penalty for all with a flat, fair tax plan [8] that holds to the principles of equality recently preached by Dr. Ben Carson at the National Prayer Breakfast [9].

Unfortunately, instead of working to rebuild marriage, our tax code this Valentine’s Day continues to penalize the institution for many families, affecting many loving couples’ decision to say “I do.”


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2013/02/14/valentines-day-treat-continued-marriage-tax-penalties-for-tax-brackets/

URLs in this post:

[1] the 13 tax increases: http://blog.heritage.org../../../../../2013/01/08/tax-changes-2013/

[2] nonpartisan Tax Foundation: http://taxfoundation.org/sites/taxfoundation.org/files/docs/fed_rates_history_nominal_1913_2013_0.pdf

[3] explained: http://www.heritage.org/research/reports/2011/06/a-marshall-plan-for-marriage-rebuilding-our-shattered-homes

[4] instituted in 1969: http://www.washingtontimes.com/news/2013/jan/8/fiscal-cliff-deal-penalizes-married-couples/

[5] Andrew Walker reports: http://blog.heritage.org../../../../../2013/02/12/marriage-makes-fiscal-sense/

[6] , as a child raised outside of marriage is six times more likely to experience poverty during childhood: http://www.heritage.org/research/reports/2012/09/marriage-americas-greatest-weapon-against-child-poverty

[7] Saving the American Dream: http://www.savingthedream.org/

[8] a flat, fair tax plan: http://www.savingthedream.org/what-it-covers/tax-reform/

[9] at the National Prayer Breakfast: http://blog.heritage.org../../../../../2013/02/08/dr-ben-carson-speaks-truth-to-power-at-national-prayer-breakfast/

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